Commentary: How I Learned To Love Online Trading

It's an article of faith: The best time to buy stocks is when everybody seems to be selling. That was true in the October massacres of 1987, 1989, and 1997. So after 14 years of writing about the markets, I decided to open an online brokerage account to do some bottom-fishing during the recent market travails.

Overall, I've had a positive experience. But I've also been exposed to the risks of buying stocks via the Internet. The biggest drawback is that you're totally on your own, and it's easy to make mistakes. A common one is to pick a broker that fails to provide quick or reliable executions or whose Web site is slow or prone to failure. It's best to try a few before settling on one, though that's not what I did. I picked Charles Schwab on the recommendation of a colleague. But before I opened my account, I did some checking. A glance at a Motley Fool message board on America Online (keyword, Motley Fool; heading, Consumer Rap) showed only favorable comments on Schwab--while there were beefs about some of the other, cheaper brokers, primarily that they execute trades slowly or not at the best price.

Not so at Schwab. It charges $29.95 for up to 1,000 shares, and 3 cents a share for larger orders, about triple what others get. But my trades were executed almost instantaneously and at fair prices. I also found Schwab's reputation for good customer service was justified. I had a couple of complaints about two of my trades--problems, it turned out, caused by my own carelessness. For example, I thought I had voided a trade by clicking on "cancel". But I had only asked for the cancellation and did not wait for online confirmation that it had taken place. It hadn't. When I phoned Schwab's 800 number for an explanation, the brokerage house handled my questions courteously.

BUSINESS WEEK'S ethics policy bars staff members from writing or editing stories about companies in which they or their families own securities, or from trading in a security based on data gathered by the magazine before a story is published. I have complied with those rules and, as required, disclosed my holdings to the magazine's Editor-in-Chief.

While my executions were fast, I found the Schwab Web site a bit slow. Even after wading through the graphics-strewn "welcome" page, the next page you see has so many graphics and frames that it was too slow to load into the 486-class computer I have at home, which gets to the Net via a 28.8 kbps modem. I had no problem with my office pc, but it has a Pentium processor and a fast T-1 connection available to few investors. Some postings on aol show a sprinkling of similar complaints. A Schwab spokesman, Dan Hubbard, says Schwab has kept graphics to a minimum, and, in response to customer feedback, is considering launching an optional, text-only Web site.

RESEARCH. Schwab and other major brokers make stock research available to customers. Schwab offers First Call summaries of analyst recommendations and Standard & Poor's company and industry research (S&P, like Business Week, is a unit of The McGraw-Hill Companies). Schwab also carries company news headlines. But they weren't available for one of my stocks, even though it is a large-cap issue traded on the New York Stock Exchange. "Our coverage is pretty good but does not grab everything," noted Hubbard.

Fortunately, the Internet offers easy access to the most useful research--Securities & Exchange Commission corporate filings. These are available to anyone via the sec Web site ( Day traders who use Schwab still don't get the kind of data pros rely on--such as the size of bid and ask orders, which is a good ultrashort-term indicator of price movements. But when the market is acting as nutty as it has been, the best thing to do is to buy on dips as I did, salt the shares away, and try to forget about the lunacy.

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