But for Ganas, now a junior at Babson College in Wellesley, Mass., the winning streak didn’t last. Just two weeks ago, he closed his E*Trade account, worth a measly $300. “Like every hotshot business-school maverick, I was greedy,” he says via e-mail.
Investors were giddy about trading stocks online in the late ’90s: Commissions were low and the Internet made research as simple as typing in a search word. These days? Forget about it. TD Waterhouse, a provider of online investment services, found that its total trades per day were down by 108,000 in February vs. the same month a year ago-a 44 percent decrease. (More than 74 percent of the company’s trades are made online). The New York Times says trading activity at online brokerage firms could be down by as much as 20 percent.
Thomas Fitzgerald is one investor who is holding back. A 35-year-old technical manager of a business-to-business Internet company, Fitzgerald started snapping up technology and Internet stocks in 1999. At first, he did well. “I would say I doubled my investments at least,” he says. “It was great.” But about a year ago, the climate changed. “I thought maybe [the downturn] was temporary,” Fitzgerald says. “I sold some and held onto the rest, thinking it was going to go back up.”
The market never did. While he still believes in online trading, he’s not nearly ready to jump back in. “I lost enough that I have become gun-shy,” he says.
An old pro, James Moyer first began trading online through the PC Financial Network (now CSFBdirect) in 1992, a time when just trading e-mails online–nevermind stocks–was still cutting-edge. The 47-year-old self-employed CPA kept most of his investments in blue chips, although he dabbled in tech stocks a few times. At one point, he purchased $200 in eToys shares, figuring he could risk that amount. He lost. Moyer says his account hasn’t been very active lately, but the stumbling market is not the reason. “I’d buy right now,” he says. “We just haven’t had the extra money to invest.”
Moyer believes online trading has lost ground with investors because it couldn’t live up to the media hype. “People thought they could make a lot of money quickly and easily, but it wasn’t that easy,” he says. “The intrigue is gone.”
What’s the bottom line for online-brokerage-company bottom lines? “They make money by having people trade,” says Todd Eyler, a senior analyst at Forrester Research in Cambridge, Mass. Uh oh.
To try to hold on to investors, online brokers are coming up with new services. “All of these financial-services firms are converging in some way,” says Laurie Cochran, director of consulting for Spectrem Group, a consulting firm.
“If they are in banking, they are adding investments; if they are in investments, they are adding banking,” she says. “If they don’t have the capability, they are partnering with someone or developing it in-house. I think they’ve found it very difficult to make it just in online trading.”
E*Trade, for example, now runs an online bank, a network of more than 10,000 ATMs, and has recently acquired an online mortgage company. They have also opened their first store, where people can ask questions, visit the Web site and apply for accounts. Ameritrade last year teamed up with Netbank for online banking, MBNA America for credit-card services and OnMoney.com, a one-stop site, for managing finances.
It looks like Spiro Ganas will be picking up some of these new offerings. Now that he’s no longer trading, Ganas plans to open an online bank account and get a credit card that tracks purchases online-and he’ll be going back to school for a Ph.D. “I won’t invest in stocks again,” he says, “until I have finished my degree and put aside at least one year’s pay in government bonds and CDs.” As he puts it, gambling’s no fun if you always lose.
