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Stock Talk: Brokerages are letting investors get together
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A screen capture shows investor Kim Seiniger’s user profile page on Zecco.
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Published: August 20, 2008
NEW YORK - Erin O'Brien and her friends are do-it-yourself investors.
As part of an online community at the brokerage Zecco, they consult each other on terminology, tax law and investment philosophy. Having tagged each other as "friends," they can see each other's trades. Together, they are learning the ropes by watching and interacting with fellow users.
Zecco and TradeKing, which tout themselves as among the first brokerages to offer online social networking, are now adding functions that go beyond the typical discussion board. Traders at both companies can reveal their portfolios and see how their performance rates among other users.
Just a year after O'Brien, a 27-year-old teacher from San Francisco, started teaching, she is ranked in the 20th percentile of Zecco traders with a 16.6 percent return on investment.
"This adds a competitive aspect, which can be motivating," said O'Brien, who invests about $200 each month. She limits herself to the 10 free trades allowed monthly by Zecco, and views the account as a learning tool -- investing only what she can afford to lose.
O'Brien can research the shares of a company by identifying which of her friends own the stock. This also reveals the other stocks in their portfolios, which gives her additional investment possibilities to look into. Over at TradeKing, users can add notes explaining why they made particular trades.
And now, larger firms such as Scottrade Inc. and TD Ameritrade Holding Corp. are introducing social networking functions.
By letting clients interact online, brokerages are encouraging newcomers who might otherwise be leery of diving into an unfamiliar arena.
Unlike chat rooms and message boards, brokerage sites verify users' identities, reducing the tendency for spam or scams to superficially drive up stocks. For those who know zilch about stocks, it's a space where no question is too basic (What, for example, is a dividend?).
The idea of people gathering to talk about stocks is nothing new. Investment clubs, which usually consist of a small group of people who meet periodically, have been around for years. But their popularity has declined, with only 13,000 in the country today, down dramatically from 20,000 in 2002, according to the National Association of Investors Corp. Online groups not only give access to a bigger pool of people, but also let users participate on their own time.
It's no wonder that such groups as "Afraid to Trade," "Newbies" and "Beginning Investors" are among the most frequented on Zecco and TradeKing.
In fact, the most popular discussion thread at Zecco is for "New Investors." On TradeKing, a popular recent forum was "Need A Mentor."
The chat rooms "let me know what to look up, where to go," said Kim Seiniger, 52, an executive in the music industry. Seiniger, of Woodland Hills, Calif., is tagged as one of O'Brien's friends. Seiniger, who says she is still learning about trading, has more than $15,000 of her disposable income invested in stocks. She uses the groups as a starting point to find answers, but she does her own research, too.
Not surprisingly, the number of users taking part in online brokerage communities is rising. Zecco says that a third of its 85,000 users are now active in community groups. Over at TradeKing, about 10 percent of its 100,000 users are active in groups -- meaning they not only visit forums, but set up public profiles.
Scottrade's online community -- which was officially introduced last week -- is a response to customer demand for more education and information, said Kristin McDougall, a company spokeswoman.
TD Ameritrade is also rolling out social networking features by the end of the year.
"In real life, traders typically congregate and become better traders by sharing knowledge. If you put them online, they'll chat as well," said Jay Pestrichelli, the managing director for TD Ameritrade's trading group.
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