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Of course, the ability to trade online has been abused, and of course there have been problems, but as long as you are pretty sure you aren't a latent compulsive gambler, and as long as you are reasonably comfortable online, that is you can read and follow instructions without getting flustered just because you're using a "computer," I don't see much of a downside to it.
Most of the problems that have been made much of in the financial media are bogeymen. To the same extent that bogeymen serve a useful purpose if they keep children from walking down dark alleys at night, the scare stories have usefully warned that trading online can be addicting for people who have a tendency to go off the deep end. But when you compare scary stories from online trading problems with scary stories from broker-related trading problems, I don't see a whole lot of difference.
So, if you are planning to start your Foolish Four portfolio this month and you don't have a discount brokerage account set up yet -- time's awastin'! If you are transferring money from another brokerage or a mutual fund company, you need to get the paper work in motion immediately. If you just want to send in a check, you have a bit more leeway, but you still need to get crackin' if your intention is to trade before the end of the year.
Should your intention be to trade before the end of the year? I think so. There are no guarantees, but the historical database we have put together certainly shows that portfolios that trade in December and January have a higher average return. Lately, though, early January has seen institutional investors piling in to the high-yield Dow stocks and driving the price up. I have no idea if we will see the same thing this year, but if I couldn't place my trades before the end of December, I would wait until mid-January, or at least until I see what the stocks are doing the first few days of the new year.
We will be renewing our portfolio (the one down below) on December 27, but any time around then is as good as any other.
For IRA investors, this question is particularly important since many of them want to get their next year's contributions working as soon as possible, but their contribution can't go in before January 1. One possibility that is a bit tricky would be to place your trades on December 31, then send in the cash to arrive by the settlement date (January 4 or 5, ask your broker).
DON'T even think about trying this unless you have 1) talked to your broker to see if they allow it, and 2) made sure you have a way to guarantee that the cash is in your account before settlement. I would want to personally walk the check, dated in 2000, over to the office and hand it to an employee along with a letter stating that the deposit is your year 2000 contribution to the IRA account.
Or you could just wait a few weeks before you place your trade. This is supposed to be easy, you know.
Whenever and however you trade, you need to do it carefully and you need to use a competent brokerage. Which brokerage specifically? I don't really have a favorite. They differ in sophistication of the online interface, level of customer service, and price, but as far as I know they are all financially responsible and competent to transmit your trades and hold your investments in an account for you. For Foolish Four trades, that's enough.
If you want to see what other Fools think about some of the more popular brokerages, we have a Discount Brokers message board where you can read about the experiences other Fools have had with the various brokerages. Note that those most likely to complain are often concerned about speed of execution. If you are doing lots of trading of fast moving stocks, that's a consideration, but then if you are doing that, you aren't likely to be reading this column. For someone interested in the Foolish Four, maybe rounded out with an index investment or a few buy-and-hold-forever Rule Maker stocks, speed of execution shouldn't be a major concern.
Customer service is usually a concern for everyone, though. That and price are the two factors I would consider most important. I don't really have a personal favorite, although anyone with more than $100,000 to invest should probably check out the new service by American Express that offers FREE trades if you have an account that large (free buys for accounts with $25,000 or more). Amazing. A year ago we were saying: Look how fast those trading costs are coming down. Where will it end? Free trades? Well, yep. Looks like it has. (Don't worry about American Express going broke. They make their money via a piece of the spread.)
If you have to pay for your trades, then our Discount Brokerage Center is a great place to find a broker. We have details and prices for some of them, and phone numbers for darn near all of the others.
And, or course, there are those ads all over our site.
Fool on and prosper!