By JoAnne Sommers
Canadians now use the Internet for everything from booking vacations to searching for new romantic partners. So it’s not surprising that growing numbers of us are researching and managing our investments online.
A recent TD Direct Investing Poll found that 41 per cent of respondents use the Internet to research their investment options; 22 per cent expressed comfort with managing their investments online and another 13 per cent said they invest online more frequently than they did five years ago.
The growth in popularity of “do it yourself” (DIY) investing has a lot to do with convenience, as well as flexibility and control.
“You can log on 24/7 and never need to make an appointment,” explains Robert Nuyten, a Toronto-based BMO InvestorLine consultant. “And online brokerages offer a variety of tools to help you manage your account with confidence.”
Online brokerage accounts can hold a wide variety of investments. BMO’s list includes mutual funds and exchange-traded funds (ETFs), guaranteed investment certificates (GICs) and bonds. Investors can also purchase individual stocks through such accounts.
Probably the most compelling benefit of the DIY approach is significantly lower commissions. “The average cost of a single online trade ranges from $9.95 to $29,” Nuyten notes. “By comparison, if you use a full-service broker it’s in the $100 to $200 range.”
It pays to shop around before selecting a trading site. There’s a wide range of online brokers to choose from and they compete intensely by offering special rates and deals, such as free trades for a specified period of time. Compare features, pricing and promotions carefully. You can also get recommendations from friends, family and co-workers, and visit investing blogs and financial discussion forums to find the broker that’s best suited to your needs.
Once you’ve chosen a broker, think about the purpose of your online trading activities. “What do you want to accomplish?” asks Nuyten. “Dabbling in the market is very different than building an investment portfolio. Your intentions will determine the type of account that’s best for you.”
To help you decide, there are advanced tools and features available on the direct brokers’ websites. You can also discuss the matter with a representative at your local bank branch.
DIY investing is not for everyone. Independence generally means limited or no access to financial service professionals when you have questions about risk or the suitability of certain investments. You’re also on your own when it comes to dealing with the emotional roller coaster of price swings and questions about whether to sell a holding that has appreciated or hold on to it in hopes of increasing your gains.
Online trading also involves a lot of work. Although all trading sites offer tools and huge amounts of research information, you need considerable self-discipline to work through all of it. So be honest with yourself – is this really for you?
If it is, then go for it. And good luck!
- The Internet has loads of basic explanatory information for people who are new to DIY investing. Start with GetSmarterAboutMoney.ca, a non-profit site that provides good, basic information.
- The investor education centre, Globeinvestor, at www.theglobeandmail.com is worth a visit.
- Investopedia (www.investopedia.com) is another website worth checking out; it’s like an online encyclopedia.
A GPS for Investing
Online investors have traditionally been on their own when it comes to making decisions, but for those who want personalized advice and validation for their choices, BMO InvestorLine recently introduced adviceDirect. The fee-based service, which is unique inCanada, provides continuous portfolio monitoring and notifications and advises investors when their portfolios require attention related to asset allocation, level of diversification and poorly rated equities. It also lets you know if the portfolio has more risk than your investor profile allows.
“The launch of adviceDirect represents a new way to invest and helps take the guesswork out of investing decisions by offering investors personalized advice so they can stay in charge of their portfolio,” says Robert Nuyten, a Toronto-based BMO InvestorLine consultant. “In many ways, it is like having a co-pilot to help you manage. Not only do we alert you, but we provide recommendations and advice about where to correct issues so your portfolio is aligned with your investment objectives.”
adviceDirect isn’t for casual investors: the minimum account size is $100,000, for which you get 30 free trades, and the cost is 1 per cent of the account value annually. For accounts between $500,000 and $1 million, the fee is 0.75 per cent and over $1 million it is 0.5 per cent.
The new service is very popular with BMO InvestorLine clients, Nuyten says. “Our feedback was that some self-directed clients wanted something between full service and complete independence. There was nothing in between those two extremes before and adviceDirect fills that void.”
More information is available online at www.bmo.com/advicedirect.