iAsk,iKnow,iInvest

The online resources for investors have transformed the culture of investing.

Vikas Miglani,24,was two months into his first job as a banker when his father suddenly perished. Aside from the grief and trauma of the unexpected loss of his father,Miglani was left with a wealthy inheritance,for a man of his age,but without any guidance for what to do with his father8217;s lifetime of earnings. Miglani was forced into resorting to his own devices while living in the unfamiliar surroundings of Delhi for the first time in his life. With no human financial resources at his disposal and two suitcases of cash locked-up under his bed,Vikas turned to the one avenue he was familiar with; one he knew he could control: the internet.

Thanks to his ability to monitor his investments and control them online all-day,everyday,Miglani developed into a stock market fanatic. Today,he wakes up half-an-hour before the opening-bell rings on Dalal Street,switches on his computer and parks himself in front of his monitor with tea and toast as the first market movements of the day commence.

I got lucky from a market standpoint8230;I started playing at the bottom and I8217;ve only enjoyed gains; honestly,I did not even know how lucky I was until earlier this year when a couple of my stocks cooled down, Miglani said during a phone interview at around 3:45 p.m. on a Friday,a critical time of the day and week for any investor. Between overheard clicks of the mouse,surely to refresh his page as the market approached 20,445 points for the day,Miglani explained how various websites have guided him toward a wealth of knowledge and monetary gains. It using the internet just made sense to me; investing online became more than just a place to let my inheritance grow,it8217;s become an addiction. I have control and I8217;m good at it, he said. Looking back,I probably should have consulted with a broker who would have told me to get into mutual funds and to buy a life insurance policy,but then I wouldnt know what I now know about playing the market.

Today,at least 20 websites exist to facilitate the needs of investors like Miglani. But online investing isnt limited just to the 20-something investors,nor do all younger investors find the resources of websites like ShareKhan.com and Indiabulls online trading sufficient when seeking an insight-based decision,said Anup Bagchi,managing director at ICICI Securities and one of the leaders of the innovative online investing platform ICICI Direct. All kinds of profiles are coming online; with more than 2 million clients in our network alone,were learning that people with resources for investing are comfortable with the internet and e-commerce, Bagchi said. Our market share and number of clients are increasing,but certainly theres a big world of off-line brokers. We are co-existing.

There are three types of investors when it comes to an investor-consultant relationship,Bagchi explained: 1. Self-directed client,2. Validation client 3. Delegation client.

The self-directed client by-in-large knows what to do and where to go and is simply seeking a transparent platform to manage their portfolio and thus is the most likely to find their way online

The validation client has a decent idea of what to do,but is seeking reassurance before parting with a large-sum of money. The validation client is a little conservative and is likely to seek the resources of an actual broker,but with a little confidence is perfectly capable of venturing out on his or her own online.

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Thirdly,the delegation client is most like an average consumer looking to buy a vehicle with little knowledge of how cars work. He or she will likely have no idea where to put their money and should seek guidance from a broker before investing. Ironically,Miglani was a delegation client when he first thought about investing,so the rules are hardly hard-and-fast.

Its true that if you look and analyse hard enough,every kind of investor can fit into every kind of broker,yet still people are moving online, Bagchi said. And although the objective of these sites isnt to put real human brokers out of business,the role of the broker is evolving along with the process of investing,said Vijay Bhushan,promoter-director of Bharat Bhushan Brokers.

Further,presuming that an investor already has a computer with internet access,the cost of investing online sits somewhere between the cost of off-line intra-day trading and delivery trading rates.. For instance,ICICI Direct declares that traders can trade shares on margin at .10 per cent on ICICI Direct and if one wishes to trade in cash,then the rates applicable are at least 0.4 per cent. Comparatively,offline transactions range from .05 per cent to .12 per cent for intra-day trading and .25 to .75 per cent for delivery,depending on the broker.

However established online markets such as that in the U.S. have worked fine-print charges into their brokerage fees. Although no major complaints have been logged against existing online brokerage websites in India,as the investment mechanism develops,brokers may take the lead of the west and start charging inactivity fees and market data fees. In India,the product remains in its adolescent stage while trying to gain the confidence of investors who have leaned on brokers for decades. But paper statement fees,electronic statement fees,exchange fees and withdrawal and deposit fees which eat into investor profits may not be far behind.

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The online rates may fluctuate within that range depending on an investors trade frequency and the type of account opened. Depending on the type of account,various features and investment opportunities open up to the consumer. For instance,ICICI Direct offers five different accounts,which allow users to personalise their account depending on the composition of their portfolio. For straight stock trading exists a share-trading account; for those interested in mutual funds exists the investment account; non-resident Indians also have an opportunity to sign up to trade from abroad while the new Trade Racer Account opens up a whole host of resources including live-streaming quotes,charting tools,live research recommendations and other technical analysis. However each account requires a PAN number and limitations for foreigners are based on their current country of residents.

The online trend is picking up steam as the value of broker-based insight is largely losing value. But as more people shift online,the cost of broker services are also rising so that they may maintain a livelihood from the diminishing volume of investors paying for their services. To remain viable in the market,both Bhushan and Bagchi agree that brokers will have to become dynamic players in the marketplace by serving as more than just transaction facilitators but specializing in wealth management.

There is a whole lot of information available on these sites that an investor probably wont get by just calling up his broker, Bhushan said. There is a large segment which will trade online,but will still look for advice,but that will not be enough for brokers because as the cost of devices to trade drops,the cost of advice goes up; therefore brokers will have to offer a range of other services and be more of an investment advisor while the transaction is taken care of online.

Causing further change to the world of investments in India is the forthcoming assimilation of mobile investments this month. Allowing investors to key into their investments and buy or sell shares using their smart-phones will revolutionize the identity of an investor and the role of the broker,said Bhushan. ICICI has made a significant dent in the market with their three-in-one scheme,but this is going to change the face of the game entirely,there will be market impacts because of this. Now a person who was stuck to his or her chair following the market can go all over India keeping an eye on their investments using their mobile phone. And without having to consult a broker to execute the transaction,the investor can sell or buy a share or two as they see fit. It will be like ordering once piece of a chicken-tikka for delivery from a restaurant in a five-star hotel,it completely changes the game. What may follow is broadening of the investor pool. With access via mobile,the game will stretch beyond the upper-class in the metros and start to carry weight with rural India,aside from the wealthy farmers who are,in some cases,already connected.

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The online trend hasnt just hit investors on the stock market,but equity-based mutual funds are also tradable online once an investor has bank,trading and dematerialised accounts.

Further,the role of insurance agents is also evolving with more information on policies available to prospective investors online. Its becoming more and more difficult for agents to mis-sell their products,to mislead their investors, said Rahul Aggarwal,CEO Optima Insurance Brokers. The focus today is still hit and run with more focus on the sales front and less on information dissemination. The information available will change that and allow information to be organized leading to fewer instances of people getting ambushed by their insurance salesman.

kartikay.mehtrotraexpressindia.com