|BUSINESSWEEK ONLINE : MAY 24, 1999 ISSUE|
What to Read: The Good, the Bad, and the Terrible
A few how-to books hit the mark--but just a few
Looking at the spate of new online-investing books reminds me of browsing those dusty, 25 cents hardbacks available at every yard sale--you'll see lots of junk and pulp, but the few gems you do find make the search worthwhile. With people flocking to E-brokers and thousands of investing Web sites to choose from, investors certainly need a good road map. The good news is that such a guide does exist. But too often what is billed as sound cyberinvesting advice is really someone promoting a personal Web site--or worse, some Gen X day trader taking up 250 pages to sell you a bill of goods.
We'll get to day-trading in a bit, but for now let's focus on straightforward online investing guides. Overall, the best of the lot is Investing Online for Dummies, 2nd Edition by Kathleen Sindell, which is full of solid advice and helpful Web hints (table). Skip Part 1, ''Online Investing Fundamentals,'' until after you've read the rest, as the intro is mainly about newsletters and fraud. But starting with Part 2, Sindell covers every area you need to worry about: financial planning, choosing mutual funds and stocks, and portfolio tracking. The book even includes a helpful section on bonds, a subject too often ignored by writers and investors.
PLUGGING AWAY. Unfortunately, sometimes Sindell's site recommendations are suspect. For example, she says the best online mutual-fund guide for beginners is on the Web site of Montana's secretary of state. Nothing against Rebecca McDowell Cook, but a better source for that information is the Mutual Fund Education Alliance (www.mfea.com). Nevertheless, if you follow Sindell's advice, you'll end up finding your own favorite sites.
If you're more an idiot than a dummy, try The Complete Idiot's Guide to Online Investing by Douglas Gerlach. Less in-depth than the Dummies book, the Idiot's Guide is best suited for beginners to both the Web and investing. Gerlach, too, covers everything from budgeting to portfolio management, but he adds some great advice on taxes and specific savings goals: retirement, college, and ''I Wants'' like boats and second houses. One minor criticism: Although Gerlach recommends good sites, he plugs his own two, www.investorama.com and www.armchairmillionaire.com, far too often--and way more than the four citations in the index.
But Gerlach's flacking is nothing compared with the self-promotion that occurs in Getting Started in Online Investing by David L. Brown and Kassandra Bentley. In this mess of a book, the two authors don't even cover budgeting, financial planning, or saving for retirement--issues any certified financial planner would say you must address before investing your first dollar. Such omissions would make sense if the writers were targeting their book to savvy people who have already dealt with the personal-finance basics, but that's not the case here. Instead, the book simply catalogs Web sites. Worse, Brown and Bentley skip better-known and higher-quality sites and shamelessly plug their own. Brown is CEO of Telescan, which owns Wall Street City (www.wallstreetcity.com), and Bentley is president of CyberInvest.com (www.cyberinvest.com).
Worst of all, Getting Started in Online Investing doesn't tell you which sites are worth the bother or the subscription price. For example, the authors list seven Web portfolio trackers and say: ''We recommend that you take a look at all of them to see which best fits your needs.'' Funny, I thought sorting that out was the job of a book like this.
These guidebooks all miss out on the hottest area of online investing: day-trading. This topic hit the book world's radar screen last year with The Electronic Day Trader by Marc Friedfertig and George West (published by McGraw-Hill, which, like BUSINESS WEEK, is a division of The McGraw-Hill Companies). The book still stands at No. 9 on the BUSINESS WEEK list of business best-sellers.
The same two authors (with Jonathan Burton) wasted no time in following up on their success by releasing Electronic Day Traders' Secrets in February. The book consists of 13 interviews with ''successful'' day traders--all of whom just happen to have taken a day-trading course with West or used Friedfertig's brokerage firm, Broadway Trading in New York. What it amounts to is 225 pages of Q&A with a bunch of twentysomething guys who dish out confusing and contradictory advice. For example: ''When you are up a lot of money, you are really playing with the house's money. You can be more aggressive'' (page 36). And ''If you make a good trade, you have to take a profit'' (page 20). Huh?
''TEENY'' STRATEGY. Secrets is meant to inspire people who already day-trade full-time, so the book will not introduce newbies to the subject. One book that purports to be such a how-to is Day Trade Online by Christopher Farrell, also out this year. Simply put, the strategies in this book are almost complete hogwash. Here's a thumbnail of Farrell's favorite trading strategy: Find a stock with a price that's not moving. Then, buy the stock at the bid price (say, 20). Very quickly, sell the stock at just under the ask price (which might be, say, 20 1/8, so your sale price would be 20 1/16). If you're right, you make a whole 1/16th (called a ''teeny,'' or just over 6 cents a share). Of course, if the price of the stock does move, or if a nimbler player cuts in while you're waiting for your E-broker to process your trades, you'll lose your shirt. But Farrell doesn't talk about that much.
The final day-trading book published so far this year, The Day Trader: From the Pit to the PC, is different from the other two: It's interesting, informative, and written by a bona fide authority, Lewis J. Borsellino, a longtime Standard & Poor's futures day trader, with Patricia Commins. Part memoir, the book does a great job describing Borsellino's rise from the Chicago streets to the top seat of the Chicago Mercantile Exchange's futures pit and then to his current job trading with computers for client accounts at Borsellino Capital Management in Chicago. Along the way, he alternates his trading stories with engaging anecdotes about his father's involvement in the Mob and eventual incarceration and his own run-ins with the FBI.
Borsellino doesn't tell you how to boot up your PC and trade your way to riches. But after you read this book, you'll remember that pros have been day trading for a long time and have effective ways to beat dabbling novices. When it comes to day-trading, that's the best lesson a book can teach you.
BY MALCOLM FITCH
To read a correction/clarification about this story, click here.
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BACK TO TOP
Your Guide to Online Investing
COVER IMAGE: Our Guide to Online Investing
CHART: The Biggest Online Brokers
TABLE: Broker Scoreboards
TABLE: Online Brokers That Meet Your Needs
Gotta Do the Legwork
``A Diversity of Thought''
Testing the Waters
Commentary: Why Old-Line Firms Need New Online Tricks
TABLE: Full-Service Dream
The Right Tools for the Right Trades
TABLE: Smart Investing on the Web
TABLE: Web Resources for Online Investors
Rocket Science Made Simple
TABLE: Quant for a Day
How to Seal a Great Bond Deal
TABLE: Where to Buy...And Get Info
What to Read: The Good, the Bad, and the Terrible
TABLE: Wired-Up Investing Books
Investor Beware of Web Talk
TABLE: Separating Fact from Fiction
TABLE: Cross Checkers
Smells Fishy? Tell the SEC
This EDGAR Is a Real Know-It-All
TABLE: Searching the SEC
Commentary: Analyst Calls: Let Investors Listen
TABLE: Calling All Netizens
The Barker Portfolio: A Battle Plan for Accidental Investors
Inside Wall Street: Wells Fargo Online
CHART: The Rise Trails Other Banks
Inside Wall Street: Bidding for 3COM?
CHART: Prior Takeovers Fizzled Out
Inside Wall Street: A TV-To-Net Linkup
CHART: ACTV's Rise Is Due to E-Commerce
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