News

Retired baby boomers with money in the bank and time on their hands are fuelling a boom for Canada's online brokerage houses.

TD Waterhouse Discount Brokerage, the country's largest, says it is seeing at least 100,000 new accounts opened every year.

RBC Direct Investing says its new accounts have increased by between 15 per cent and 16 per cent in each of the past two years, and E*Trade Canada says business is in expansion mode.

"I had a client tell me that now that he is retired he has a choice between taking up woodworking or managing his own investments," says Doug Coulter, president of RBC Direct.

"He said with online trading at least he would not lose any fingers."

The reasons for this shift to self-investment are simple enough, says Dann Kupiec, vice-president of service delivery at TD Waterhouse: savings on commissions, combined with a growing sophistication among investors.

"There is now significant wealth among those of middle age and up," Mr. Kupiec says. "They have been investing for years and are more confident in their judgment and skills. At the same time they are not afraid of computers.

"Many look at the savings on trades discount brokerages offer and think they might want to try buying and selling themselves."

But while trading online might seem as simple as buying and selling on eBay, investors can find they have much, much more to lose. Making money on stock markets is a function of time spent on research, an understanding of how markets work and individual skills putting it all together, say the people who manage discount brokerages.

"We advise that they do their homework, then start slow," says Duncan Hannay, president of E*Trade Canada. "This is not something you want to rush into."

For those with the hankering to try their hand at online trading, the experts offer some basics on how the system works and a few words of advice.

What you pay per trade varies depending on the amount you have invested with a brokerage house and the number of trades you do in a month.

RBC and the Bank of Montreal have announced that, in late December, they will be repricing their online trading fees to bring them into line with companies such as TD Waterhouse. TD charges $9.99 a trade for family accounts with $100,000 or more invested and doing at least 30 trades a month. Those with smaller accounts and fewer trades pay $29 a transaction for trades less than 1,000 shares plus 3 cents a share extra over that 1,000 share mark. For active traders with 150 or more transactions a month the charge is $7 a trade.

E*Trade offers lower entrance qualifications. Its $9.99-a-trade fee starts with family accounts of $50,000 or more or 30 trades a quarter. Less than that and it is $19.99 a trade.

Education

All the discount brokerages are heavily into investor education. They offer "webinars," seminars and even huge get-togethers, such as a technical analysis seminar E*Trade Canada will hold at the Metro Toronto Convention Centre on Nov. 3. Go to their websites for details or in the case of bank-run brokerages ask at your local branch.

"We try to make it as easy as possible to get that basic education clients will need," says TD's Mr. Kupiec. "On our site, for example, we have a PDF file that explains all the ins and outs.

Research

Learning about specific, individual investments is key to success in trading, say the experts. While the online brokerages' no-frills approach does not offer the comfort of a live adviser to guide them, they are increasingly offering various levels of analysis.

E*Trade Canada, for example, offers research from five independent sources plus daily market reports from Reuters. The downside is that online traders have to make sense of it all by themselves.

Tools

Online brokerages are in an extremely competitive business; each is trying to outdo the other in the added-value gadgets it provides.

E*Trade, for example, offers a "cash optimizer," which lets clients earn 4.15 per cent on cash sitting in their accounts waiting for investment opportunities, while RBC has investment-comparison tools that allow historical comparisons between companies in similar fields.

How do I start?

Piece of cake, say the folks who run the brokerage houses. It can be done online through the website, in person at a bank branch or investment centre, or even through the mail. Fill in an application form, provide some form of identification and then deposit funds in the account. That can be done by cheque, electronic transfer through the website, or through a transfer from another brokerage.

In many cases, online investors can be up and trading within 24 hours. The only hitch is if investments are being transferred from another brokerage; that can take as long as two weeks, experts say.

As for advice, all the experts agree: Go slow. Start by doing your homework on markets, online trading and the companies you want to invest in. Then begin by trading just a small part of a total portfolio to get the feel of the process.

Track the results of your own trades and after three months or so examine the results. The simple fact is you may not be suited to self-management.

"Successful on-line investing demands a commitment of time spent on research," says Mr. Kupiec. "It is not for everyone."