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27 year old Fahima Anwar is photographed in Toronto on Nov 29 2011. Anwar, a Kitchener, Ont. based project manager for a large communications firm has money invested in mutual funds through work, but in the past six months opened an online brokerage account. She is taking about 15 per cent of her money and investing it mostly in individual stocks (The Globe & Mail/Fred Lum)
27 year old Fahima Anwar is photographed in Toronto on Nov 29 2011. Anwar, a Kitchener, Ont. based project manager for a large communications firm has money invested in mutual funds through work, but in the past six months opened an online brokerage account. She is taking about 15 per cent of her money and investing it mostly in individual stocks (The Globe & Mail/Fred Lum)

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Investors going it alone online Add to ...

Until a year or so ago, Fahima Anwar didn’t think much about her retirement savings. She dutifully went to a financial adviser to set up a registered retirement savings plan, and had money deducted from each paycheque directed to mutual funds.

But when she took a close look at those funds, she felt she was paying too high fees for not high enough returns. So Ms. Anwar, a 27-year-old Kitchener, Ont.-based project manager for a large communications firm, decided to take 15 per cent of her retirement savings, open an online brokerage account and invest it herself.

“I’ve taken some hits, I’m not going to lie,” she says. “I’ve made some guesses that really didn’t pan out at all.”

But, “when I first started, and I saw positive [returns]instead of negative, it was one of my proudest moments.”

Canadians are turning more and more to online brokerages. The number of accounts has grown by 36 per cent in the past three years to 4.4 million, according to Investor Economics, a Canadian financial services research company. In the same period from September, 2008, to September of this year, assets in online brokerages increased by 37 per cent to $228-billion.

For 2008 through 2010, the number of trades in online brokerages was higher than full-service brokerages (130.4 million to 128.6 million).

Investor Economics does not track based on gender, but Rowena Chan, vice-president of business development for TD Waterhouse, Canada’s largest online brokerage, says the number of female clients is growing.

A summer survey by TD Waterhouse found that 66 per cent of its female online investors signed up in the past five years, and 50 per cent said they planned to increase the portion of their portfolio with their online brokerage.

Why? Ms. Anwar is unabashed about her reason – she wants to take control of her own financial destiny.

“I don’t want to have to trust anyone’s judgment but my own,” she says.

“That’s the main reason women give us is – they want to be in control, they enjoy making investment decisions on their own,” Ms. Chan says.

In fact, the TD Waterhouse survey of women of all ages and incomes found that 45 per cent of women were investing online because they wanted control of their investments while only 13 per cent cited cheaper trading fees.

Ms. Chan said more and more women are like Ms. Anwar, having “dual relationships” – investing part of their money with a broker and part by themselves through online brokerages.

The survey found that women believe one of the most important parts of the do-it-yourself experience is being willing to do the research and learn. It’s the No. 1 piece of advice women had for others considering taking the plunge in online investing.

It’s also one of the reasons why Marci O’Connor chose to go it alone and invest online.

The 40-year-old mother of two, who lives in Montreal, decided more than a year ago to get serious about her finances. She had spent almost a decade staying at home with her boys but decided she was ready to get back to work and earn a second income for the household. She and her husband had put money into their house over the years, but they wanted to do more.

“We started to educate ourselves, figure out our goals – what we want,” Ms. O’Connor says. “We needed to look long term, to invest.”

Ms. O’Connor, who blogs about financial literacy, is learning as she goes. “Right now, there are so many online resources, there’s so much help available that there isn’t anything that we feel we’re not able to answer.”

She has taken advantage of everything she can find – online tools, webinars and tools for simulated trades – and says she feels confident because of them.

“I don’t know if I would have a lot more trust in a financial adviser than I would in our own knowledge,” she says.

Ms. O’Connor’s approach is to build her finances – she wants to make sure there’s money for her children to go to university and to build retirement funds for her and her husband, who is self-employed.

She’s not unlike the 70 per cent of women surveyed by TD Waterhouse who said they were thinking long term in their online portfolios – and planning for retirement. Among their investments were retirement savings plans and income funds.

That long view is one of the reasons that experts believe that women do better than men when they invest.

One of the classic studies of investment behaviour was published in 2001 by two professors at the University of California, Davis using data from a discount online brokerage.

The analysis of 35,000 households found that men traded stocks within those online accounts 45 per cent more often than women, which reduced their net returns by 2.65 percentage points a year.

Ms. Anwar’s approach, however, is decidedly more short term. When she started investing online, it was in index funds but six months ago she moved to trading in individual stocks. She buys and sells often – and rarely holds.

She’s now musing about moving into high-risk options.

“My goal here is to learn,” she says. “My goal [in the next couple of years] is to be able to walk away with what I came in with.”

Her five-year plan is much more ambitious. By then, she says, “I want to double or triple my money. But first I have to learn more.”

Investors should take care

Eric Kirzner has some advice for all the people flocking to online investing: Investor beware.

The finance professor at the University of Toronto’s Rotman School of Management understands why investors want to feel in control, but he says novices really shouldn’t be trading on their own. It’s not that he’s a “big fan” of full-service brokers, he says, but he’s a fan of their process: setting out client objectives, figuring out risk tolerance and building a well-balanced portfolio.

It’s similar advice to that given by female online investors polled by TD Waterhouse. When asked what advice they would give other women considering online investing, 51 per cent of respondents said to make sure you have a well-balanced portfolio, 49 per cent said to be disciplined so that your investments match your objectives, 78 per cent said to be willing to do your research and 58 per cent said don’t be afraid to ask for help.

Some places to start:

GetSmarterAboutMoney.ca is a Canadian website run by the Investor Education Fund that offers a lot of smart advice on personal finance and investing.

GlobeInvestor.com is The Globe and Mail’s site for investors. Along with basic investor advice, it has a feature that allows you to track stocks you’re interested in.

Mint.com is more dedicated to personal finance and budgeting, but it has easy, intuitive ways to track your money and investments.

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