Trade in your old way of investing; with these electronic tools, you can bring the hottest market data home quickly - includes related article on suggested investment software and services

Home Office Computing, July, 1993 by Linda Stern

Computers have changed the world of investing forever, and not just on Wall Street.

Anyone willing to spend about $300 and some time learning the process can screen stocks, mutual funds, and other investments as well as manage portfolios, download quotes, and execute trades with a level of data and efficiency that seriously rivals the biggest mutual-fund managers. The American Association of Individual Investors (AAII) counts more than 500 investment programs and more than 160 related databases on the market today for the personal investor. (For the AAH's phone number, as well as recommended software and services, see the box "The Electronic Investor's Toolkit. ") There are at least five online discount brokers, countless local clubs, and several online bulletin boards aimed at investors.

All of this new technology has merely replaced one question with another for confused investors. Now the toughest question isn't which stock or mutual fund to buy or even when to sell: It's how do you pick a system that works. To sort through it all, take some time to figure out what kind of investor you really are. Investment activity can be broken down into five basic jobs: picking a system, selecting investments, monitoring the market, making transactions, and keeping track of your portfolio. To find the best software and online services for your needs, consider how you want to deal with each of these five tasks.

JOB ONE: PICK YOUR SYSTEM

All stock market investors can be simplistically divided into two groups: fundamental and technical.

Fundamental analysts study individual companies for their business activities. A fundamental stock picker will buy a company because its earnings are growing or because it's selling at a price that's inexpensive relative to those earnings.

Earl V. Wise, Jr., of Betwick, Pennsylvania, is a fundamental investor. "It's nice to know what you are investing in," he says. When Wise wants to find a new stock to buy, he uses Value/Screen H by Value Line to sort through 1,600 stocks for those that fit his criteria. This program offers 49 variables that you can set in any way you want to find good investment prospects.

In a typical search, Wise might set the following parameters: companies that have steady dividend growth, an earnings per share growth over 15 percent a year, at least 50 percent institutional ownership, and a price-earnings ratio under 15. Some of the companies that meet his criteria include Coca Cola, Merck, and Microsoft--familiar names to anyone who follows Wall Street's winners. "All you have to do is find one winner," says Wise, "and the program has paid for itself."

Technical analysts, in contrast, buy and sell stocks on the basis of their price movements and momentum. They use investment software that gives them up-to-the-minute price quotes and charting capabilities. When a stock's chart indicates that its next price move will be up, a true technician will buy, without even having to know what kind of business the company in question is in.

Donald Beckett clearly remembers investing in the days when brokers posted stock quotes on blackboards with chalk. "I used to walk up to my broker's office with a notebook and write down the prices of all the stocks I liked," he recalls of his early market-watching days. But that was more than 40 years ago.

Today, the 69-year-old Beckett waits no more than a few seconds for a quote. He tracks 200 stocks and executes trades from a computer in his Orlando, Florida, condominium. At 5:30 every morning, he flips on two computers and a TV and keeps them going all day long.

One computer--his old 286 PC--is completely devoted to running X*Press Executive, a Denver-based information service that modems a 15-minute-delayed stock ticker to Beckett's screen. The television is tuned to CNBC, a cable channel that runs business and stock market news continuously during daytime hours. On his second computer, a 486/DX33, Beckett stays tuned to Fidelity On-line Xpress (commonly called FOX), the Fidelity Investments electronic network that he uses to secure up-to-the-minute stock quotes, transact buy and sell orders, review his net worth, and pay his monthly bills.

Beckett is a quick turnaround trader who will buy and sell on small price moves. Recently, he saw via X*Press that Emerson Radio, a company he's been watching for years, had dropped lower than it's been for a long time. He dialed his account on FOX and entered a buy order for "a few thousand shares" at 1 3/8 ($1.62 a share) and a sell order for when the price reached 1 7/8 ($1.87 a share). The buy order was executed immediately; the sale came three days later, and Beckett became a winner--on a trade that never could have taken place 10 years ago.

JOB TWO: SELECT INVESTMENTS

Choose your screening tools with your own investment parameters in mind, suggests John Bajkowski, editor of the AAII's Computerized Investing newsletter: "Each product has its own character or flavor. Value/Screen H focuses on the larger stocks and the more active securities. Market Base, on the other hand, is an on-disk analysis program that lists more than 5,100 smaller stocks." Market Base data, albeit with more limited screening ability, is also available through Prodigy.