Online Investing Goes Mainstream

It’s been called America’s new national pastime. Thanks to online brokerage accounts, hot Internet stocks, and low commissions, trading stocks has become an online hobby for 2.4 million American households, according to Forrester Research.

Forrester’s latest Technographics^® Report estimates that 1.9 million North American households will start investing online by the end of the year 2000. Most of these investors will come from so-called mainstream households — those that aren’t the wealthiest, and don’t have the highest education levels

According to Forrester, two factors draw Internet users to online investing — convenience and price. Low transaction fees, real-time information, and a self-service environment are the hallmarks of today’s online brokers.

Only 7 percent of households with brokerage accounts engage in online investing, but the online investors have a net worth of more than $236,000, and on average have invested more than $90,000 of their assets online.

The next wave of growth, Forrester predicts, will come from online households that already have brokerage relationships. Of consumers with brokerage accounts, 39 percent are online but still trade through traditional channels. These consumers make fewer trades and are satisfied with their current service, but Forrester says the Internet will get them.

“Investors will continue to flock to the Internet as they come to realize that that managing their portfolio will be no more complex than managing a few bookmarks in their browser,” said Kenneth Clemmer, a Forrester analyst. “To compete for these customers, e-brokers will have to create flexible products that give customers what they want and deliver intimate service.”

According to Forrester, “Aggressive Affluent” investors are the most prevalent type of Net investor, representing 29 percent of investors with Internet access. They have a net worth of more than $320,000, trade almost 10 times a year, and are risk takers. Those with the lowest trade frequency are the “Retirement by the Book” investors.

Other investment types classified by Forrester include the “Portfolio Cruise Control,” which are moderate traders with portfolios averaging more than $360,000, and “Get Rich Quick” segment, which consists of young, risk-tolerant investors worth less than $40,000.

The “Retirement by the Book” and “Portfolio Cruise Control” investors will responsible for most new growth, Forrester said.