It's 1959. Your broker, a silver-haired man named Chester, calls to dispense his sage advice: Move your money, say, from General Motors to General Electric.
In 1999, waiting to hear from Chester seems as outdated for many investors as the tail fins on a '59 Chevy Impala.
Once, consulting with a broker - and paying hefty commissions - was the only way to invest. How do you know which route is right for you? A full-service brokerage? An Internet-based discount brokerage. Or even day-trading.
The lines between these options are blurring.
Full-service brokerages specialize in giving personalized advice through a broker (like Chester) who earns a fat commission. In June, even Merrill Lynch announced it would begin offering cheap Internet trading.
Discount brokerages specialize in letting investors pay less and navigate their own way, though these firms have added information to guide investors.
Finally, professional day traders have access directly to the markets that no Internet-based trader has now.
In making this decision, the first question to ask is whether you're comfortable enough with your knowledge of investing to go it alone or if you want to pay extra for someone to hold your hand, says Bob O'Hara of the National Association of Investors Corporation. If you think that investment guidance from a real person is important, stick with a full-service broker.
Some discounters may offer limited information to customers, trying to match the advantages of full-service firms. But be wary, says Louis Harvey, president of Dalbar Inc., a financial services research firm in Boston.
"Nobody who's worth their salt," he says, "is going to give you advice for free."
Discount brokerages work for people who are confident in their investment decisions and want to save money. Among more than 140 choices, how do you know which discount house is right for you?
Mr. Harvey advises staying away from small start-ups, which are prone to go out of business. Stick with larger, better-known discount brokerages, he urges.
These firms, which include Charles Schwab, E*trade, and Datek Online, generally charge a flat fee per trade, ranging from $7 to $30. Many offer limited research on their Web sites, but there's no one looking over your shoulder to tell you not to put your entire retirement fund into Anyinternetcompany.com.
Select a discount brokerage that meets your specific criteria. Some, for example, are simpler to use than others and have more basic information, which make them particularly useful to beginners. Others offer more complicated research and analytical tools, making them better for more sophisticated investors.
Finally, companies are moving to allow individuals access to exchanges directly, via computers - an option already available to full-time traders at specialized firms.
"There's a difference between online trading and interactive trading," says David Downey, vice president of Interactive Brokers, whose firm already allows individuals to trade futures and options that way and plans to expand to direct stock trading next month. Direct trading, he says, means cutting out the brokers who profit on an exchange.
"We don't want shooters and gamblers," he says. "We want people who want to hedge their portfolios."
To compare brokerages and find the one that works best for you, try these Web sites:
Expert Online Investment Advocates (www.xolia.com); Gomez Advisors (www.scorecard.com/Finance/Brokers); Money Magazine (www.pathfinder.com/money/broker).
(c) Copyright 1999. The Christian Science Publishing Society