Investor Tools: Escaping a Maze

Lee Hevner's students range from retirees in their 60s on fixed incomes to young couples in their 20s buying their first homes. Many who fill the classroom at Montgomery College in Rockville, Md., for Hevner's investing lectures feel like they are trapped in a maze of confusing choices.

The end result is that the students often don't know how to navigate the obstacle course of brokerage firms touting stocks, dubious mail offers pitching get-rich-quick schemes and a clutter of Internet sites promising big profits for little work.

Sometimes, the students make the wrong choices.

One retired couple, for example, came to Hevner after class and told how they had lost 60 percent of their portfolio by following the stock tips of an apparent con artist.

"A lot of people don't know where to start," said Hevner, an instructor at the community college in suburban Washington, D.C. "It can be intimidating. There is so much information out there. People get confused and give up in despair."

Hevner has tried to cut through the confusion in his own classroom — and the world beyond.

For seven years he has overseen the National Association of Online Investors, which sells investing courses through the mail and online. The association also has developed a list of 25 investing Web sites that Hevner recommends as useful tools for investors. Hevner came up with that list after evaluating more than 1,000 Internet sites.

"What makes them good sites is that they are one-stop shops offering a variety of information," Hevner said.

Hevner's focus on online tools comes at a time when the Internet is growing as an investing force.

Only about 13 percent of U.S. investors have opened an online brokerage account, according to Friedman, Billings and Ramsey. But online brokers could see average customer growth of 10 percent to 12 percent annually during the next five years.

The group's recommended sites include such high-traffic destinations as Morningstar.com, well known for ranking mutual funds, and Yahoo! Finance, a popular clearinghouse of financial information for average investors. Other sites are less known. Validea.com, for example, purports to mimic the investing styles of Warren Buffett, Peter Lynch and other famous gurus to come up with model portfolios.

"What we look for is a friendly user interface," Hevner said. "If it is too complicated, if you have to dig through multiple levels to find information, that is a big negative."

Dave Emerson, a 48-year-old airline pilot who trades stocks in an online brokerage account from his home in Cincinnati, completed one of the association's online investing courses about six months ago. He's found the association's list of investing Web sites a useful resource in cutting through the clutter of the Internet.

"It directs you to a lot of sites that you might not find on your own without hours of research," Emerson said. "It opened my eyes to what was available."

Mary Ellen Fitzpatrick, a 50-year-old math teacher in Rockville, Md., who owns about 30 stocks in her portfolio, also has taken the association's online investing courses and used its Web resource directory.

"It is like having a huge library on your desk," Fitzpatrick said of the Internet. "It has opened a whole new world for me as an investor."

Hevner added that online brokers are generally good about offering fast trading that generate commissions. Yet they are less adept at investor education.

"I think the good online brokers in the future will feature good educational resources," Hevner said.

Despite the growing traffic and the multitude of online tools, Hevner estimated that only about 5 percent of the population are motivated investors — people who seriously take charge of their financial futures through self-education.

An additional 10 percent are potentially motivated but don't know where to start.

About 35 percent of the population are investors who rely on brokers or other advisers, but don't do their own research. The other half of the population is not invested in stocks at all, he said.

"Our biggest challenge is to get people's attention — to make them care," Hevner said.

Hevner, a resident of Washington, D.C., was a vice president at a computer company before he retired to focus on investing. That was during the bull market of the early 1990s when stocks often rose, even when the fundamentals of sales and profits were questionable.

"In that era, it didn't matter what you bought, it made money," Hevner said. "People got a very false sense of security and power."

Hevner said he learned about the risks the hard way.

"I was a millionaire on paper, but as time went on I lost a lot of it back because I didn't know when to sell," he said.

Before starting the association in 1997 he was disillusioned that there were few resources to guide people like himself through the investing minefield. He found that many investing books, Web sites and newsletters offered incomplete advice.

"When I saw all these powerful tools, it looked like a panacea for making money quickly," said Hevner, now 52. "But I found out it wasn't that easy. Most of these powerful tools available on the Web told you what to buy, but they didn't tell you when to sell. I, like everybody else, would buy and watch the stock go up for a while, then go down and down."

Hevner said he came to realize that discipline, education and solid planning were keys to success. Those elements are emphasized in courses that Hevner's association sells to investors. He said the courses include education about the basic asset classes (stocks, bonds, cash), tips on how to put together a portfolio that maximizes return and minimizes risk, advice on asset allocation and diversification.

The courses also stress setting goals and coming up with a plan. The association has 1,500 members who have bought courses. About 150,000 investors a month connect to the group's Web site for information.

"Unless you have a plan that guides your decision-making process, then you are essentially gambling," Hevner said. "When opportunity comes, you need to ask: 'Where does this fit in my plan?' "