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10/24/00 02:40:33 PM PST
by Jayanthi Gopalakrishnan

The brutally competitive online brokerage industry makes it difficult for new entrants to survive unless they distinguish themselves from the rest of the pack.

Peter E. Breen, chief executive officer (CEO) and cofounder of

Sparked by the belief that everyone should be in the market, Peter E. Breen, chief executive officer (Ceo) and cofounder of, saw the potential for growth in the small- or beginning-investor market segment. Breen explains that giving individuals the opportunity to purchase fractional shares of stock, pay low commissions, and learn about the value of dollar cost averaging and compounding will open the door for the large number of people who have not yet ventured into the stock market.

The minimum required to open an account is $20, and commissions have been kept to $2.99 per trade. So how do you get started with just $20? account holders can purchase based on value of shares as opposed to the number of shares. For example, if you wanted to purchase shares of Microsoft Corp., you would request to purchase shares for $20, which will give you ownership of only a fraction of a share. It's a start, and with time and experience, you can own larger portions and watch your investments grow.

Since was created with the novice in mind, the design of its Website, the application process, and the placement of trades have all been kept simple. The Website even includes an educational section, which introduces the investor to the principles of dollar cost averaging and compounding, topics necessary to understand the basics of making your money work for you.

You can download forms from the Website, fill them out, and mail them to the physical address of I was told that the Website owners plan to incorporate E-signatures to expedite this process. If you own dividend reinvestment plans (Drips), you can easily transfer them into your account. The popular shopping cart interface has been incorporated into the Website; once you open an account and log on to the site, you can research stocks offered by the company and place the stocks you select into a shopping cart.

You can't buy and sell shares of all public companies, but as of this writing, 2,700 companies and three indexes (an index is a basket of stocks) were listed, and plans to add more. You can search for companies either individually or by sectors. By the time you proceed to check out, you may find that you have built a diversified portfolio for yourself. Customers I spoke to said they loved this feature, but most felt that the quality of the research available from this site is limited.

To maintain the low commissions of $2.99 per trade, the company can only place two transactions per account per day. This can be a disadvantage when it comes to trading volatile stocks, but for the buy-and-hold investor, it shouldn't be a concern. Because of the limited number of daily transactions, you can only place market orders. There are advantages, and they are the low commissions and limited exposure to system downtime in case of technological problems.

Most of the company's investors are not active traders. %93When the markets crashed in April 2000, our customers held on,%94 notes Breen. %93They just lowered their dollar cost averaging but continued holding their positions because they were confident their stocks would rise in value after the temporary slide. What's more, because of dollar cost averaging, they were getting those same shares for a lower price.%94 encourages dollar cost averaging through a program called EZ Vest, which ties your checking and savings account to your brokerage account through the Banklink program. You have a lot of flexibility if you want to set up this process. You can set it up weekly, monthly, or semiannually, and alter the amount of your contribution if circumstances change. Customers can also place their funds in an interest-bearing money market account. Three different money market accounts are offered through Goldman Sachs. was the first broker to offer this type of service. Since then, a few other companies have joined the race. %93This proves that the market for beginning or small investors has a lot of growth and potential,%94 notes Breen, who sees the growth of the long-term individual investor increasing exponentially in the future.

Since the company's launch in November 1999, it has received top ratings by Barron's and the Website. It has also attracted a dedicated following of novice investors whose aim is to invest for the long term. Lately, has also seen a wave of entrants who had previously tried active investing but decided that buying and holding for the long term was a better alternative.

Figure1: offers novice investors the opportunity to purchase fractional shares of stock.
Breen's objective for is, and has been, for the site to become an online solution or destination for the individual long-term investor. The company relies heavily on customer feedback. For example, several customers requested the inclusion of Iras in their services, and in response has decided to add that feature in the near future.

%93A large share of people will move to and treat the stock market like they would their 401(k) plans by contributing a specific amount on a regular basis,%94 said Breen, who is enthusiastic about the opportunities that he has opened up for individual investors. %93And let's not forget those who wish to start a college fund for their kids. Opening a custodial account where they can contribute regularly and watch that amount grow would make such a great story.

Jayanthi Gopalakrishnan

Staff Writer

Title: Staff Writer
Company: Technical Analysis, Inc.
Address: 4757 California Ave SW
Seattle, WA 98116
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