The Advantages of Trading Penny Stocks Online

Buying penny stocks online can be very profitable, but you will need a very reliable stockbroker to get the most from these penny shares.

However, before you get started trading penny stocks, you will need to open a trading account. You can do this in one of two ways: you can open an offline account, which will require a full service or discount broker; or you can buy and sell penny stocks online, which will still require a deeply discounted broker. If you find the perfect discount broker, then you will get competitive commission rates and trading facilities online, which is an excellent incentive for signing up with an online broker.

Buying or trading penny stocks online is a good way to get in on the ground floor with a company, especially if you know that this company is going to be big.

Penny stocks are shares that are not trading on the NASDAQ or on any other stock exchange. They are shares that are priced below $5.00 and they trade on the pink sheets. These penny stocks are low priced, of course, but they have a high-risk attached to them because these stocks usually have a short and also erratic history of earnings and revenues.

If you know the risks and still want to go for some penny shares, then you are welcome to as you like a risk. But a lot of people will prefer to stay with their shares that are riding high in the NASDAQ, as that is safer for them and they prefer that rather than taking a risk with penny shares.

The risk when buying penny shares is the chance of a high price rise or fall every time that there is the slightest rumor floating around about the company. If there is a rumor about a fall in the company's quarterly profits, then that could create a big drop in their prices, so proceed with caution.

Do Any Companies Offer Free Online Stock Trading?

While some companies offer what they claim is "free online stock trading," no company can ever realistically offer a product for free, unless they are a non-profit organization with a stated goal to help bad stock traders learn how to trade better. And because no such organizations exist, you will have to trade with a company that charges you fees, whether it is explicitly or implicitly.

Companies that offer "free online stock trading" are generally offering free access to a members-only online stock trading site, which will allow you to use a range of stock trading analysis tools; it will also usually give you access to dozens of free stock tips from different sources, often including relevant newspaper clippings about publicly-owned companies.

If you opt for a "free online stock trading" company that gives you a free membership, that site will likely generate revenue by selling ad space or by charging commissions on trades. This means that your stock trading experience may be significantly inhibited by pop-ups, flashy ads, and biased information; or it may mean that you will have to pay excessive fees every time you make a trade.

On the other hand, some "free online stock trading" companies charge membership fees, but do not charge for trades. If you plan to make a lot of small stock trades each month, then you should consider opting for one of these companies, which will charge you each month, but wont require you to pay fees when you trade. However, on the other hand, if you plan to make few large trades, then you should consider selecting one of the online stock trading companies that will charge you per trade, rather than per month.

Keep in mind that there is no best solution to this problem for every person. The best solution for one trader may be completely different for you. This is why is it is crucial to inspect each deal in terms of what it will offer you personally as a trader.

How to Find the Cheapest Online Stock Trading Service

If you are looking for a cheap online stock trading service, then you will need a web-based firm that won't charge you for signing up for their membership site and will also give you a lot of free services that you can use when you are a member. Of course, there is also always the option of asking a broker about cheap stocks that could skyrocket in value very soon.

Brokers are very easily to find. You can get in touch with one through the telephone, fax or even online. The best option, though, is a face-to-face meeting, as that will allow you to see their license to facilitate stock trades and to provide buyers with information. Brokers are very informed stock managers; and they know the mechanics of trading, as well as a number of tricks that can help you save money. They can also point to cheap stocks that could make a strong leap in a short amount of time.

But to fully get the full "thrill" of online stock trading, you have to get yourself signed up with a website that will allow you to make all of these decisions on your own. This is the easiest and best way to put what you know and what you learned into practice. You can then see if that information is correct or not by checking price shares periodically before you ever buy.

Finding the cheapest online stock trading website isn't hard really, but you have to be aware of the prices that are associated with these websites. Some of the website offer advice that is from a broker themselves. So you will have to pay some price for using this service, however it will more then likely be a monthly fee that you will have to pay.

But when you are looking for a totally free online stock trading website, you will not want to pay a single cent for the services. These websites are available and a simple search will help you find them. The only paying that you will do will be to buy those stocks that are hopefully going to bring you in some cash.

How to Maximize the Return on Your Investment with Canadian Online Trading

There are a lot of websites that can help you start Canadian online trading. The right website can give you precious advice on how to start trading correctly and how to start making money through Canadian online trading services-whether they be relatively inexpensive services or high-quality services for professional traders; however, to begin with, you will have to find the right website for your needs.

The Internet is the best place to find specific information about trading. There are hundreds of websites that will offer you advice on online trading, no matter what strategy you plan to employ-no matter whether you want to trade futures or to profit off of shorts. Find the information and take it; because you never know when it could save you from a huge loss or give you a huge gain.

When you find the right website for you, then all you have to do is open an account and start Canadian online trading. When you do start online trading, you will be given the option of putting your money into worldwide shares, which are any shares that allow you to put some money into them and see how much the share equity increases before you purchase more. Of course, you will get up-to-the-minute stock prices on your shares and you will be able to purchase and sell shares extremely fast and through a secure server.

These websites really do have it all and they are the perfect place to begin your Canadian online trading career. But you don't have to be stuck to the computer screen all the time; you can come home from work and get the end-of-the-day stock prices-and then decide what to trade and what to keep for the following day.

Getting Smart Online

A study by the Pew Internet & American Life Project (www.pewinternet.org/
reports.asp) shows that 63 percent of U.S. adults are now online, and many
of them — especially those with several years of online experience — have
built Internet use into their lives in practical ways. This research indicates
that if you start using the Internet to do your own investing, you won’t spend
a significantly longer time in front of your computer than other people do.

Connecting to the Internet gives you access to millions of documents, a vast
variety of software programs, and high-caliber information that in the not-toodistant
past only large financial institutions could access. The World Wide
Web provides an easy-to-use interface with which you can access the Internet’s
many financial resources. With your Web browser, you can acquire an education
in investing, frequently avoid costly financial services, and conduct highgrade
online research.

Online investor tutorials

If you’re serious about seeing your capital grow at the fastest rate possible,
you need to get smart about investing. The Internet provides many online
tutorials, courses, and feature articles that can bring you up to speed.

Avoiding information overload

When you’re just starting out on the Internet, you
can easily become overwhelmed by the huge
amount of business and financial information that’s
available. The best way to avoid this information
overload is to divide these sources into specific
categories. You can add these categories to your
browser’s bookmark file. (Netscape Communicator
calls them bookmarks. In Internet Explorer, they’re
known as favorites.) For example, this chapter provides
information for these bookmark categories:

1-clubs
2-Investment news and market commentary
3-Investment publications
4-Investment simulations
5-Investment tutorials and training

Bookmarks offer a convenient way to retrieve
Web pages. When you find a Web page that you
know you’ll want to revisit, add it to your Web
browser’s list of bookmarks (or favorites — both
terms mean the same thing). The next time you
want to visit that page, you don’t have to search
for it or remember the series of links you followed
to reach the page in the first place.
Instead, you can simply select the page from
your list of bookmarks, and voilà! You’re there.
Your Internet browser has menu commands and
icons that enable you to create and organize
your bookmarks. For more information about
bookmarks, refer to The Internet For Dummies,
10th Edition, by Levine, Baroudi, and Young
(Wiley Publishing, Inc.).

Traditional investment bankers and brokerages that are competing for your
investment dollar often sponsor these sites.

These Web sites are usually 80 percent content and 20 percent sales pitch. In
my opinion, the ratio makes them well worth the annoyance or inconvenience
of having to complete a free registration or read an advertising banner. Here
are a few examples of these informative sites:

About Investing for Beginners (beginnersinvest.about.com) is
designed to help investors understand why the stock market exists,
what makes a stock undervalued or overpriced, and what makes stock
prices change. This collection of short online tutorials covers most of
the basics and can be very helpful for beginning investors.
Investing Basics (www.aaii.com/invbas) contains feature articles from
the American Association of Individual Investors (AAII). Articles show
individuals how to start successful investment programs, pick winning
investments, evaluate their choices, and more. The articles cost nothing
with your free registration. However, higher levels of information require
your membership. Basic membership is $29 a year for 10 issues of
the AAII Journal, the Annual Guide to the Top Mutual Funds, Yearly Tax
Planning Guide, Local Chapter Access, AAII Research portfolios, Discount
Broker Survey, Guide to Dividend Reinvestment Plans, Guide to Investment
Web Sites, and other reports. Enhanced membership is $53 and includes
all the Basic membership benefits, plus six issues of the AAII Computerized
Investing newsletter, member access to the Computerized Investing “sitewithin-
a-site,” and a 300-page online guide to Computerized Investing. The
$349 lifetime membership includes both the Basic and Enhanced membership
benefits for life.
CNN/Money 101 (money.cnn.com/pf/101) is written by the editors of
Money magazine and includes 23 interactive courses on managing all
your finances. Each online tutorial takes about ten minutes. Lessons
include calculators, quizzes, and a library for supplemental materials for
online investors who want to dig deeper.
NASD Investor Education (www.nasd.com/stellent/idcplg?
IdcService=SS_GET_PAGE&nodeId=13&ssSourceNodeId=5), provided
by the National Association of Securities Dealers, offers educational
materials for investors. In the top margin is information about investor
alerts, investment choices, investing resources, investor protection,
markets and trading, online tools for research, simulation games, and so
on. The left margin shows top links for investors. The center of the page
shows what’s new for investors, provides quick links, and offers investment
tips. The third column includes information about how to check
your investment professional’s background and an NASD Knowledge
Quiz. The Knowledge Quiz includes 18 questions guaranteed to test your
investment smarts.

Web sites for new investors

You can find many investor news, finance, banking, and investment organizations
on the Internet. Competition is high, so companies are willing to give
away a large amount of high-quality information, downloadable software, and
online tools for free. These organizations hope that individual investors, like
you, will become fans of their great services. This way the online company
can become a well-known entity that can charge advertisers for banner ads
or require financial institutions to pay high fees for using their services.

To see a few examples of investment sites for new investors, check out the
following Web pages:

MSN Money (moneycentral.msn.com/investor/research/wizards/
SRW.asp), shown in Figure 2-1, shows you how to research a stock.
Discover how to determine whether a company is financially sound, how
much investors are willing to pay for the stock today, how much investors
are likely to pay for the stock in the future, and how the stock compares to
the industry.
SmartMoney University (university.smartmoney.com) is a great
starting place if you’re a beginning investor or if you want to look up a
specific investing concept. Here, you discover the basics of investing
theory, are introduced to the concept of risk management, and get familiar
with the major asset categories.

Using Free and Fee-Based

Online investors have their choice of searching free or fee-based online databases.One advantage of both types of databases is that they’re constantlyopen.

That is, you can access them 24 hours a day, 7 days a week.It’s a no-brainer that savvy online investors should start with the free databases.If the information you desire isn’t available in the free databases, tryfee-based databases. If you carefully select a fee-based database for yourwell-constructed query, you can often get the information you want withoutpaying big bucks.

Totally free databases

The Internet is a network of networks linking millions of computers worldwidefor the purpose of communicating. The Internet was originally developedin 1969 for the U.S. military and gradually grew to include educational andresearch institutions. These colleges and universities have never charged forthe Internet they assisted in creating. Consequently, many free referencesources exist online. Here are a few examples:

Federal Reserve Bank of St. Louis (www.stls.frb.org/research/index.html) provides links to high-quality economic research such asFRED II (Federal Reserve Economic Data), a historical database of economicand financial statistics, and FRASER (Federal Reserve ArchivalSystem for Economic Research), a new collection of scanned images ofhistorical economic statistical publications, releases, and documents.Sign up for the mailing list and be notified about late-breaking data ornew publications.

The Federal Web Locator (www.infoctr.edu/fwl/index.htm#toc) isa service provided by the Center for Information Law and Policy and isintended to be the one-stop shopping point for federal government informationon the World Wide Web.

Government Information Locator Service (www.access.gpo.gov/su_docs/gils), shown in Figure 1-2, contains records of public informationthroughout the U.S. government. Government Information LocatorService (GILS) records and describes the GILS holdings of a particularagency. However, the GILS database is updated irregularly. Each GILSdocument is available as a downloadable ASCII text file and as anHTML file.

When all else fails — fee-based databases

For specialized investor topics, the only information available may be in anonline database that you have to pay for. How each organization charges fordatabase access varies from company to company. Charges can be by query,month, hour, or document. Most firms were designed for large corporate use,and they tend to flounder in their attempts to find equitable ways of chargingindividuals for private use.

Fee-based databases have several limitations. Often, they use their ownsearch methodologies that require some getting used to, and they can becostly. The fee structure may be geared for corporations and too expensivefor individual use. Databases tend to be traditional and may not have that bitof unique information you’re seeking.Here are a few examples of fee-based databases (all price quotes are as ofthis writing and are subject to change, just like everything else on theInternet):

Lexis-Nexis (www.lexis-nexis.com) includes information from majorregional and national newspapers, news sources, company information,and financial information, including SEC reports and proxy statements,in addition to other business sources in English and foreign languages.Find the information you need in one of two ways: select the product orservice that you want to subscribe to or choose a particular topic. Lexis-Nexis accepts online credit-card payments. You can pay as you go, $3 fornews sources, $4 to $12 for company and financial information. Or youcan pay by the day or the week. For example, newspaper, business, andfinancial databases are $250 weekly or $75 daily. The top 34 businesssources are $150 per week or $50 per day. Major papers (such as TheNew York Times, The Washington Post, and the Chicago Tribune) are $75per week or $30 per day.

Highbeam Research (www.highbeam.com/library/index.asp) has,among other things, electronic access to many newspapers, periodicals,and journals that you can search by keyword. Highbeam Research is agood source for background or academic financial research. Basic serviceis free and limited to previews of articles. Full membership includesunlimited access, lets you archive articles, and provides alerts whennew articles about a topic you’re researching are posted. A free sevendaytrial is available. Full membership is $19.95 per month or $99.95 for12 months.

STAT-USA (www.stat-usa.gov) is sponsored by the U.S. Department ofCommerce. This site includes economic indicators, statistics, and news.It also offers data about state and local bond rates, foreign exchangerates, and daily economic news. Statistics include interest rates, employment,income, prices, productivity, new construction, and home sales.Subscriptions for individuals are $75 per quarter or $175 per year.

Getting Online Investor InformationGeared to Your Needs

Today, online investors come from the entire spectrum of society. Onlineinvestors range from young to old, beginners to professionals, and so on.Each of these groups has specific needs and interests. Many of the individualsin these special-interest groups are looking to online communities foranswers and information about their special investment needs. Others seecommunities as a way to make online investing simpler because informationis geared to their way of thinking. The Internet provides special Web sites targetedto online investors with specific interests. The following is a sample ofwhat you’ll find on the Internet.

Investor Web sites for children

Every day you’re bombarded with information about the stock market. Turnon the car radio, walk through a hotel lobby, or watch the news on television,and you get updates about the stock market whether you want to or not. In arecent Merrill Lynch survey of 512 teenagers between the ages of 12 and 17,about 9 percent who save their money invest in mutual funds or stocks. Howcan young people invest? A parent must open a custodial account because aminor can’t make securities transactions without the approval of an accounttrustee. The Merrill Lynch statistic indicates an interest in investing that’ssupported by a number of online Web sites aimed at children.Here are a few examples of the wide range of online resources that can meetthe needs of even the youngest investor:

Big Money Adventure (www.agedwards.com/public/content/fcgi/bma/frontpage.fcgi) is a site in which you select your guides andadventure based on your age: 2 to 6, 6 to 10, and 10 to adult. Visit theRainbow Castle, jump into a storybook adventure, and learn aboutinvesting, or you can play a stock-picking game and win prizes.

The Young Investor Web site (www.younginvestor.com) is an interactivecommunity designed for children and parents. Find out the fundamentalsof managing money and investing. Don’t forget to visit the gameroom and play a few investing games.

Web sites for young investors

A recent NASDQ (National Association of Securities Dealers) survey showedthat college-aged individuals (18 to 34 years old) account for about 20 percentof all U.S. investors. Online brokerages target these investors as their next revenuesource. Many online brokerages understand that college-aged investorsdon’t have a lot to invest now but will likely become substantial investorsover time.

Here are a few examples of sites that target this group:

Edustock (library.thinkquest.org/3088) is an educational Web sitedesigned by high school students for investors young and old. The Website includes beginning investor tutorials about how to select stocks,company profiles, and a free 20-minute delayed online stock marketsimulation.

Independent Means (www.anincomeofherown.com) is a Web sitedesigned for women under 20 (and their over-20 mentors) to find anincome of their own. The motto of the Web site is “girls, money, andpower.” Discover articles about money and investing, teen businesspages, and more.

TeenAnalyst (www.teenanalyst.com) is staffed by a group of younginvestors aged 15 to 16 years old. Using their experience and knowledgeof investing, they bring young investors information in a fun and informativemanner.

Other investor special-interest sites

Many financial institutions sponsor special-interest Web sites that provideselected groups with the information they need to be educated investors.These and other specialty Web sites (which are often nonprofit) understandthat many investor sites attempt to educate online investors but fail to do socorrectly because they don’t understand the unique needs, top issues, andinterests of the Internet users they serve. The following sections presenta sampling of the various special-interest investor Web sites available:

Senior investors

Older investors can turn to the following sites for investment information:

Money & Investing (www.eldernet.com/money.htm) is geared tosenior citizens. You access this site from the ElderNet home page.ElderNet’s Money & Investing site provides tutorials on the basics ofinvesting, mutual funds, stocks, and bonds. Also, it includes soundadvice on how to select a financial advisor.

ThirdAge (www.thirdage.com/money) provides information aboutinvesting, money management, and retiring well for adults in their mid-40s through 50s. If you’re investing for an early retirement, this Web sitecan help you.

Socially responsible investors

If you have an active social conscience, consider these sites as startingpoints for your investment research:

SocialFunds.com (www.socialfunds.com) has more than 1,000 pages ofstrategic content to help investors make informed decisions regardingsocially responsible investing. The Web site provides news, information,research, investment analysis, and financial services.

The Investor Responsibility Research Center (www.irrc.org) providesresearch related to corporate governance, social issues, and environmentalpractices. Get information about corporate benchmarking andenvironmental indexes.

The Social Investment Forum (www.socialinvest.org) offers comprehensiveinformation, contacts, and resources on socially responsibleinvesting. The Web site includes an online guide, financial services,news, and research.

Minority and women investors

The following sites are representative of Internet investment resources targetedspecifically at minority and women investors:

The Gay Financial Network (www.gfn.com) provides free financialnews, information, and services. The site also includes articles by featuredcolumnists and a weekly poll.

WIFE.org (www.wife.org) is the Web site of the Women’s Institute forFinancial Education (WIFE), a nonprofit organization dedicated to financialindependence for women.

iVillage MoneyLife Personal Finance for Women (www.ivillage.com/money) targets women who want to take control of their finances andstart investing. Other topics include handling credit and debt, lifeand money, and money talk.

Understanding How Newsgroups

Newsgroups are discussion forums (or electronic bulletin boards) where
individuals post messages for others to read and answer. New newsgroups
appear — and old, unused newsgroups disappear — almost daily.

The advantage of these groups is that the opinions of authors are disparate
and come from around the world. There are between 20,000 and 50,000 publicly
accessible newsgroups. Some of these newsgroups are filled with spam
(junk mail), and others are inactive shells. Newsgroups range from serious to
silly and support almost all religious ideologies, political points of view, and
philosophical beliefs. If you want to know what investors think about a particular
investment, a newsgroup is a good place to look for the answer.
Newsgroup participants aren’t necessarily investment professionals, but
many of them are savvy investors.

Knowing how newsgroups are named can help you determine whether a
certain newsgroup may interest you. Newsgroup names typically have two or
more parts. The first section of a newsgroup’s name is the most general
grouping or topic. Here are some examples of different first names that may
be of interest to online investors:

Section ........................ Description

Alt .......................... Alternative subjects, ranging from the serious

............................... (investing and finance) to the weird (occult and

............................... alternative lifestyles)
Biz ......................... Business subjects, including commercials

Misc ....................... Miscellaneous topics, from items for sale to finance

Newsgroups can have names with two sections. For example the first section
can be alt, and the second section can be invest. The name of the newsgroup
then would be alt.invest. Some newsgroups do not have any subgroups,
but others have 20 or more subgroups under the major topic. One example
of a major topic is alt.invest.real-estate, which branches into other
newsgroups, such as alt.invest.real-estate.methods. That is, each
component of the name represents a different level in the newsgroup. The last
named component is the actual theme of the group. For example, alt.invest.
real-estate is about investing in real estate.

Subscribing to a newsgroup is easy. With most browsers, you simply click the
name of the newsgroup you want to subscribe to. For details, use your Web
browser to check out Beginners Central at Northern Webs (www.northern
webs.com/bc/index.html). Discover how to navigate your browser’s newsreader,
select a newsgroup, and post to newsgroups.

Finding the perfect newsgroup

The Internet provides various sources for finding Usenet newsgroups.

Here are a few examples:

Harley Hahn (www.harley.com/usenet) provides Harley Hahn’s Master
List of Usenet Newsgroups. The master list includes a short description
of each newsgroup, placed in a category and organized in an easy-to-use
search list.
Yahoo! Groups (groups.yahoo.com) offers nearly 3,000 investment
groups and more than 600 online investing mailing lists. In this population,
60 subgroups focus on e*Trade. Registration is free. You can even
start your own Yahoo! group.

Robot Wisdom Newsgroup Finder (www.robotwisdom.com/finder/
index.html) enables you to search by historical period, numbers of
articles, and country or state locations. This site uses clickable maps of
the United States and the world. Responses include the newsgroup
name, address, description, charter, and sometimes Frequently Asked
Questions (FAQs) if available.

Tired of the same old newsgroups? Discover all the Web’s new newgroups by
going to Newsville at www.newsville.com/news/newnews.html.

Finally, some investor news reading

One of the easiest ways to find newsgroups is to go to Google (www.google.
com). Click Groups, then click Browse all of Usenet. At the next Web page
shown in Figure 1-1, to select your topic enter your keyword in the Directory
Search or scroll through the Usenet names. Regardless of which approach
you select, you’ll discover a listing of newsgroups that may be of interest to
you. Each group includes the group’s name, a description of the group, the
group’s category, and other characteristics. These characteristics can
include information about the number of group members, whether the group
is open to the public, restricted, moderated, and so on.

The best feature of this site is that you can post your questions directly to
the newsgroup without a great deal of fuss. You can also search newsgroup
articles for keywords. For example, assume that you’re thinking about investing
in Microsoft. As part of your research, you can see what newsgroup members
had to say about the company, and when they said it.

Another great feature is that you can research the author of the newsgroup
article. Google shows how many articles the author has posted and which
newsgroup that author is posting to. This data can indicate which newsgroups
regularly carry the type of information you’re seeking.

Getting the Message from
Investor Message Boards

With investor message boards, you can read what other online investors are
saying about an investment that may interest you. Overall, these message
boards include many honest, knowledgeable investors, with only a few
unscrupulous fraudsters with questionable intentions. Therefore, you must
determine what is sound advice and what is trash. Make certain that you
complete your own research before acting on any message board information.
The following are a few of the top-rated investor message boards online:

Silicon Investor (www.siliconinvestor.com/stocktalk) has several
levels of membership. Basic membership is free with your registration.
The free, limited level allows you to post between one and two messages
per day. You can’t turn off ads and can’t make use of advanced features
such as Next 10 and Search. Paying subscribers have unlimited posting
privileges, the ability to turn off ads, and access to Next 10, Search, and
Advanced Search features. Subscriptions are $19.95 per month, $29.95
per $29.95, and $49.95 for six months. Annual subscriptions are $89.95,
and a lifetime subscription is $199.95.

The Motley Fool (boards.fool.com) is free with your registration. Here
you find company discussions sorted by name, industry, and market
analysis, as well as an investors’ roundtable for discussing strategies.
Before you post, don’t forget to read the “Fool Community Guidelines” at
www.fool.com/help/?display=community04.
Raging Bull (www.ragingbull.com), now owned by Lycos, has more
than 15,000 active message boards. Participants earn a “power rating”
that indicates how much credibility a member has earned with the community.
Features include lists of the most active message boards and
message boards with the greatest number of posts.

Uncovering Investor Information
from Mailing Lists

Mailing lists are e-mail groups that are started by organizations or individuals
who purchase mailing list programs. Then they advertise to others who may
be interested in joining a topic-specific discussion group. The advertisement
usually provides precise instructions for subscribing to the mailing list.

You subscribe to a particular mailing list by sending an e-mail message to the
list’s moderator. In return, you receive an e-mail message confirming your
enrollment. This message typically includes the address you use for posting
messages to the mailing list, the rules of the discussion group, and instructions
for removing your name — that is, unsubscribing — from the mailing list.

Mailing list participants exchange e-mail about issues in their subject areas. If
someone starts a thread, or topic, that you want to comment on, you post
your comments to the list, using the instructions you received when you
subscribed.

To answer questions or make comments, subscribers send an e-mail message
to the mailing list address (which differs from the mailing list program’s
address), and everyone gets a copy of the message. Unlike newsgroups, most
lists are moderated so that inappropriate messages aren’t sent to the group.

Today more than 300,000 mailing lists exist. You may find a mailing list while
surfing the Net, but they tend to be private. The best source for finding an
investor-related mailing list is Tile.net (www.tile.net). Tile.net has more
than 66,000 public mailing lists and is growing. Don’t despair; the site is
searchable and provides information that describes each mailing list and how

(Sometimes knowing how many subscribers will receive your investment
question is a good idea.)

Don’t lose that information about how to unsubscribe! Mailing list members
receive an average of 30 messages per day. If you just signed up for four mailing
lists, you may have more than a hundred messages tomorrow.
to subscribe (and, more importantly, how to unsubscribe if it doesn’t meet
your requirements). Another good mailing list directory is CataList (www.
lsoft.com/lists/listref.html), which includes more than 66,000 mailing
lists. It’s searchable by site, country, and number of list subscribers.

Setting Up Your Basic Investment

Search engines are commercial enterprises that collect and index Web pagesor Web page titles. You can use them to help you sift through all the Webpages out there so that you can find the information you need.

Some of these enterprises review the sites they collect, and others providesite information unfiltered and unedited.

Some search engines (like Yahoo! atwww.yahoo.com) are hierarchical indexes and use subject listings that aresimilar to the card catalog in a library. Often, you can search hierarchicalindexes by keyword (a word that sums up or describes the item or conceptthat you’re seeking) and by topic.

Knowing how to use a search engine is a basic Internet skill. Currently, morethan 600 different search engines exist on the Net. These Internet tools canbe divided into two categories: metasearch engines and search engines।

Metasearch engines

Metasearch engines enable you to enter a single search term to query manyindividual search engines. This kind of all-in-one shopping is used to matchyour inquiry to the millions of Web pages on the Internet. Metasearch enginesoften have different approaches to presenting your results. Some metasearchengines just query a wide variety of search engines and report your resultswithout you having to go to several search engines.

Other metasearch enginesbypass existing search engines and query multiple online sources for yoursearch results. Here are some examples of metasearch engines:

Dogpile (www.dogpile.com) searches the Web, Usenet newsgroups, FTPsites (sites for downloading software and data via FTP — the file transferprotocol), weather information, stock quotes, business news, and othernews wires. (For more information about Usenet newsgroups, see thesection “Understanding How Newsgroups Can Help You,” later in thischapter.) This site also includes a Web catalog.

Momma (www.momma.com) simultaneously queries a series of searchengines and properly formats the words and syntax for each sourcebeing probed. The search results are then organized into a uniformformat and presented by relevance and source.

Metacrawler (www.metacrawler.com/index.html) works like Dogpilebut doesn’t search Usenet newsgroups and FTP (file transfer protocol)sites.

Search results aren’t annotated.

SurfWax (www.surfwax.com) allows users to put together search sets.For example, an “Investor” SearchSet can include The Wall Street Journal,CNNfn, The New York Times, and so on. You can also use tools for exploringsearch results. For example, SiteSnaps allows you to quickly view pagecontent, and ContextZooming allows you to search highlighted terms.FocusWords offers suggestions about how you can narrow or broadenyour search. Finally, you can use an InfoCubby to save your search resultsfor later retrieval. SurfWax offers three levels of service (free, silver, andgold). With your free registration, you receive the free level of service thatincludes three SearchSets of up to 15 sources each. Silver and Goldsubscribers pay $24 and $60 per year, respectively. Each registered levelhas access to all of SurfWax’s capabilities; the difference is the extent ofpermitted uses. (Firm pricing is available on a custom basis.)

Profusion (www.profusion.com) allows you to search one, some, orall of the listings from AltaVista, About, AOL, Lycos, Raging Search,WiseNut, Metacrawler, MSN, Adobe PDF, LookSmart, Netscape, Teoma,and AllTheWeb. You can fine-tune your search by selecting your searchtype, the number of results per page, the number of results per source,and when you want the search to timeout. You can narrow your searchby looking into vertical search groups, such as Business or Finance.

Vivisimo (www.vivisimo.com) technology was developed by researchersat Carnegie Mellon University. Vivisimo doesn’t index the Web; it simultaneouslysearches several major search engines and directories (suchas Fast, MSN, Yahoo!, AltaVista, Lycos, Open Directory, Excite, andWebCrawler). The Vivisimo technology then groups results into clustersof titled folders that best fit the query.

Popular search engines

Search engines are trustworthy Internet programs that match the words inyour query to words on the Internet. Each search engine is a competitive,commercial enterprise with different databases, search programs, and features.Everyone has a favorite search engine. The search engine that is best isthe one that works the best for you.

Search engines employ spiders or crawlers (robot programs) that constantlyseek new information on the Internet. These robot programs index and categorizetheir findings and then let you probe their lists with keywords. Theengine shows your search results with short descriptions and hyperlinks.Just click the hyperlink to go to the Web page you seek.

Personalized search engines

With more than two billion Web pages, yoursearch for investment information is likely todredge up many articles that are outdated orsimply not relevant.

One way to increase yourtreasure-to-trash ratio is to use a personalizedsearch engine. My Yahoo! (my.yahoo.com)allows users to set up profiles for (among otherthings) specific news topics and a stock portfolio.

The My Excite Web site (my.excite.com)includes much of the same personalization featuresas My Yahoo! With your free registration,you can select page colors, settings, content,and layout (two columns or three?).

Here are a few of the more popular search engines on the Net:

Excite (www.excite.com) enables you to browse many subject categories,such as investing. It uses a combination of concept (a generalidea) and keyword (a specific word in the Web page) searches, so theresults are usually pretty good. If you’re unsatisfied with your findings,click the Excite Metasearch link at the bottom of the page for moreresults.

Google (www.google.com) is currently ranked as the number-onesearch engine. It has the largest amount of the Internet indexed. Googleoffers the Google Toolbar, a quick-and-easy-to-install toolbar that automaticallyappears along with the Internet Explorer toolbar to increaseyour ability to speedily find information on the Net.

MSN (search.msn.com) enables you to set preferences to automaticallycorrect spelling errors, select the number of results per page, and determinewhether search responses should include summaries. Additionally,you can search from any one of MSN’s international Web sites. If you’reunfamiliar with search engines, click Help to get the advice you need.Additionally, MSN has a new beta that is supposed to be a “Googlebeater,” a search engine, index, and crawler. For more information seebeta.search.msn.com/default.aspx?FORM=HPRE.

Yahoo! (www.yahoo.com) is a popular starting point. This directorysearch engine includes a vast array of subject directories, categories,and special services, such as People Search, Weekly Picks, What’s NewThis Week, Yahoo! Loan Center, Finance Yahoo!, and Real Estate Yahoo!

Online Investing Fundamentals

The Internet has more than two billion Web pages and is still growing. Thisinformation overload has sent some timid investors to full-service brokers,where they pay high commission fees for brokerage services and investmentadvice. Smart online investors can avoid information overload by developingtheir own information systems.Now we will show how you can take maximum advantage of the Internet’smany investment tools, links, and resources. The chapter explains theInternet basics of using search engines, finding investor newsgroups,Subscribingto investor mailing lists, accessing online databases, and using Websites tailored to your specific needs to maximize your personal wealth.

Building Your Own OnlineInformation System

Investments provide opportunities to make money in both a bull market (thatis, an up market) and a bear (down) market. No one ever knows for certainwhether the market will go up or down, but investors can develop an informationsystem to watch indicators for potential price changes and investmentopportunities.

This chapter introduces the elements you can use for buildingan online investment information system that meets your specific needs.Investment indicators often signal future market trends. For example, changesin bond prices an

d interest rates often reflect trends that may affect stockprices. That is, if bond yields decline, investors often rush to purchase stocks,causing stock prices to increase.Investors need this information to decide whether they should buy, sell, or hold.Gathering, organizing, and saving this information can be time-consuming.

However, using your own online information system can make the process moreefficient.Successful investing involves five basic steps:

1. Identifying new investments

2. Analyzing investment candidates

3. Purchasing investments

4. Monitoring investments

5. Selling investments — and reaping your rewards

The following sections summarize online sources of the information you needfor each step. Knowing what type of information you need and where to get itonline can help you build your personalized online information system.

Identifying new investments

Before investing, you need to clearly state your financial objectives andknow your risk-tolerance level. This information can help you determineyour required rate of return. By doing this type of homework, you candetermine which categories of financial assets you may want to considerinvesting in.

For example, if you’re selecting investments for your IndividualRetirement Account (IRA), you don’t want to invest in tax-exempt municipalbonds (because being tax-exempt twice isn’t the best way to make use of taxexemptions).

Here are some examples of online sources for identifying investmentopportunities:

Company profiles describe a firm’s organization, products, financialposition, chief competitors, and executive management.

Direct purchase plans (DPPs) show how to purchase stock in a companywithout paying a broker’s commission.

Directories of investor sources provide hard-to-find information that’snecessary for investment decision-making.

Dividend reinvestment plans (DRIPs) describe how to join dividendreinvestment programs to purchase company stock at a discount andwithout a broker.

Initial public offerings (IPOs) are new opportunities for investorprofits.

Investing e-zines (electronic magazines) provide educational articlesand pertinent facts for beginning and experienced investors.

Mailing lists provide opinions and investors’ insights about investmentcandidates.

News reports on the Net can provide information about new investmentopportunities.

Newsgroups are informal, online groups of individuals who share theirideas about a common interest. You can find dozens of investment-relatednewsgroups with topics ranging from specific types of investments toinvestor strategies.

Online databases (free and fee-based repositories of information) providehistorical stock prices, economic forecasts, and more.

Search engines (specialized Internet programs that seek the data youdesire) provide you with links to the Web pages that have the investorinformation you want.

Stock recommendations from professionals enable you to find out whatbrokers and analysts are saying about your investment selections.

Mutual fund and stock screens for selecting specific securities enableyou to sort through thousands of investment candidates in seconds tofind not only the right investment but also the best investment available.

Analyzing investment prospects

The process of analyzing investment prospects includes examining groups ofinvestments or individual securities. For this task, you need information toforecast the timing and amount of future cash flows of investment candidates.That is, the price you pay today is based on the future income of the asset.Figuring out what the asset will be worth in the future requires some homework,analysis, and luck.

Here are a few examples of online sources for thistype of information:

Company profiles and annual reports often forecast the company’sfuture revenues and earnings. (For more information about findingannual reports online.

Databases (free and fee-based online sources) provide news, marketcommentary, historical stock prices, economic forecasts, industry standards,and competitor information. I introduce you to these databases inthe section “Using Free and Fee-Based Online Investor Databases.

Earnings estimates from brokers and analysts give you forecasts of acompany’s future earnings.

Industry or business-sector news can frequently indicate whether anindustry is in a downward cycle.

National economic data can point you toward a particular investmentstrategy. For example, if the country is going into a recession, youmay want to select stocks that provide you with some defense.News databases offer breaking news that can help you judge whetheryour stock purchase is a winner or a loser.

Securities and Exchange Commission (SEC) filings provide you withfinancial statements from publicly traded companies. These companiesare required to file financial statements every 90 days and more often ifbig events are happening within the firm. More than 7,000 publiclytraded firms are now filing online.

Purchasing investments

After you decide which investments you want to purchase, you have to decidehow you want to purchase them. For example, you must decide whether youwant a full-service broker or, for online investing, either a premium discountbroker who offers online trades and advice or a discount broker that onlyexecutes your trades and doesn’t offer any recommendations.

You may participate in an automatic investment plan (AIP). With yourapproval, this type of plan deducts a certain amount from your checkingaccount to purchase mutual funds, savings bonds, or other investments.

Monitoring investments

If you have more than one investment, you likely want to monitor and comparetheir performances to the market and to similar investments.

Here are afew examples of the information and the software you need to accomplishthis objective:

Market-monitoring tools send alerts that you determine. For example, ifyour stock increases by 25 percent, you may want to consider selling it.You can set up an alert that sends you an e-mail message notifying youthat your stock has reached this target.

The Internet provides many portfolio management programs that let youknow when your investments are in the news.

Online portfolio management tools can automatically send you an e-mailmessage at the end of the day to let you know whether your investmentsgained or lost value.

PC-based portfolio management tools are downloadable software programsthat assist you in tracking your investments and record keeping.

Your online broker may track your portfolio for you and keep records ofyour profits and losses.

Selling investments

You need to decide what proportion of your personal wealth you want toinvest in specific assets, how long you want to hold those assets, andwhether now is a good time to sell those assets to harvest your rewards.

To that end, you need information about the following topics:

Asset allocation methodologies: You need to determine what portion ofyour portfolio should be invested in mutual funds, stocks, and bonds.

Capital gains and tax issues: The Smart Money Capital Gains Guide(www.smartmoney.com/tax/capital) can assist you in understandingthe tax implications of investing activities.

Selling strategies: Determining when you should harvest your investmentsrequires using specific order execution strategies, mutual fundredemption plans, and analyses.