The BW Online conference of May 28 featured the author of the June 5 Business Week Cover Story on online investing, BW Associate Editor Gary Weiss.
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OnlineHost: Good evening and welcome! Tonight Business Week Online blasts off into cyberspace with the Cover Story from the current issue (June 5), on online investing. Our guest speaker is the author of that story, BW Associate Editor Gary Weiss (GARYW BW).
Gary Weiss spent weeks hunched over his computer keyboard discovering -- and evaluating -- the information and services now available for investors online before writing his highly personal story.
A native of New York City, Gary Weiss graduated from City College of New York and Northwestern's Medill School of Journalism. In his nine years on BW, he has been twice honored for investigative reporting by the Deadline Club of the Society of Professional Journalists.
The moderator tonight is Jack Dierdorff (JackBW), consulting editor of BW Online. And now on to your questions and comments about online investing.
JackBW: Good evening to all of you on AOL. And hi, Gary Weiss.
GARYW BW: Hi, Jack!
JackBW: Gary, here's an opener for you.
Question: How did you get started on this story, exploring information and services for investors out in cyberspace?
GARYW BW: Well, back toward the turn of the year, the entire staff of BW went online, and I started exploring the investment features of the online world, starting with AOL. I was astounded by the difference between the reality online and the portrait of online investing portrayed by the media.
JackBW: What was that reality, Gary? Or virtual reality, if I may.
GARYW BW: The reality, quite simply, is that there's a lot of useful stuff out there. The media focused on scams and other sensational stuff.
JackBW: We have another question for you here.
Question: What are the pluses and minuses of using the Net for investors?
GARYW BW: The main plus is that you can get tons of good information. The main minus is that it can take a bit of practice, time, and experience to separate the wheat from the chaff.
JackBW: Gary, how does the online info compare with what you can get from a broker?
GARYW BW: Most of what you get from a broker is inherently biased. Brokers are interested in selling whatever makes the most money for them, and if you make money, that's fine -- if it doesn't interfere with them making money. Online, people have their prejudices, but overall you get a better chance of getting a complete answer to any given question.
JackBW: CLabash asks this.
Question: I've read that 400,000 people currently invest online. What are the implications for the future, especially for banks?
GARYW BW: I think full-service brokers have the most to lose, because online brokerages make it easy for investors to use discount brokerages -- which is basically all that online brokerages are. I don't see much impact on banks. I don't see much change in saving and lending practices.
JackBW: Gary, do you have any general advice for Callfrwd? We can't make specific recommendations.
Question: Gary, based on your research, if you have between $10,000 and $50,000 to invest, what strategy are the experts recommending?
GARYW BW: Simple: Put it in an index fund. That isn't a lot of money to play with. You can't get very diversified with just a few thousand bucks.
JackBW: Gary, I was going to ask why you said so little about what's on AOL, but BHBauer did it for me.
Question: Gary, why no mention of AOL's Motley Fool area in your article? Seems like you didn't do your homework.
GARYW BW: Business Week has a business relationship with AOL, so I wanted to bend over backward not to be self-serving. Fortunately, from that perspective (perhaps not too fortunately from AOL's perspective) most of my best examples involved the competition! I did monitor the Motley Fool, however, and it is pretty good.
JackBW: Try this one from HWAPEI.
Question: How about the security issue? Seems to me that is the biggest barrier for online investing? Your thoughts?
GARYW BW: I think the online brokerages, which have the main problem in that area, have security issues pretty well handled. The other aspects of online investing involve information exchange and networking, in which security is not a factor.
JackBW: Unhook takes us back to full-service brokerages vs. online, re access to good information.
Question: I find I can get just as much information regarding investment ideas from my online service, i.e. AOL, as I can from my broker. Does a full- service broker still have an advantage from an information-gathering stand-point?
GARYW BW: A full-service broker can call you -- something your computer can never do. That is the one main advantage to having a person on the other end of the line -- to call with good info. The question is, is it good?
JackBW: Another aspect of this is who can get the best information from a company. Your story had an example of a company holding a special briefing for an online group, much like the ones companies hold for analysts and institutional investors.
GARYW BW: Well, it seems that a bunch of shareholders in this tiny company, TMM Inc., organized themselves via the Prodigy Money Talk bulletin board. The upshot is that apart from exchanging info among themselves, they also received a presentation from the company itself, which is the kind of thing institutions usually get -- rarely small investors.
JackBW: How about this one, Gary?
Question: To what extent do Wall Street professionals use the Net?
GARYW BW: I found very few investment pros using the Net, but more and more, they're starting to hook up with the Net and online services.
JackBW: AlanM2121 has an interesting comment on which you might want to comment.
Comment: Gary, your story is excellent and right on target. This will continue to cause rapid paradigm shift. The world will never be the same. The Net gives individuals capabilities previously only available to corporations -- an individual has the same "info power" as companies.
GARYW BW: I agree, as information is what it's all about -- every pro knows that. The question is whether individuals will seize this opportunity. They have the capability, the means, but will they do it? Remember -- online investing can involve hard work.
JackBW: Here's one about something that wasn't in your story.
Question: What about real estate online? After all, buying a house is the biggest investment most of us make.
GARYW BW: There's quite a bit of real estate information on the Net -- everything you can say about stocks and bonds, you can say about real estate. My article focused on securities investment primarily -- we could have done a story of equal length on real estate.
JackBW: This question brings up what could be a troubling issue, from legal and other standpoints.
Question: How much inside information do you think is flowing around the Internet? And how accurate is it?
GARYW BW: If by inside information you mean that in the legal sense -- material nonpublic information, as the lawyers would say -- I'd say little or none. Remember that to be genuine inside information, it must be improperly disseminated, and there's a big difference between inside information and special insights that people have into companies for various reasons.
JackBW: AlanM2121 is back, with a question this time.
Question: Gary, what new insight and experience have you developed since writing the BW story? Also, where are some good chat groups for investing beyond what you call out in the story?
GARYW BW: Well, I've become quite a Net browser! I know how to use the Net as a reporting tool -- and no, I'm not writing an article about that! As for chat groups, if you mean real-time chat, I can't really help you. If by message boards, well, I suppose this would be a good time to mention the boards here on AOL (since I stayed away from them in the story).
JackBW: There's a lot of discussion about investments right here in the BW Online message boards.
JackBW: This one is next, Gary.
Question: How many investors do you figure are prowling the Internet --and are they telling each other anything worth knowing?
GARYW BW: Very tough to estimate -- it would have to be a wild guess. Prodigy estimates 50% of its users make use of its financial features. If there are 30 million people on the Net, and only 25% use the financial features, that's almost 8 million people. How reliable? As I said in the story, lots of it is reliable -- you have to develop skills for separating the wheat from the chaff.
JackBW: Miguel2000 has an apt question for many of us about wheat from chaff.
Question: How can a nonsophisticated investor intelligently evaluate the information they might be looking at online?
GARYW BW: Start by knowing who's posting the messages. Accept nothing on faith. What are their qualifications? Send them E-mail. Ask them questions by E-mail or by telephone.
JackBW: JannieK wants to know more about interactive real-time chats. This has to be the last question.
Question: Did you participate in any financial IRC chats on the Internet. If so, could you tell us how to access them from AOL?
JackBW: On the second part, Jannie, for the Internet in general, use AOL's Internet connection, or try its new Web browser.
GARYW BW: I'd stay away from the chats except for entertainment -- you can't rely on that mode of communication for serious information. But it's fun -- no question.
JackBW: Thanks, Gary Weiss, and thanks to all of you in the audience, for your questions and attention.
GARYW BW: My pleasure, Jack!
OnlineHost: Thanks to Gary Weiss and the Business Week Online team for this fascinating conference on online investing. If you'd like to continue the discussion, we invite you to move over to the BW Online Chat Room or to post your questions and comments on the BW Online Message Boards (try Economics & Finance).
Transcripts of all BW Online conferences are available for downloading soon after the event (look under Talk, Special Events, or Search BW). Join us this week for two Interviews With the Author: John Kotter of "The New Rules" on Tuesday, May 30 (9pm ET, Bowl) and Margaret Wheatley of "Leadership and the New Science" on Thursday, June 1 (9pm ET, Globe).
And don't forget there's a weekly BW Online conference with editors or newsmakers here in the Globe every Sunday at 9pm ET. Thanks again and goodnight!
Copyright 1995 by The McGraw-Hill Companies, Inc. All rights reserved.
