Bringing Wall Street home: computers and the Internet have made securities trading from home easier than ever

Black Enterprise, April, 1996 by Tariq K. Muhammad

A quiet revolution is under way in the stock market. More and more consumers are forsaking brokerage houses to test the stock trading waters from the comfort of home.

The wealth of information available on the Internet, and through stock quote services, has made it possible for many investors to manage their stock portfolios from their home computer. Last year, Louis Hureston, 35, earned $15,000 trading securities from his Rockville, Md., home, with a 50% return on investment. Equipped with a PC with a 14.4 kbps modem, Prodigy and America Online--both of which offer specific investor tools and information--he has taken the mystery out of day trading.

Hureston has been trading from home for the past two years. An electrical engineer and owner of an information technology consulting firm, Hureston Associates, he had previously done isolated trading of no more than two or three stocks a year through a brokerage house. He began home trading after taking a voluntary severance package, which included a pension payout and a 401 (k) plan, from his former employer.

"I was looking for a way to earn more than the 4% return that I would get from a bank," says Hureston. Taking advantage of an option to manage his own pension plan, he transferred it to a brokerage account in the form of a self-directed IRA. Hureston was ready to trade. But he recalls, "I nearly lost my shirt the first time I traded without any advice from a broker."

In-depth company information was the critical piece of the puzzle he was missing. "Intelligence gathering is the most important aspect of home trading. I wouldn't recommend trading without it," asserts Hureston.

H. William Rutherford III, a financial consultant with New York-based Americorp Securities, agrees. "You have to make the commitment to watch the market and gather a great deal of information on companies prior to trading--or you could set yourself up for a big loss."

Hureston now has several means of gathering information on prospective companies, although none includes a real-time quote service. He taps the business and investment sections of his online service providers as well as investment news groups for pertinent information. In addition, he has an account with Legg Mason, a full-service brokerage firm that manages part of his portfolio, and a discount account with Charles Schwab, which complements his online information sources. His Charles Schwab account includes Tele-Broker, a service that allows him to check stock quotes and trade stocks via an 800 number, and Schwab's StreetSmart software for conducting trades online For other online transactions, Hureston uses Prodigy's PC Financial Network (PCFN), which allows him to buy and sell stock. He says PCFN not only quotes good stock fees, but gives him a breakdown of fees at full brokerage houses and discount brokers so he can compare costs. (For more on online stock trading, see "Resources for `Insider Trading,"' Techwatch, this issue.)

Most of Hureston's online investment time, 10 hours a week, is spent in intelligence gathering. He prefers Prodigy's Quote Track because it allows him to create multiple "tracks" on the companies in which he invests, or is planning to invest, and charts their performance over time. This lets him get a feel for the performance of several companies before and after he's committed his money to them. Quote Track provides company news and vital information, such as projected growth rate, projected earnings, operating income and price-earnings ratio.

Hureston, like many home traders, also enjoys the discount in trade fees provided by online trading. But he warns: "It's a pricing game because you may be saving money on the trades, but if you're not making good trades because of a lack of information--then you'd be better off going with a broker."