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Manage your portfolio
By Sam Barrett
It's done wonders for shopping and it helps you stay in touch with faraway friends and family. The internet can also play an important role in boosting your investments.
Online dealing and fund supermarkets have made it much easier to invest in shares and funds. Rather than completing application forms or visiting a stockbroker, these services allow you to buy and sell at the click of a button.
The internet's brought down the cost of investing too. With much smaller overheads, the companies behind these services have been able to slash charges. For shares, while you'd have paid £25 or more to buy or sell 10 years ago, today you'll pay £10 or less, with some services taking the price of buying down to as little as £1.50.
With funds, the savings are passed on in the form of reduced charges. For example, with Interactive Investor's ISA service you can shave up to 5.5% off a fund's initial charge and buy shares with its portfolio builder service for free. This can make a significant difference, especially when markets are fairly flat.
Research
But it's not just a question of convenience and cost - these services also offer a wide range of tools that can make your investment decisions much more informed.
Many of the online share dealing services offer access to market data and research. A large proportion of this is free, so you don't need to be a customer to access it.
The fund supermarkets are also packed full of research. For example FundsNetwork, which is run by Fidelity, provides access to reports from Morningstar and Standard & Poor's on each of its funds as well as their annual reports and accounts. On top of this, it offers risk ratings and past performance figures to help you make your investment decisions.
Some companies do require you to be a customer before you can access their information. For instance Barclays Stockbrokers only provides its share research package to customers, but does allow a free 90-day trial if you want to see what's on offer.
Information is also available from other online sources. Websites like citywire.co.uk and digitallook.com have news and research to help you select shares and funds.
Internet forums and bulletin boards can be another useful source of information. But, if you do use the forums, treat the information you find there carefully. Although companies hosting them will root out anyone who wilfully flaunts the rules, unless you know the person posting well, always try to validate their recommendations before you act on them.
Portfolio tools
Building a diversified portfolio is one of the most difficult things to achieve when buying shares and funds, especially if you're regularly buying and selling holdings.
To make this process easier, many online services have tools that will show you where you should be investing. For example, The Share Centre has an investor profile tool that looks at your appetite for risk and your experience of investments to suggest a portfolio. Similarly, Barclays Stockbrokers has a tool, Investment Selector, which asks questions about risk, timescales and tax requirements to determine where you should invest.
Once the asset allocation is determined, many online services also have share and fund picker tools that allow you to filter investments according to criteria that are important to you. For shares, this could be data such as the dividend yield, price/earnings ratio (P/E) or price/earnings to growth (PEG) ratio. Once you've started trading, you can also use tools to check your portfolio doesn't get out of shape.
Sector analysis tools will make sure you have a spread of investments that suit your objectives. The fund supermarkets are also keen to help you build the right portfolio for your investment objectives. Funds Network suggests model portfolios, giving links to possible funds to help you make the right selections.
As well as being able to see instantly what you've got in your portfolio, holding it online means you can get instant valuations. "We send out valuations through the year, but you can log on anytime and see instantly what your portfolio is worth and how much it has increased," says Keith Bowman, equity analyst at Hargreaves Lansdown.
Investing
The online services can also help you when you're in the process of buying and selling. Although funds are only priced once a day - so the time of day you buy them isn't so important - share prices can fluctuate all day long. Keeping track of their
movements so you can invest at the price you want is a major task, especially if you have to work.
To ensure you get what you want at the price you want, many of the online share dealing services offer alerts. "We can email you or send you an SMS to let you know when a share reaches a certain price," says Tom Ryan, director of Barclays
Stockbrokers.
This type of service is usually free if you are a share dealing customer, and you will often be able to keep tabs on several shares in this manner.
If you're really strapped for time or even on holiday, you can instruct an online share dealing service to buy or sell for you if prices hit levels set by you. This is known as a limit order: you set a maximum price at which you would buy shares (a buy order) and a minimum price you'd be prepared to sell them at (a sell order). For example, say you decided you wanted to invest in Marks & Spencer (MKS). At the time you select it as a potential investment it's trading at £6 a share, which you believe is too high. You would however like to invest £500 in it if the price fell to £5.75, so you set a buy limit of £5.75. The price subsequently falls and your online share dealing service buys on your behalf.
Buy and sell orders can be set for anything up to a month and, because online services are fully automated, do not usually cost any extra to put in place. Ryan says they are particularly popular at times of uncertainty. "As much as 40% of our trades come in through orders when the markets are volatile," he says. "It can be difficult to make decisions when prices are moving and putting an order in place can take some of the emotion out of the transaction."
More advanced limits are also available. By setting a minimum price, a stop-loss limit can help you hang on to gains by selling if the price falls. Likewise, a tracking stop-loss limit follows the share price, locking on to its peak and then selling it if it falls to a set level below this.
As well as advanced investment tools, there are some to help you decide whether you even want to run your own share or fund portfolio. For example, Hargreaves Lansdown and The Share Centre offer practice accounts where you can experience investing without having to commit any money. "This tool is great for beginners as you can get an idea of what it's like to run a portfolio," says Bowman. "You can set up model portfolios and use the tools to find out how they work, without any risk to your investment."
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