Investors Find a New World on the Internet : Mutual funds: A vast array of information, including performance ratings, stock quotes and prospectuses, is only a few keystrokes away.
Over the past 10 years, Richard Grant has made a good living, and shared in an Academy Award, by using computers to help composers write music for movies. But lately, Grant has been turning his computer to a more pedestrian task: shopping for mutual funds.
From a cozy office in his Sherman Oaks home, Grant can use his computer to gather data on thousands of mutual funds--collections of stocks, bonds and other securities owned by investors and managed by investment companies.
Grant, 52, can check on the backgrounds of fund managers, get stock quotes every 15 minutes, and gather numbers and addresses for fund companies. With a few keystrokes, Grant can even print copies of performance charts and fund prospectuses--documents that spell out a fund’s risks and objectives. Most of this information is free and, for the computer literate, relatively simple to obtain.
“If you can run a computer and read,” Grant said, “you can one-stop shop.”
Among the millions of stations dotting the so-called information superhighway, a growing number provide investment and personal financial information, including a handful of sites that have popped up over the past year dedicated to mutual funds. So far, transactions can’t be executed through these sites, but they do offer information investors can use to choose and track mutual funds.
In most cases, all that’s needed to tap this information is a personal computer, a modem and an account with one of dozens of services that provide access to the Internet, the global web of computer networks. Prodigy, America Online, CompuServe and other on-line computer services commonly include such access in basic subscriptions that cost about $10 a month.
Grant had always kept his savings in bank and certificate of deposit accounts, but last year decided to start building a mutual fund portfolio for his retirement. He started shopping for mutual funds in December by exploring the financial information included in his subscription to America Online.
By pointing and clicking with his mouse, Grant made his way past a basket of financial news stories and stock quotes to a bundle of mutual fund tables assembled by Morningstar Inc., a Chicago-based company that rates funds.
The tables listed the top performing funds of various types, from conservative bond funds to aggressive but risky international stock funds. Grant wrote down the names of a few funds that sounded interesting and jumped out of the cozy confines of America Online to look for more information on the vast landscape of the Internet.
Using software designed to make navigating the Internet easy, Grant searched for sites linked to the words “mutual” and “fund.” Up popped NETworth, a slick-looking Internet address that is home to extensive information on mutual funds.
Launched last year by two graduates of the Carnegie Mellon business school in Pittsburgh, NETworth is not the only such service solely devoted to mutual funds, but it seems to be the largest. In addition to tables that chart the performance histories of thousands of funds, NETworth offers a virtual catalogue of about 1,000 mutual funds, complete with addresses, phone numbers, information on fund managers and prospectuses that can be printed at the touch of a button.
NETworth also arranges on-line question-and-answer sessions with fund managers, and offers abridged versions of Morningstar reports--quarterly reviews of thousands of funds that many investors use to make their investment decisions. NETworth pays Morningstar for the reports partly by giving users the option to order complete Morningstar subscriptions in printed form, which cost up to $395 a year.
NETworth’s services are free to computer users, but the service charges mutual fund companies rates ranging from $500 to $50,000 a month to have information about their funds posted on NETworth, said Joel Maske, co-founder and vice president of Galt Technologies Inc., NETworth’s parent company. To date, about 52,000 people have used NETworth, Maske said, and the number grows by about 15% per month.
One recent user is Mark Fielder, who owns a Burbank-based investment company, Fielder Financial Management. NETworth doesn’t offer any materials or information Fielder hadn’t already been getting for years by phone or through subscriptions to newsletters and magazines. But these methods of gathering information take time and cost money. On the Internet, Fielder said, “it’s just instantaneous information at your fingertips.”
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Other services, including Bloomberg and Dow Jones, have been offering computer-based financial information for years. Though some of these services are now available to everyday investors, they have traditionally catered to brokers and investment houses.
Fielder makes his living by charging up to $170 an hour to advise investors on which stocks and mutual funds to buy, or by collecting 4% to 6% commissions from mutual fund companies on sales. The Internet may help some investors bypass brokers, but Fielder doesn’t see it as a threat to his business.
“People have so much information now, but they still don’t know what to do with it,” Fielder said. “The vernacular alone is difficult enough. And [investors] don’t have a lot of time to devote to spending hours on-line and reviewing a prospectus.”
Others in the mutual fund business say Internet access is expanding the market for funds, which have multiplied from fewer than 2,000 five years ago to more than 6,000 today. “The feeling is that [the Internet] is reaching a segment that might not otherwise be reached,” said Sue Duncan, a spokeswoman for Investment Company Institute, a Washington, D.C.-based mutual fund trade association.
Despite the instant access, shopping for funds via the Internet still takes time. Richard Grant said he has spent about 50 hours so far this year putting together his portfolio of about four funds.
Half of that time was spent gathering data via computer, and reading investment books, newspapers and newsletters to learn more about how to put together a diversified fund portfolio. The other half was spent narrowing his list of choices and making purchases.
Grant said that, so far, his efforts are paying off. The $25,000 he invested in February in an international stock fund is now worth $26,000, and his other funds are holding steady. But Grant, like any reasonable investor, knows there are no guarantees.
“No matter how much computer power,” he said, “it’s still throwing darts.”
