I say “large complex” because computer investing is complex, and it has grown into a large activity for many individuals. Today it includes such investing activities as passive observation of investments, or active investing in all investment types such as individual stocks, funds, options, financial and commercial indices etc. Computer investing is complex also because we have to cover several associated fields like data bases, evaluation techniques, active trading approaches, bookkeeping of trades, an d tax requirements. Computer investing can be carried out in long-term time increments, say a check on investments once every week or month, or it involves nightly data downloading, or one can be occupied all day long in on-line active market activities.
Computer investing activities, no doubt, have sharply increased in volume during the last decade. One of the major reasons seems to be the large number of retired people “suddenly” having large amounts of cash on hand and, therefore, the need to invest p rudently. The ease of computer handling as well as the availability of practical and low-cost software programs, and the availability of large data bases have been strong additional factors. The long US stock market price run up since early 1995 certainl y has added to this increased personal investment activity—the first may even have been fueled by the latter.
One result of all this is the dazzling array of data bases, computer-assisted investing programs, and financial “awards” offered (“we guarantee financial success - if you buy our program”) in trade magazines, on TV, or on the Internet. Surely, it takes experience and time to sort out the good from the bad.
I am often asked “which is the best computer investment program or approach?” The answer will always be one of caution and reluctance, because: a) there is no such thing as “the best”, and b) individual levels of investing philosophies quickly come into play at this point, making it impossible to find “the best” investment program or approach for individuals with differing investment targets.
The “best answer” is a recommendation to seek personal exposure to different programs, data bases, investment techniques, and investment philosophies before deciding which route to take. In Houston, for example, there is the unique chance to obtain this exposure by joining the HAL-PC Computer Investing SIG (Special Interest Group) and its meetings. One will have exposure to many of the items I listed above, and one will greatly learn from discussions with the 70-80 active members and investors present a t these meetings, possessing all grades of activity, philosophies, and experiences. Local and out-of town speakers covering widely diverse subjects normally give two to six or more individual talks at each of the meetings. Thus, we indeed cover a large f ield of computer investment themes, questions, problems, and answers.
The final selection of the “right” data base, computer software, and investment techniques will depend to a large degree on an individual’s needs, inclination, time, and experiences. Cost, while certainly of concern, can be considered to be of second imp ortance. Financial gain or loss as result of “right” or “wrong” investing decisions are much larger in monetary units than the price for an analysis program or a data base. With investment software programs for individuals in the $30-$300 range, of data bases in the $15-$20/month range, and the price of a “suitable” computer in the $1,200-$2,000 range, anybody investing over $ 50,000 really should not be limited by these initial costs. Selecting the “best” software program should include practicality o r ease of program utilization. An individual investor will have to find a system that combines financial (investment level) requirements, technical knowledge levels, cost, and time available. Computer hardware is hardly a problem. Faster computers, of co urse, will cut the time required in data management like sorting and scanning of large databases, but the differences in required time is measured here in single minutes or seconds only, not hours.
Data bases are offered by Internet Serving companies (for example CompuServe, AOL), by technical analysis companies (for example TC2000, PCQUOTE), and by data companies (for example REUTERS). Check if a certain data base that looks desirable by price or availability can be used by the technical analysis program or bookkeeping program of your choice (for example, QUICKEN). Although some excellent technical analysis programs do not have their own data base (for example, METASTOCK), these programs accept m any of the generally available data bases. (This list of individual companies offering data bases, services, or programs is incomplete).
Investment analysis involves both Fundamental Analysis and Technical Analysis. The first covers the basic economic, financial, market, sociological, and political factors in money movement. In Technical Analysis past behavior of prices and volumes are an alyzed with the goal to obtain predictive knowledge. A combination of both major fields is highly recommended. Some software programs (for example PCQUOTE) begin to combine both fields of Fundamental and Technical Analysis by offering data bases that can be analyzed for both parameters. In other cases, Fundamental Data bases exist, like EXPERT for funds, or like a data base and evaluation program by AAII (American Association for Independent Investors).
There is also this famous argument about the time one is willing to invest in any computer investment scheme. The extreme is the professional investment broker or analyst job. Even here we see clear separation between investment marketing, advising, and analysis mainly because the day only has 24 hours, and nobody can manage all offered data or fields of investment alone! And, as an individual investor works alone, he/she will always be restricted in usage of all available investment data and technique s.
At this point the big word is “practicality”: The overall system for an individual computer-assisted investor should be practical enough to obtain the maximum of efficiency in the time frame available without losing accuracy of analysis.
A debatable program for an individual investor investing in stocks may, for example, be the following: As data base and Technical Analysis program we select TC2000, as additional research technical analysis program METASTOCK, as additional data base, fir st-hand data scanning and sorting program with an additional acceptable amount of Fundamental Analysis data PCQUOTE. We may use TC2000 every night, for example, resolve special analysis programs with METASTOCK on long weekends, and add Fundamental Analys is data and data from a wider (cheaper) data base offered by PCQUOTE than available under TC2000. Most of this will work for stocks and funds, although at present PCQUOTE contains only stock data. There are data and analysis program combinations speciali zing in fund investing. There is also a large group of investment programs on the market designed for specific investments like options, or for proprietary investment/trade programs.
Finally, trade orders can be placed today by (mail pigeon, runners, mail, telegram, direct radio,) phone, e-mail, or Internet connections. A strong current trend toward lowering trading cost (commission) seems to lie in Internet connections (for example , SCHWAB, E*TRADE, just to name a few). Time only will tell to what degree these are mainly short-time market ploys to attract customers, or whether they indicate real trading cost reductions. Of course, personal touch with your well informed and experie nced broker (after all, he/she often has immediate access to tens of experienced company analysts!, and he/she has been around for years) over the phone or during an office visit may also remove some doubts regarding your investment skills. Or, it may st rengthen your (possibly well founded ) belief that you can do better or at least as well as the professional. After all, you will in most cases have the luxury (seen from the professional’s side) to have so much more time on hand. And, here too, “time is money!”
A few facts finally emerge: 1) Computer-assisted investing for individuals from their homes is here to stay. 2) The number of investing software programs covering data bases, analysis, and trading is large. Quality differences will decrease in the futur e as investors become more sophisticated and demanding, and as the market becomes larger. 3) Joining other individual investors interested in the wide field of individual computer investing through interest groups like those at HAL-PC promises excitement , increase in knowledge, and, finally, better investment results.
J.C. (“Chris”) Pratsch is a HAL-PC member and Consulting Petroleum Geologist. He is active in HAL-PC’s Computer Investing SIG and in his own individual computer investing efforts.
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