Invest With Your Friends
Some brokers want you to mingle more online.
Some brokers want you to mingle more online. They have created social networks on their Web sites that allow you to share investing ideas, show selected customers your actual trades and view their trades. The idea is that you build a rapport with the cyber community, and the firm keeps you as a loyal customer. It's like Facebook for your portfolio.
The trend has legs. TradeKing and Zecco have attracted scores of social networkers since the firms started in 2005 and 2006, respectively. Charles Schwab and Scottrade both launched social networks this summer for investors to rub elbows with each other online. Firstrade, OptionsHouse and OptionsXpress say they are working on similar projects.
The value of social networking varies greatly. "We have built this wonderful, safe neighborhood," says Don Montanaro, TradeKing's chief executive. He brags that when a novice asked the firm's network users about buying worthless penny stocks, experienced investors persuaded the greenhorn to avoid them. TradeKing posts a board of top-performing customers who share their picks. Zecco lets you scan the performance of network members by investing experience, trades per month, portfolio diversification and time period.
But among online brokers, Zecco flogs its social network the hardest. For instance, when you pull up the trade screen on Zecco, you see a display of what its online community thinks about the stock on the page. "Zecco is like a social-networking site that happens to have a brokerage," says James McGovern, vice-president of consulting services with research firm Corporate Insight.
Don't expect most online brokers to make social networking a major feature of their services. Bill Doyle, an analyst with Forrester Research, finds that although investors who trade online are more likely to use social networks, "younger users dominate social networks while the older investors with the money aren't demanding that service."