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And while the Internet is vast, it is not always fast. Moving from one Website to another takes time and a little luck. "When you place an order over the Internet, you have to cross your fingers and hope that it gets there," says John Markese, president of the American Association of Individual Investors. "Sometimes, you just might be better off calling a broker by phone."
Perhaps the biggest investor error, says Jamie Kiggen, a managing director and Internet analyst at Bear Stearns, is overconfidence. "Many investors fall into the trap of thinking that technology somehow makes them invulnerable or wiser. Nothing could be further from the truth," she says.
Online trading is unchartered territory as well for regulators who are concerned about plans by companies like Spring Street Brewing, which launched the first ever initial public offering on the Internet earlier this year. The New York City-based beer company was briefly forced by the Securities and Exchange Commission to suspend trading until it hired a bank or escrow agent to handle investor money. The offering of nearly 900,000 shares at $1.85 a share was such a smashing success that Spring Street wants to start an in-house brokerage to take other companies public and trade their stocks exclusively on the Internet.
With their core-investor market aging rapidly, firms such as Merrill Lynch and Smith Barney know they have to expand into online trading to find new blood. And fast. The typical client at a full-service brokerage is 63 years old. Online investors are mostly affluent, computer-savvy males whose average age is 41. The big brokerages claim they aren't worried about the upstarts and like to point out that their traditional business is still growing. But the movement to the Internet has tremendous momentum, and Wall Street knows better than to swim against the tide.