Journalist Center

35 Online Brokerage Firms Agree
To Improve Investor Education Content

WASHINGTON, D.C.///January 17, 2000///A non-profit Web project originating in Washington state will aid several hundred thousand investors nationwide in the coming weeks and months as 35 online brokerage firms agree to prominently feature the non-profit Investing Online Resource Center, the first non-commercial Web site dedicated solely to educating the individual consumer who invests online or is considering doing so.

"The Investing Online Resource Center establishes a new 'gold standard' for consumers who are or soon will use the Web for investing purposes,” said Deborah Bortner, who is the director of the securities division of the Washington State Department of Financial Institutions and a member of the non-profit Investor Protection Trust. “You can find literally thousands of places on the Web that explain the general ground rules of investing, but no one until now has made it their mission to spell out how to be an online investor in a focused and sophisticated Web site.”

Bortner added: “I applaud the 35 online brokerage firms that already have agreed to link to the Investing Online Resource Center. This extraordinary level of added visibility will mean that the Center is going to be seen by additional hundreds of thousands, or even millions, of investors in the coming months. I have asked a total of 60 firms to consider featuring IORC investor education content and we expect the list of those agreeing to do so to continue growing in the coming weeks and months.”

In an unusual move, Bortner approached the nation's top online brokerage firms and asked them to provide on a voluntary basis a direct link from their homepage (or a prominent backpage) to the IORC site. After less then a month, the online brokerage firms already agreeing to feature the Investing Online Resource Center site include:

Datek Online
http://www.datek.com
T.D. Waterhouse
http://www.tdwaterhouse.com
Muriel Siebert & Co.
http://www.siebertnet.com
Wingspan.com/BancOne
http://www.wingspan.com
Quick & Reilly
http://www.quickandreilly.com
Mr. Stock
http://www.mrstock.com
My Discount Broker
http://www.mydiscountbroker.com

AF Trader
http://www.aftrader.com
Wall Street Electronica
http://www.wallstreete.com
Wyse Securities
http://www.wyse-sec.com
BCL Securities
http://www.bclnet.com
BC Ziegler
http://www.bcziegler.com
Cales Investments
http://www.calesinvestments.com

Firstrade
http://www.firstrade.com
FOLIOfn
http://www.foliofn.com
Peremel Online
http://www.peremel.com
Sloan Securities
http://www.sloansecurities.com
Trading Direct
http://www.tradingdirect.com
Zions Direct Brokerage
http://www.zionsdirect.com
Access Broker
http://www.accessbroker.com
Bright Trading
http://www.brighttrading.com
Self Trading Securities
http://www.selftrading.com
KeyTrade Online
Wall Street Equities
http://www.wsei.com
On-Site Trading
http://www.onsitetrading.com
Freedom Investments
http://www.freedominvestments.com
MarkeTrade.com
http://www.marketrade.com
RUSHTrade
http://www.RUSHTrade.com
Terranova Online
http://www.terranovaonline.com

Bortner emphasized that the online brokerage industry reaction to IORC has been overwhelmingly positive. Muriel Siebert, president and chairwoman of Muriel Siebert & Co., Inc. said: "The Internet has leveled the playing field for the individual investor. Individuals now have access to the same information that institutions use … We believe that having IORC as a hyperlink on the Muriel Siebert & Co., Inc. site will help our customers put into practice our philosophy of responsible investing through online education."

The Motley Fool is welcoming the Investing Online Resource Center to the effort to educate investors about the benefits and pitfalls of online trading. According to Jay Perlman, the company's associate legal counsel: "The Motley Fool, which teaches investors how to take control of their own finances, is happy to recommend this important new educational resource."

WHAT IORC FEATURES

Despite its roots in Washington state, the IORC site features content that will be of interest to current and potential online investors nationwide. The slick, state-of-the-art IORC Web site is funded through the nonprofit Investor Protection Trust (IPT) and is a project of the Securities Division of the Washington State Department of Financial Institutions.

“We recognize that online investing is here to stay so the issue is how best to ensure that investors learn the ropes without getting burned first,” Bortner explained. “We use the best of available Web technology to draw investors into the site so that they are engaged and entertained, which is the key to using the power of the Web to teach. But we stop at giving investors the facts. We stand back and let them make their own decisions.”

The Investing Online Resource Center includes the following core elements:

“Are you ready?” quiz. This 8-question interactive quiz helps the investor evaluate if he or she is ready to become an online investor. The resulting score is used to place the investor in one of four categories. Additional tips and resource links are provided depending on the “state of readiness” ranking that emerges from the interactive quiz process.
Understanding the real costs of daytrading. This Macromedia Flash-powered presentation uses cutting-edge Web technology to illustrate the commission and tax consequences of daytrading. Using a simulated transaction, the Flash animation details how much would typically be paid out for commissions and taxes, which has the effect of reducing the initial trading profit in a dramatic fashion.
Eight things every online investor should know. Diversification, costs, limit orders and the possibility of technical snafus are just a few of the topics covered in this concise discussion of the realities of online investing. The list of eight topics was developed based on recurring investor complaints reported to a number of state securities agencies around the U.S.
Exposing the myths about online trading. Four of the most common myths about online investing - including the notion that all Web-based trades are automatically executed instantaneously - are addressed in the “myth v. reality” portion of the IORC Web site.
Online trading in the news. This is a regularly updated set of links to key media stories about online investing. Using RealVideo, the site will routinely feature a streaming video feed of a recent television news story about online investing.
Broker rating/ranking sites. After discussing the inherent shortcomings and inconsistencies of available ratings of online brokerage firms, this portion of the IORC site features nine different rankings. IORC is careful to note in this section that it neither endorses the methodologies of any of the rating systems, nor does it believe that the rating/ranking information is sufficient as a basis for choosing an online broker.

Indiana Securities Commissioner and North American Securities Administrators Association (NASAA) President Bradley Skolnik commented: "Deborah Bortner and Washington State's Department of Financial Institutions should be commended for developing this web site; it complements other investor education resources in laying out both the opportunities and limitations of online investing."

ABOUT THE INVESTOR PROTECTION TRUST

Based in Arlington, Virginia, the non-profit Investor Protection Trust (IPT) is America’s leading source of independent, non-commercial information on investing. Established in 1993 and funded with $2 million as part of a multi-state settlement, IPT is dedicated to providing consumers with the facts they need to become informed investors. IPT was chartered to fulfill two major functions: (1) to serve as an independent source of investor education materials and (2) to assist in the prosecution of securities fraud. IPT is available on the Web at www.investorprotection.org.

CONTACT: Scott Stapf, for IORC, at 703/276-1116 or sstapf@investingonline.org.

Brokerage Firm

Brokerage firms are licensed to buy and sell securities for clients and for their own accounts. Brokerage firms provide individual investors their link to the financial markets by employing brokers who carry out the investor’s order to buy or sell securities.

The firm may be a huge, corporation with hundreds of brokers, a small partnership with only one broker or any size in between. A brokerage firm could also be a full-service firm, a discount firm or somewhere in between. Typically, larger firms, and full-service firms, provide an increasing range of financial services, including financial planning, asset management, and educational programs. In addition, many maintain research departments for their own and their clients’ benefit. Other brokerage firms, such as online firms and discount firms, are increasingly providing their customers with a wealth of investment information on their websites and encouraging their customers to trade electronically.

An investor should note that while online and discount brokerage firms may charge lower commissions than full-service brokerage firms to execute their buy and sell orders, those firms are also less likely to provide the range of services mentioned above. This may not be an issue for many investors as extensive information and online account access are now readily available. The individual investors’ needs will dictate which services will be required.

Day Trading

This is a trading strategy in which the investor buys then sells, or sells short then buys, the same security on the same day in an attempt to profit from small movements in the price of that security. The strategy is to take advantage of rapid price changes to make money quickly.

This is a legal investment strategy; however, it is also highly risky and should be reserved for more experienced investors. Most of us do not have the wealth or time to make money by day trading, much less the ability to sustain the devastating losses that it can bring.

Diversification

This is an investment strategy wherein the investor spreads their investment dollars among different markets, sectors, industries, and securities. By adopting this strategy the investor seeks to protect the value of their overall portfolio in the event that a single security, industry or market sector takes a serious downturn and drops in price. Studies have shown that diversification can help secure your investments against market and management risks without sacrificing the level of return desired.

Establishing a well-diversified portfolio will depend on the investor’s age, assets, risk tolerance and investment goals. The securities mix that’s right for you may include small-, medium-, and large-cap domestics stocks, stocks in multiple sectors or industries and international stocks.

Limit Orders

Limit orders allow the customer to specify the price at which he or she is willing to buy or sell a security. While limit orders can help investors avoid buying or selling security at an undesirable price, thereby protecting them from the possibility of rapid price changes, there is the risk that the limit order will not be executed (i.e., the market price may quickly surpass your limit before the order can be filled). In addition, some firms may charge you more for executing limit orders.

Ratings/Rankings

In general, online brokerage ratings indicate the level of customer service or satisfaction with the online brokerage firm. There are several sources of online broker ratings and each may use different criteria in their ratings. In addition, the online broker ratings sources are not regulated entities. Investors should keep in mind that while a brokerage firm may be ranked #1, that is in terms of customer satisfaction and it does not mean that they will have a better chance of making you money.