The Bottom Line: Self-directed investing - Make money grow by doing your homework

A disciplined investor beats the market with good data and a set of firm guidelines

Here's my Nov. 9 column for The Oregonian:

KEN MAXWELL, 62, a former high-tech salesman, lost "a lot of money" from his retirement account with the stock market downturn in 2000. So he left his broker and started directing his IRA stock holdings himself from a laptop in his Lake Oswego family room.

"Now that I'm self-directing, I've been doing better than market averages," Maxwell says.

Daily, Maxwell goes online to check Yahoo! Finance, personalized stock tickers at his Scottrade account and statistics from subscription services at VectorVest and TimingCube.

"I'm not a 'buy and hope' type -- I'm a trader," Maxwell says. "If there's something I need to do, I do it. If not, I wait another day."

Maxwell joins a new breed of traders who are checking the market daily but -- unlike the day traders of the roaring 1980s and '90s, who became famous for getting in and out of holdings on the same day -- who are interested primarily in an entrepreneurial approach to their self-directed savings accounts. Such accounts include traditional and Roth IRAs, Coverdell educational accounts, health savings accounts and self-employed pension plans.

The North American Securities Administrators Association reports that millions of Americans are using such online discount brokers as Scottrade, Charles Schwab, Fidelity, TD Ameritrade and ETrade to self-trade. With the number of new self-directed IRAs growing at three times the rate of new traditional IRAs, the per-trade cost has dropped as low as $4.

"Transaction costs through brokers used to be much too high for day traders," recalls Maxwell. "Now (that) transaction fees are lowered with the advent of online brokerages, it makes the fees almost irrelevant."

The pluses of day-trading stocks in a self-directed account held by an online broker include zero cost to open many of these accounts, greater control and the potential for more profit that's either tax-free for Roth accounts or tax-deferred for all others.

The real question is, would you want to?

"It depends on the person involved and what they want to achieve," says David Peterson, a Lake Oswego financial planner. "You can go after stock market trades with a lot of risk or be very conservative, depending on whether you add in commodities, real estate investment trusts, bonds."

Finding the right balance is a matter of knowledge and confidence in that knowledge. Peterson recommends subscribing to Investor's Business Daily and reading the book "How to Make Money in Stocks: A Winning System in Good Times or Bad," by William O'Neil, Investor's Business Daily founder.

"I've been reading (IBD) for 10 years and I learn something every day," Peterson says.

Most online brokerages offer stock charting, personalized portfolio management and top-shelf research for their clients. Firms such as Scottrade, which has a Washington Square office, also have salaried brokers at no additional cost to help local investors.

"The new information out there is obviously quite helpful and the tools are great if people use them consistently instead of just looking for the trends they want to see to justify their trades," says David Tatman, administrator for Oregon's Division of Finance and Corporate Securities.

Though Maxwell doesn't use Scottrade's broker advice, he agrees that even a six-year IRA investor like himself needs advice.

"It's hard to keep the discipline to actually make the trade because there's so much noise out there. That's why I subscribe to the advisory services," he says. "Still, there's tremendous empowerment in controlling your own destiny."

E-mail your Bottom Line questions to info@jennifermeacham.com or subscribe to Gather.com today to make a comment on this article.