Younger investors, with high salaries and disposable incomes are, not surprisingly, turning to less conventional sources to help them enhance their wealth and lifestyles. One such source is the Internet and World Wide Web through which considerable financial transactions and investments are already taking place.
One regular reader of this column is a 25year-old information technology consultant working with a multinational firm who surfed the Web and discovered what he believes may be an ideal investment outlet.
"I have about £6,000 in savings, no outstanding debt, a pension and life assurance and have not been attracted to tracker bonds, unit trusts or other products on the domestic market. I am prepared for a reasonably highrisk investment, however, preferably in the short to medium term. I am particularly interested in foreign investment, especially in the US and have been looking at the many discount brokers in the US that now provide information sites on the net."
Discount brokers are, by US law, required to restrict themselves to share deals only they may not offer investment advice. For that, a conventional broker must be engaged.
Hundreds of discount and advisory brokers have Web sites in the US and provide trading on the Internet; they include both the large reputable firms such as Charles Schwab as well as smaller ones such as Datek, Etrade and Ameritrade. Our reader has done his homework in finding out about the terms and conditions which dictate their activities.
"The broker is insured; trades are in US dollars and new account holders are not required to have a minimum balance in their account to join. The main stocks in which they trade are on the Nasdaq and NYSE; each trade carries a commission of around $10 or $20 and you must sign a Federal W-8 tax form to declare that you are an alien non-resident."
The downsides to this kind of international online trading can include technical hitches, with Web servers breaking down as trades are being made (emergency telephone numbers are provided).
Since funds from overseas investors must be lodged in the broker's account before the trade, you must be sure that you are dealing with a reputable firm, but with so many big Wall Street brokers doing this sort of business, finding a good one isn't that difficult.
Financial advisers here with experience of the American stock market claim that US brokers "are streets ahead" of Irish or European ones in the way they conduct personal equity business. "There is a huge share owning culture in the United States and stock brokers are very clued into servicing the small investor market," one adviser said. "Trading on the Internet is well-established but you also need to be well prepared to do it successfully."
Aside from choosing a trader carefully (credentials can be checked online with the stock exchange regulators or their ranking on http://www.onlineinvestors.com/don/) you need to seriously consider doing your own research, rather than relying on the conventional brokers for advice.
The US might be the "financial engine room of the world", but advisers we have spoken to believe that £6,000 in hard earned savings (as opposed to £6,000 in unspent income or a windfall) might be better spent on a tax-efficient Irish-based investment. US technology stocks that he can assess himself for their potential earnings and capital growth.
Irish stock brokers may warn that the investor is too far away from the source of the US trades and the individuals executing them if anything goes wrong. But they will be missing the point entirely: the world's financial markets are now at the investor's fingertips and systems and regulations are in place to give them instant access.
