July 24, 2000 5:00 AM PDT
Net investors struggle with stock split calculations
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Although some Web sites alert investors that their stock has split, few automatically calculate split adjustments and update people's online portfolios. As a result, many investors find major errors in their accounts when splits go into effect.
Popular sites, including The Motley Fool, America Online, Yahoo Finance, StockMaster.com, Quicken.com and Morningstar, do not offer automatic split adjustments.
Jim Travisano, a 46-year-old University of Virginia McIntire School of Commerce employee, considers himself an amateur investor. Recently he checked his Motley Fool portfolio to find a shocking change in his holdings of Wisconsin-based department store chain Kohl's.
"I noticed that the value of the stock was cut in half," Travisano said. "I still had the same amount of shares, but they were worth like half what they were worth the day before."
In actuality, Kohl's stock had split, and The Motley Fool hadn't adjusted Travisano's portfolio to reflect the change. The portfolio showed Kohl's new split price--half its former value--but did not increase Travisano's holdings. In turn, it appeared Travisano had lost nearly half his money in the company.
"It could lead to a little bit of panic," said Travisano, who had to manually change the number of shares he held in the company.
People with portfolios on Yahoo Finance, Quicken.com and Morningstar are finding themselves in the same boat. While these sites notify people if their stock has split, customers must open their portfolios and manually enter the new amount of shares they own after the split.
America Online members must notice the change themselves and then adjust their portfolio to reflect the new amount of shares. CNET Investor will automatically update stock splits, but it does not calculate splits for mutual funds.
MSN Money Central is among the few sites that make automatic adjustments for stocks and mutual funds, but MSN just added the mutual fund feature Friday morning.
Investors sound off
Although no online portfolio service said it has received reports of customers making bad investments based on the split issue, many admit they've had complaints.
One such complaint came from Glen Gishel, an investment adviser for Capital Advisor Management in Maryland, who tracks more than 300 mutual funds and stocks through Microsoft's MSN MoneyCentral site.
When Gishel's Rydex OTC fund appeared down 64 percent for the year, he wrote MSN MoneyCentral to complain. In fact, the fund had split three ways in April and was up 3 percent. MSN MoneyCentral has since fixed its site.
"It's very important to me that if I'm talking to clients, I'm giving them accurate data," Gishel said. "I don't like making mistakes myself, and I certainly don't want to read data off a screen that is wrong."
While potentially an inconvenience, free online portfolios at financial Web sites are not necessarily tied to any real investment money; people can track stocks they already own, are considering buying, or are just pretending to own.
At most online trading sites, where portfolios are tied directly to the customers' cash or stock accounts, accounts are typically updated to adjust stock and fund splits automatically.
When contacted, each of the online financial Web sites said it was working on adding the automation feature.
As more amateur investors try their hands at the stock market, many of them turn to financial Web sites to track their holdings, seek news and analysis, and even conduct trades online. At the end of 1999, 7.1 million households held online trading accounts, according to market researcher International Data Corp.
While many financial Web sites offer free personalized portfolios, few have justified the added cost of programming for automatic split adjustments, said Shaw Lively, IDC's research manager for online financial services.
"It's really easy for a developer to build something and say, 'Put a box here and do this mathematical equation.' But as soon as you have to hook up to feed somewhere, it adds to the complexity and it's a cost," Shaw said. "Sure, the sites want to give you a portfolio tracker, but we don't get anything back except maybe more stickiness," people staying longer and returning to the site).
Receiving stock and fund data from a feed service requires a relatively simple program. But when accounting for stock and mutual fund splits, the individual sites must have a special program.
"It's not hard to do, you just have to program a routine," said Neil Nordby of CNET Investor. "If it's all feed intensive, you could just rely on the feed."
Ultimately, financial Web sites will be left to make split decision: free portfolios with relatively inexpensive software or fee-based portfolios with automatic splits and other features.