BUSINESSWEEK ONLINE : JULY 31, 2000 ISSUE
BUSINESSWEEK INVESTOR Shop 'Til You...Save A new plan offers stock rebates to Net customers In the old days, you'd open a savings account and get a free toaster. Now, if you buy a toaster, you'll get free shares in a mutual fund. A handful of fund companies are forming Web partnerships with major U.S. retailers to offer reward programs akin to airlines' frequent-flier plans (table). The shop-first-save-later format works in two ways: Ring up your purchases at program Web sites, and you can earn rebates of up to 15% that turn into shares of existing funds, such as the Fidelity Advisor series. Or you can earn shares in a new fund that invests in participating e-tailers. Consumers who accumulate shares in both of these programs are free to redeem them for cash. They may also use bonus rewards for additional online purchases. The Web sites will provide access to fund-performance data and customer statements. Will a bonus dollar here and there add up to a substantial portfolio? Eric Solis, founder of SaveDaily.com, an online investment advisory in Irvine, Calif., says yes. ''We found a way for millions of Americans to harness savings of $5 or $10 a day through consumption,'' Solis explains. ''It's not a gimmick. We want to help people who are having a tough time saving for retirement to accumulate wealth.'' Emptying your wallet to secure your financial future sounds suspicious to some. ''I don't like the idea of encouraging spending with the aura of saving,'' says New York financial planner Lewis Altfest. ''I'd rather do my own saving and spending and have the choice of the universe of funds out there.'' He says some funds' minimum requirements are as low as $250, making them accessible to small investors. Solis and other proponents figure if people are going to shop at J.C. Penney (JCP), Toys 'R' Us (TOY), and Esprit anyway, they might as well get something back. A $5 initial purchase on SaveDaily.com, plus a $10 sign-up bonus, means consumers are on their way to buying a share in a select group of existing funds from the Berger, Fidelity, PIMCO, and Stein Roe families. The new Stockback fund as well as another from State Street Global Advisors work differently in that they have created a mutual fund just for the rebates. (Both are under review at the Securities & Exchange Commission and are scheduled for fall launches.) Each fund will invest a portion of its assets in all retailers affiliated with its rebate program. But just because a company signs up doesn't mean its shares are worth owning. Managers of Stockback and State Street's SSgA OWNx CustomerOwner funds say they'll diversify by buying stocks outside their member groups. At Stockback.- com, customers can browse at about 80 virtual shops and ring up purchases with, say, Dell Computer or Tower Records. Merchant members offer buyers up to a 15% rebate on purchases, which is credited to a ''reward'' account. A pair of $50 Lands' End pants bought on the Stockback site will earn a 4%, or $2, bonus. Stockback.com will swap the bonuses for shares or fractions of shares in its upcoming no-load Merrill Lynch-managed fund. GOOD PR. Stockback customers have no minimum investment requirement. Nonmembers must pony up $1,000 initially. Annual expenses on the fund, which boasts no commissions or transaction fees, run 1.5%. The OWNx ConsumerOwner program works almost the same way, except purchases do not have to be made online to earn shares in the SSgA fund. OWNx customers have to pay a $15 annual maintenance fee and wait three months for credits to ''vest.'' A minimum of $25 in credits is required to translate into a piece of the fund. In the end, these programs are more about customer relations than investing. Consumers ''are being rewarded for their spending and for loyalty to the companies,'' says John Fitzgerald, CEO of OWNx. True, but free fund shares don't take the place of a disciplined savings plan. Hopefully, once you see how these funds perform, you won't wish you had the toaster. By MARA DER HOVANESIAN _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP					RELATED ITEMS Shop 'Til You...Save TABLE: Sites to See INTERACT E-Mail to Business Week Online

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