Yates' column: Taking stock of the internet

Unless you have absolutely no interest in matters of finance, you are already aware that you can become an instant billionaire by listing your company on the stock market -- as long as your company purports to be Internet-related. For example, the current stock market valuation of America Online deems the company to be more valuable than the entire US transport industry. That is, AOL is worth more than all the trains, planes and boats in the USA combined. Anyone who thinks this is sensible and reasonable should whip out and make a killing right now. The rest of you should read about the Tulip market madness in 1600. Or the mining industry madness in the 1970s. All booms do bust. If I knew when, then I'd be a billionaire instead of writing for a living. And if you knew when, you'd be spending your billions instead of reading this!

So, let's assume that you know enough to be a tad wary of these Internet stocks. But you don't want to write off the entire stock market -- you want to invest your hard-earned cash in some shares, even if it is a boring old bank with rock solid profits and 15 per cent growth. Here's where the Internet can actually be useful to the stock market instead of being a paradox. What the Internet offers, above all else, is immediacy. One of the things that you need when investing in the stock market is access to up-to-date and accurate information. You need to know what the market is doing before you buy, and you need to watch its antics after you buy. No point finding out on Friday that your shares started a free-fall last Monday.

A few online share market brokers have sprung up recently, and our very own Commonwealth Bank has opened for business as Commonwealth Securities, offering Internet and telephone-based trading and information services. There are others out there, but I like www.comsec.com.au because they don't charge any fees to belong to their service. And they also arrange for you to be connected to CHESS, the new generation electronic shares register, which lets you buy and sell shares without needing to keep actual share certificates under the bed. The shares are held for you by the ASX and you get a monthly statement, a bit like a bank statement, showing what you have bought and sold. It also means that you can act instantly to sell those shares without having to find the certificates first.

You can be in the CHESS system whoever your broker is, but ComSec has other advantages as well. For a start they charge you a flat $29.00 for any trade up to the value of $10,000 and 0.3 per cent if you spend more. For this you get no advice, but the process is incredibly simple. After you have joined ComSec -- which you can't do online, although you can print the application form from their Web site -- you just click buy or sell and type in the name of your shares. You tell them the price you are prepared to trade at, and click the button. Within five minutes an e-mail arrives telling you that the process has begun. Usually within the hour another e-mail arrives letting you know that the trade has been completed. You'll get the official paperwork via snail-mail the next day. Under the new ASX rules, you have three days to pay for your shares, or receive payment if you were selling. With ComSec this is also painless as they will debit or credit your nominated bank account on settlement day.

Of course, if you buy shares you can't afford, you'll end up paying $50 per day in fines, but you wouldn't do that would you? Overall this low transaction cost makes it possible to either save money when compared to traditional brokers, or else it allows you to buy smaller parcels of shares. You know what I mean -- ones you can afford. This works because you need to be able to sell your fabulously over-performing shares at a profit that includes the cost of brokerage fees. When you are only paying $58 for the complete buy-sell cycle, you have less of your glorious profits eaten up by fees. The only downside is that you can't buy every share on the market via the Internet. However, the list of shares that you can buy is extensive and covers all but the fairly obscure securities. If you want to buy something that isn't on their list, you can still do so by making a phone call, for which they'll charge you $50 flat. And you can sell anything you own, even if it isn't on their list of available buys. So the total buy/sell trading cost for the more obscure shares becomes $79 which is still pretty good value.

ComSec also lets you set-up 'watch lists' which are personal lists of shares that you own or would like to watch -- and wish you'd bought. After you've set this up, a single button click will show you the current market prices of those shares, highlighted in green as they rise in price, or, darn it, in red as they sink below the horizon. Another button click lets you see a graph of the prices of any particular stock or market index for the last twelve months. And you can also download a spreadsheet of daily pricing for the last month, three months or twelve months, if you want to do your own serious market analysis. You wish.

Don't forget that there's no advice with this service, but hey, you already know what you're doing, don't you? I'm off to get myself a parcel of shares in the new www.suckers.com -- sounds like a winner to me. Send your hot share tips to Ian_Yates@idg.com.au and I'll make a packet, then gloat about it.

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