Feature: Computer Systems for the Individual Investor

Figure 1.Glossary atComputerized InvestingArea of AAII.com CLICK ON IMAGE TO SEE FULL SIZE.

If you are contemplating whether it’s time to replace your computer, you are not alone. A spate of PC replacement purchases is driving PC sales this year. Information technology industry research firm Gartner, Inc. estimates that almost 100 million personal computers will be replaced in 2004 and another 120 million or so in 2005. Overall, Gartner’s latest estimate calls for total PC shipments to be in excess of 187 million units in 2004, an increase of 13.6% over shipments in 2003. Gartner estimates that more than 30% of personal computers are now at least three years old and many have operating systems that are no longer supported or are about to lose technical support. Expanding mobile technologies are also driving consumers to purchase new computers.

Our annual computer guide is geared toward the mainstream investor who is performing investment tasks or analysis such as portfolio management, stock analysis, and charting, as well as general-purpose Web surfing, E-mail, word processing, and spreadsheet building.

For the first-time PC buyer, choosing among the multitude of options you have for computer types, brands, and configurations can be an intimidating proposition. From the ultra-cheap Microtel Linux-based systems sold at Walmart.com (www.walmart.com) for under $300 to the $3,000+ high-end media center systems, the choices are seemingly endless. For the vast majority of individuals, the right PC lies somewhere between the lines (extremes); however, this area is still quite expansive. With a little research and education, you should be able to reduce the time and frustration that might otherwise arise in selecting a system that offers the right balance of power and flexibility to serve your current computing needs as well as your needs in the years to come.

For those new to the terminology used here, a glossary of computer and investment terms can be accessed at the Computerized Investing area of AAII.com (Figure 1).

Defining Your Needs

The biggest mistake you can make when buying a new PC is to select a system that is inadequate and will therefore need to be replaced quickly. On average, a mid- to high-end system purchased today should be functional for about three years. The rate of advancement in computing technology and ever-evolving operating systems make system viability much past three years unlikely.

Alternatively, you do not want to spend money needlessly on bells and whistles you won’t use. To avoid these potential missteps, it is a good idea to spend some time determining the tasks you wish to accomplish with your system. Ideally, you will identify what it is you wish to do and purchase a system accordingly. If all you are looking for is an on-ramp to the World Wide Web to surf the Internet and send and receive E-mail, a high-end system with advanced audio and video capabilities is most likely a waste of money. Likewise, if you wish to perform advanced technical analysis, such as trading system development and backtesting, or run more system-intensive software, a basic system would not be the proper choice either.

A paramount issue when buying a personal computer is choosing one that supports the software you wish to use. The frustration among Mac users with the limitations they face when trying to locate specialized investment programs for their systems is well known. The dearth of software investment titles for the Mac OS leads us once again to recommend Windows XP systems for members looking to run a wide range of investment-related titles. Even with Windows emulation software, which allows Windows-based programs to operate on Mac systems, there tends to be a tremendous drop-off in performance that makes this option less than optimal and a Windows-based system the preferred choice for investment analysis.

At this point in time, Windows XP is the operating system of choice for individual investors. Both the home and professional versions of XP are designed from the Windows NT platform, which is inherently more stable than other Windows predecessors such as 95, 98, or ME. Windows XP supports a wider range of hardware add-ons and even software programs than previous Windows versions.

Windows XP comes in two versions—Home Edition and Professional. The fundamental core and interfaces are the same for both operating systems, but the Professional version has additional security, networking, file sharing, and multi-processor support. For the average user in a single-computer household, Windows XP Home Edition will suffice, unless you need to connect to a corporate network.

There is no question that the eMac, iMac, iBook, and PowerBook have revolutionized PC design. However, Apple saw its worldwide PC market share slip to an all-time low of 1.7% in 2003, according to Macworld UK. In the U.S., Apple controlled 3.2% of the market at the end of 2003. Apparently there is a glimmer of hope for Apple, as the brokerage and research firm Piper Jaffray reported in late September 2004 that Apple will grow its market share ahead of expectations over the next two years, fueled by greater-than-expected adoption of the popular iPod personal music system. This, in turn, will lead to an acceleration in sales of Macintosh computers.

Table 1. Computer Usage Among AAII Members CLICK ON IMAGE TO SEE FULL SIZE.

Among AAII users (Table 1), Mac usership declined from 2000 to 2004, with 6.9% currently using a Mac. This is compared to 92.5% of members using Windows-based systems. Another 0.6% employ other operating systems such as Linux.

In October of 2003, Apple released Mac OS X version 10.3, titled Panther, which included over 150 new features. The operating system builds on the way users access and search for files, browse file servers, and view and manipulate file windows. An upgrade to Panther costs $129 for a single user’s license; the Mac OS X Panther Family Pack—a single-residence, five-user license—costs $199.

Mac systems remain good choices for Web browsing, E-mail, word processing, music and video manipulations, and spreadsheet work. They are also the system of choice for graphic designers. Furthermore, Mac systems tend to be more secure than Windows systems, which we will discuss in a later section of this article.

As stated, the biggest problem Mac users face is a scarcity of investment software, with no indication that the situation will improve. The majority of Mac offerings are personal finance programs such as Quicken, but the advanced features found in the Windows versions of such programs are not always found in their Mac counterparts. Even such popular Web sites as CNBC at MSN Money (investor.msn.com) use technology that renders the most popular features useless for Mac users. Apple’s greatest impact these days appears to be on the music industry with its iPod music player and iTunes software system—both of which are available to Windows and Mac users.

Intended Uses

No matter what the tool you are looking to buy, it is always a good idea to know beforehand what you wish to do with that tool and then buy the right tool to do the job. The same is true when you are buying a new computer—you will need to purchase a personal computer with certain capabilities, especially if you wish to perform computer-assisted investment analysis.

Technical analysis is probably the most system-intensive work in the realm of investment analysis. This type of analysis involves the manipulation and graphical display of a large quantity of data—typically daily open, high, low, and close price and volume data over several years. In order to perform such tasks, a computer requires a processor that can quickly perform calculations. Furthermore, a high-quality, high-resolution monitor and possibly a color printer are necessary to examine and print charts and graphs. If you are looking to store a large amount of historical data for many companies, as is typical of most disk-based fundamental screening and analysis programs, a large hard drive would be useful. For day-to-day downloading of data or for extensive Internet-based research, a high-speed connection is desirable. In contrast, most portfolio management programs require less complex processing capabilities and, likewise, a comparatively less advanced computer.

Computing Synergy

In business, synergy is a popular term used when discussing the merger of two companies. It is the concept that the sum of the parts is greater than the value of the individual components. The same can be said about a computer. While most people view a computer as a singular item, in actuality it consists of various components, such as the processor, hard drive, disk drives, and video and sound cards—each of which requires the others in order to function. You need to understand a certain amount about each component to make sure your overall system is right for you and the tasks at hand. The major components are discussed below.

Processors

In relation to an overall computer system, the processor is one of the smallest pieces. However, without it the computer is rendered useless. The central processing unit (CPU)—or simply, the processor—is the brain of the computer. The faster the processor, in theory, the faster the computer is able to execute operations and perform calculations. However, the support system must be up to the task of supplying data and instructions to the processor and then acting upon the processor’s instructions. Other factors, especially the amount of memory your PC has (discussed later), can have a more noticeable impact on performance than the processor.

Chip manufacturers are continually trying to outdo each other for the title of fastest processor. Consequently, faster and more powerful processors enter the marketplace every few months. In fact, Moore’s Law (credited to the co-founder of Intel) states that processor speeds double every two years. Remarkably, this statement has held true for close to 40 years and Intel expects it to remain valid at least through the end of this decade.

The two main competitors in the processor industry continue to be Intel, the king of processors for the last several years, and Advanced Micro Devices (AMD). AMD has stepped up its challenge to Intel over the last few years, but remains firmly entrenched in second place. Intel continues to have the fastest desktop processor: Intel’s Pentium 4 Processor with HT Technology has the highest clock speed on the market today at 3.6GHz (gigahertz). However, Intel hypes its Extreme Edition, which tops out at 3.4GHz as offering the fastest processing capabilities. AMD’s Athlon 64 rivals the Pentium 4 in performance and even surpasses it in certain benchmark tests. The fastest desktop processor in the Athlon 64 family—the Athlon 64 FX-53—runs at 2.4GHz. What makes the Athlon 64 unique is that it is a 64-bit chip, whereas the Pentium 4’s are 32-bit chips. Intel does provide a 64-bit chip—the Itanium—but it is best suited for power-hungry scientific or engineering applications, or for very powerful servers running flavors of Unix. However, adoption of Itanium has been disappointing, leading Intel to proceed with plans for a new line of 64-bit chips. What makes this development interesting is that Intel is basing its new 64-bit chip on the AMD Opteron 64-bit chip. A 64-bit chip can address more memory directly than its 32-bit counterparts—up to a theoretical limit of four terabytes (1,024 gigabytes, or over one million megabytes), versus four gigabytes for 32-bit chips. These 64-bit processors can also handle large-number math more easily and directly. The limiting factors to this technology include compatibility issues with existing 32-bit operating systems and software applications. Therefore, the full potential of 64-bit technology will not be reached until software makers begin making 64-bit-compatible software.

While the Athlon 64 and Pentium 4 chips represent the high-end processor market for consumer systems, competition is just as fierce in the value market. Here again, Intel and AMD do battle with the Celeron D and Sempron chips, respectively. These chips do not offer the processing power of their high-end siblings. However, they offer enough power for all but the most power-hungry users at a fraction of the cost.

In Macintosh systems, PowerPC G4 (G4 for short) and G5 (made by IBM) processors prevail. The G4 is found in the bulk of Apple portable systems, including the consumer-oriented iBook notebook, the low-end eMac, and Power Book G4 laptops. The G5, a 64-bit processor, is currently found in the Power Mac and iMac systems and ranges in speed from 1.6GHz to 2.5GHz. In head-to-head comparisons, the G4 and G5 rival and often surpass the performance of equivalent-speed Pentium processors. In a slightly embarrassing incident for Apple, the Advertising Standards Agency stated that the company’s claim that the G5 is the “world’s fastest personal computer” was misleading and asked Apple not to repeat the claim. For most, any of the G4 chips should be adequate. As you move up the eMac, iMac, and Power Mac ladder, faster processors, additional memory, and larger and better displays are available. The eMac and LCD iMacs are available in packages that provide a good balance of power, memory, storage, and features. Most of the processors found in today’s PCs should suit your needs. You shouldn’t be concerned with processing speed unless you plan on using heavy-duty gaming, video editing or other processor-intensive applications with your system. If money is an issue, you are better off forgoing a higher-end processor in favor of additional memory or a more powerful video card.

Data Storage Media

As today’s programs grow in their level of sophistication, so too do their needs in terms of the amount of hard disk space they require for proper installation. In addition, as computers face assault from a growing number of hackers and virus-writers, backing up your data has become an important issue. To ensure that your computer will be able to meet the demands of today’s and tomorrow’s software, make sure it has an adequate amount of data storage media.

Memory

In computers, temporary memory is just that—temporary. In other words, when the computer is turned off, data is lost. In PCs, the form of temporary memory that is employed is RAM (random access memory). The amount of memory (RAM) a system has impacts several aspects of computing—specifically what kind and how many programs can be used on a system simultaneously.

The more applications you run at the same time, the larger the files you deal with or the more complicated the operating system on your PC, the more RAM you will need. Even with a top-of-the-line processor, a lack of memory can degrade your system’s performance. Programs such as anti-virus applications are always running and can quickly use up system resources. Most low-end systems ship with 128M (megabytes) of RAM, while mid-range systems typically offer at least 256M of RAM. Some systems share video and program memory, a.k.a. “integrated memory.” This is especially common with a lower-end system. You should inquire as to whether memory is dedicated separately to main memory and the video system, or whether the system offers integrated memory between the main memory and video memory. If needed, you should purchase additional RAM to compensate for integrated memory.

We recommend you purchase a system with at least 256M of RAM, although 512M is a more optimal amount. To upgrade a 128M system to 256M of RAM will probably cost between $25 and $50, while adding an additional 256M will probably cost anywhere from $45 to $100. Memory is the last place where you should try to save money—upgrading your memory is a wise investment. If you are looking for ways to lower the cost of a new PC, you would be better served by forgoing a more powerful processor in favor of purchasing more memory.

Eventually, you may wish to add additional memory to your computer. Two things will have a direct impact on your ability to do so—the number of slots the computer has to house the memory chips, as well as the maximum amount of memory the system can handle. If the system has empty slots, you can simply add new memory components. However, if all the slots are full, you will have to add additional memory at the expense of removing a component with less memory—say, removing 64M of memory and replacing it with a larger increment, such as 256M.

Hard Drives

Temporary memory, as we have discussed, is an important element of a computer. However, there will inevitably come a time when you need to save data for future use. This is where permanent storage comes into play. With permanent storage, your data can be retained when the computer is shut off and can be accessed at a later time. The primary type of permanent storage in personal computers is the hard drive. The matter of greatest practical importance when choosing a hard drive is its size. Today’s operating systems and many of the applications that run on them can consume a great deal of available hard disk space. When looking at new computers, you should purchase one that has a capacity of at least 40G (gigabytes), which is where most low-end desktop systems begin. Hard drives with up to 160G of space are not uncommon among mid-range desktop systems, and high-end systems can have hard drives in excess of 200G.

Laptop users may have to settle for a smaller drive, but no less than 30G. While this may seem like an infinite amount of storage space, keep in mind that if you are going to be using any type of historical data service, oftentimes this data is saved directly on your PC, and you will want to have the necessary capacity. Outside the context of computerized investing, if you want to work with multimedia files—music, digital photos, or digital videos, you will need substantial amounts of free hard disk space.

Floppy Drives

When discussing permanent storage and hard drives with gigabytes of storage capacity, it is easy to overlook the unassuming 1.44 megabyte 3.5" floppy disk. However, a floppy drive can still be useful—make sure your system has one. Beyond providing long-term storage, floppy drives are invaluable in the event of a major system crash. Using the floppy drive, you are often able to boot, or start, the system and perform basic repairs. Many computer manufacturers, especially those that allow you to create your own systems, do not automatically include a floppy drive. When building a system, be sure to specify a floppy drive. Apple desktop and laptop systems do not come with internal floppy drives—a complaint among many Mac users—so if you opt for this system, be prepared to spend around $40 to purchase a floppy drive that connects to the USB port of Mac systems.

Some vendors may offer Zip disk upgrades for desktops and laptops. These removable higher-capacity storage disks can hold between 100M and 750M and cost between $100 and $250 for internal drives and $80 to $200 for external drives. Media for the drives cost between $7.50 and $15 per disk. However, in most cases, you can skip the upgrade to Zip drives and concentrate on re-writeable CD or DVD drives, depending on your storage needs, which are discussed below.

CD and DVD Drives

CD-ROM (compact disc read-only memory) drives allow you to read data from compact discs as well as play ordinary music CDs. Compared to floppy drives, CD-ROM drives have much higher data transfer rates. However, they cannot match the transfer rates of hard drives. As is the case with hard drives, the speed at which the CD spins translates into how fast graphics and video are read from the CD and displayed on the system. With slower drives, you may experience pauses in the video playback from time to time as the data is being transferred. CD-ROM drives range from eight-speed (8x) to 72-speed (72x), while most consumer models top out at 52x, and can be either internal or external, although it is best to select an internal CD-ROM if possible. An internal CD-ROM drive most likely will cost between $20 and $50.

CD-R (recordable compact disc) drives allow you to save data on CDs—something that is not possible with standard CD-ROM drives. CDs offer a significant amount of storage capacity—up to 800M—compared to other types of removable storage media. In addition, CDs are relatively cheap: About 65 cents per disk when the jewel case is included and 25 cents to 75 cents when purchased in bulk. While CD-Rs have the advantage of being able to write data to CDs, once one has been burned, or written, the disc cannot be used again to save additional data. CD-Rs have become popular options for individuals creating custom audio CDs.

The shortcoming of not being able to re-record CD-Rs was solved by the introduction of the CD-RW (re-writable compact disc) drive. CD-RW discs can be reused and read in any standard multi-session found in PCs. It is important to note, however, that while most consumer audio CD players can read CD-Rs, only the latest generation CD players can read CD-RWs. CD-Rs are more reflective than CD-RWs, so they can typically be read on a wider ranger of players (the same applies for DVDs). Lastly, CD-RW drives can handle CDs, CD-Rs, and CD-RWs. The average cost for an internal 48x/32x/48x CD-RW drive is less than $100 (the first number is the speed of recording a CD-R disc, the second is the speed of recording a CD-RW disc, and the third is the reading speed).

DVD or DVD-ROM, which stands for digital versatile disc, has become a popular option. ROM designates the disc as read-only memory. DVDs are probably best known to consumers through movies, as software development has been all but nil—with the exception of some gaming and reference areas (such as encyclopedias). First-generation DVD drives were limited in their ability to play CD-R discs, but today’s computer DVD drives can read all types of CDs—standard music CDs, CD-Rs, and CD-RWs. While their usefulness is limited on desktop systems (media center PCs provide a more true cinematic viewing experience), many laptop users like the ability to view DVDs while on the road. Beyond the physical drive, you will also need a decoder to view the video contained on the DVD disc. There are two types—software and hardware. Any new PC should have the processing power to support software decoding, despite the fact that it places a considerable burden on the CPU which, in turn, could lower video quality.

In addition, there are recordable DVDs that come in a variety of fashions. The most common are recordable DVD drives that can write standard CD-Rs and CD-RWs as well as play DVD-ROM discs; most of these CD-RW/DVD-ROM combo drives cost between $50 and $150.

A number of competing DVD standards can read and write to special DVD discs. DVD-RAM is the oldest technology that is geared toward creating data discs used solely with a computer. DVD-RAM drives, which premiered in July 2000, allow users to write data to DVD discs just like CD-Rs and CD-RWs. These drives can also read all CD formats. The main advantages of DVD-RAM were its capacity—9.4G or 5.2G on double-sided discs housed in cartridges and 4.7G or 2.6G on single-sided discs—and the fact that DVD-RAM discs could be re-written, in theory, 100,000 times. That means for one double-sided 9.4G DVD-RAM disc, you have the capacity of almost 14 700M CDs or over 6,500 standard 3.5" 1.44M floppies. The problem with DVD-RAM discs is that they cannot be read on consumer DVD movie and music players and are only compatible with drives manufactured by companies supporting the DVD-RAM format. Apple used to offer DVD-RAM drives on select Macs, but the format never caught on so they shifted to providing DVD-R/CD-RW combo drives instead. DVD-RAM survives mainly today in digital camcorders.

DVD-RW and DVD+RW both offer rewritable DVD discs and represent a battle of two separate alliances trying to establish a de facto standard. Both formats have major manufacturer support, but are not fully compatible with each other (see Table 2) or with existing drives and players. A DVD+RW drive can’t write a DVD-RW disc, or vice versa (unless it is a combo drive that writes both formats). Over time as it became clear that neither format would become the accepted standard, manufacturers began producing multi-format drives that read both DVD-RW and DVD+RW. We recommend that users wanting the ability to create DVD discs consider a multi-format drive offered by companies such as Sony that supports all of these competing DVD standards. These drives cost between $80 and $350. Single-format writeable DVD drives can be purchased for as little as $50.

Table 2. CD and DVD Drive Formats
Format Recording Compatibility
CD-ROM	Read only	Standard music and program discs
CD-R	Record once	Compatible with most writable discs; properly formatted and closed discs can be read on most consumer music players
CD-RW	Record, erase repeatedly	Good for computer data storage; newer consumer CD players can read properly formatted and closed discs
DVD-ROM	Read only	Standard video distribution format
DVD-R	Record once	Compatible with most recent consumer DVD players; good for storage of videos and data
DVD+R	Record once	Compatible with most recent consumer DVD players; good for storage of videos and data
DVD-RAM	Record, erase repeatedly	Good for data storage; not compatible with consumer DVD players
DVD-RW	Record, erase repeatedly	Good for storage of videos and data; compatible with most recent consumer DVD players
DVD+RW	Record, erase repeatedly	Good for storage of videos and data; compatible with most recent consumer DVD players

Like their CD counterparts, DVD-R and DVD+R discs can be written only once and are compatible with most consumer DVD players. DVD-RW and DVD+RW discs can be rewritten about 1,000 times.

Portable Drives & Storage

The trend in recent years has been to come up with alternative forms of data storage that are highly portable yet still have enough capacity to handle enormous amounts of data. Two standards that are taking hold are USB flash drives and ultraportable hard drives.

USB Flash Drives

Universal Serial Bus (USB) is a type of connection offered on most new systems. A variety of peripherals can be connected to a personal computer via USB, including mice, keyboards, and other lower bandwidth input devices. With the ability to connect diverse peripherals, a major goal of USB is to replace traditional connection ports—such as serial and parallel ports on a PC—with one versatile interface. With USB-compliant peripherals, you can simply plug a peripheral in and begin using it without having to shut down and restart the PC, a process called “hot-swapping.” Additionally, USB distributes power to many peripherals, allowing the PC to send the required power to the peripheral in order for it to operate, and thus eliminating the need for power supplies.

USB is not supported at all in DOS, Windows 3.x, or Windows NT. Windows 95 offered limited USB compatibility. Windows 98 and all later versions of the Windows operating system include a full set of Windows drivers. Apple Macintosh systems also support USB. In 2002, an enhanced version of USB—USB 2.0—was introduced and has become the new standard for USB connectivity. With USB 2.0, data transfer speeds increase 40-fold to 480 Mbps (megabits per second). Most USB-capable PCs come with at least two USB ports and you will want to make sure any PC you purchase has several USB 2.0 connectors—including at least one in the front for connecting a keyboard or monitor.

For easy and highly portable data transfer and storage, a variety of USB Flash memory devices are available. Flash memory cards have long been the media of choice for digital cameras, PDA devices, and the like. This technology has been integrated with a USB interface to arrive at USB Flash Drives, which are small enough to fit on a keychain, yet can contain up to 2G of data. These devices have even evolved enough to the point of doubling as MP3 media players. A 512M USB flash drive costs between $50 and $300.

Ultraportable Hard Drives

USB’s high-speed competitor is IEEE-1394, also known as FireWire, which was developed by Apple. FireWire offers data transfer speeds of 400Mbps, with IEEE-1394b capable of transferring data at rates up to 3.2Gbps (gigabits per second)—over seven times as fast as USB 2.0. With this higher transfer rate, FireWire is more suitable for digital video and audio devices, external hard drives, and other high-speed peripherals. Hard drives offering FireWire connectivity are fast becoming a popular choice for high-capacity external data storage. Capacity is a key feature for these types of drives, which can reach up to 500G of capacity. This high capacity is also offered in a reasonably small package. LaCie (www.lacie.com) offers a Data Bank drive with 40G of storage space that is the size of a credit card and as thick as a cell phone. Lastly, compared to Flash memory, the price per megabyte for this type of hard drive storage is a fraction of the cost. A 60G Iomega Portable Hard Drive costs $199.95 (www.iomega.com), or $0.003 per megabyte.

As with USB, you will need to be sure that your PC provides IEEE-1394 (FireWire) ports, a feature found in many of today’s new systems.

Backups

Few computer owners bother backing up their PC, mainly because the process is time consuming and expensive. To save yourself a great deal of mental anguish, it is highly suggested that you establish an effective backup system for your computer. While breakdowns of computers are, luckily, infrequent, crashes caused by ill-behaving software or computer viruses can wreak havoc on your system. Abnormal program terminations, a.k.a. “program bombs,” can corrupt system files and render your system inoperable. Whereas the need to have a backup system has increased exponentially in recent years as more and more hackers and viruses attempt to corrupt or destroy your files, the days of having to feed dozens of floppy discs into your PC have passed. Don’t wait until it is too late to implement a backup system for your computer.

Normally, backups are performed on high-capacity tape drives, but CDs, DVDs, and high-capacity portable drives can also be used to create effective backups. Using an external hard drive as well as using automated backup software to copy data from your PC to the backup drive on a regular basis is probably the easiest way to ensure you perform regular backups of your PC.

Maxtor (www.maxtor.com) markets an external hard drive that offers a single-button press option to backup your computer’s internal hard drive. The hard drive connects to either Windows or Macintosh systems via USB 2.0 or FireWire. The OneTouch line has drives ranging in size from 80G to 300G and costing $149.95 to $349.95. The company has also introduced OneTouch II drives, which are currently available in 250G and 300G models. These drives cost $329.95 and $379.95, respectively. Iomega also provides Automatic Backup and Symantec Norton Ghost disaster recovery software with its external drives for backup and storage.

Monitors

While the computer itself performs the analysis and tasks, the monitor is just as important since it allows you to view the fruits of the system’s efforts. When shopping for your new computer system, make sure that the quote you receive includes the cost of the monitor; some companies quoting “low” prices for the computers they sell exclude the monitor. As you are comparing prices for your new system, don’t try to save money by skimping on the monitor. While other aspects of a computer, such as memory, can be upgraded or expanded upon simply by adding more, a monitor can only be upgraded by starting over with a new one. The increased viewing area and clarity of a bigger monitor will be well worth the money, as well as a relief to your eyes.

When looking at monitors, there are basically five critical areas to consider: CRT versus LCD, size, resolution, refresh rate, and dot pitch.

LCD Versus CRT

Once upon a time, the choice for a typical PC buyer between a CRT (cathode ray tube) and LCD (liquid crystal display) really wasn’t a decision at all. CRT is the technology used in most televisions and computer display screens. While superior in their display quality, LCD displays were beyond the budgets of the average home PC buyer when they were first introduced. However, as is the case with most new technologies over time, falling prices have made the decision more difficult.

One advantage LCD monitors hold over CRT displays is that of overall size—both in terms of area desktop space covered and weight. An LCD monitor is relatively compact and lightweight, since it is built on a thin screen instead of a bulky tube. LCDs take up less space on your desktop, and they can fit into places where a larger CRT display would not. On average, LCD monitors take up less than one-third of the space of an equivalent-sized CRT monitor.

LCD monitors also consume considerably less energy than CRTs, both when running and when in standby mode. LCDs can reduce energy consumption by over 50% when compared to CRT monitors. This makes LCDs a good choice for laptops and portable devices.

Furthermore, LCDs do not emit VLF/ELF (very low frequency/extremely low frequency) electromagnetic radiation emissions that are associated with the scanning electron beam required in CRTs.

Size

The size of the monitor determines how much “real estate” you have for displaying data. Typical monitors for personal computers range from 17" to 20". Monitors that are 21" and larger are generally reserved for desktop publishing and computer-aided design (CAD) applications. Most new computers today come with a 17" CRT monitor standard.

At the retail level, respected name-brand 17" monitors cost between $100 and $150 and 19" monitors are selling between $190 and $270. The extra cost will be more than recovered in reduced eye strain over several years of use. If you decide on a larger monitor, keep in mind the amount of desktop space you will need for it. As a rule of thumb, a CRT monitor is typically as deep as the diagonal length of the screen. If you are short on desktop space, you may opt for a short-depth monitor or a flat panel LCD. A 15" LCD is roughly comparable in display quality and viewable size to a 17" CRT monitor. Note that LCD monitors are typically sized by their actual viewable diagonal measurement, but CRTs typically are not. For example, the viewable area of a 17" LCD monitor will typically measure 17" diagonally, but the viewable area on a CRT monitor of similar size will typically only measure 16" diagonally. Normally, at least one inch of the stated CRT display is hidden behind its bezel. LCDs offer a wonderful flicker-free display, but at a price premium. Expect to pay $200 to $300 for a 15" name-brand LCD panel. Seventeen-inch LCD panels are selling for between $250 and $500.

Resolution

A monitor’s resolution is measured in number of pixels, both horizontally and vertically, and determines the relative size of the objects displayed on the desktop. A higher resolution means objects will appear more clearly on the screen. When running at high resolutions, such as 1024 by 768 or higher, the need for a larger monitor becomes more apparent. At such resolutions on a 15" CRT monitor, the objects are so small that viewing becomes difficult. CRT displays are easily able to adjust between resolutions.

However, LCD monitors usually have what is called a “native resolution,”—generally the highest resolution that the LCD panel can display and also the display resolution that will appear the sharpest. A good resolution for 17" CRT displays and 15" LCD panels is 1024 by 768.

Refresh Rate

The refresh rate of a monitor refers to the number of times the screen is redrawn each second. This is only a concern with CRT displays. The higher the refresh rate, the less the screen flickers or strobes. Reducing the flickering of the screen lessens the strain on the eyes. The absence of flicker is an added benefit of LCD panel displays. A refresh rate of at least 75Hz (hertz) for planned resolution gives you the best viewing on a CRT monitor.

Dot Pitch

Dot pitch has to do with the distance between the phosphors in the monitor. The smaller the pitch, the clearer the images appear on the screen. The largest you should go is 0.28mm diagonal pitch—however, 0.25mm or smaller offers a clearer display.

In conclusion, a new monitor should be at least 17" for a CRT or 15" for LCD. Also, for CRTs, it should support a high refresh rate (at least 75Hz) and have a dot pitch of 0.28mm or less. Purchased separately, such a name-brand CRT monitor currently costs about $150. A 15" comparable LCD display will cost under $300.

Sound and Video

With the advancements that have been made in PC audio and video over the last few years, you have the potential of turning your computer into a home entertainment system, if you so choose. These so-called “media center” systems can cost in excess of $3,000. Even if this isn’t your goal, or if it is beyond your budget, most systems these days come with built-in audio suitable for typical users.

Most of the video boards that ship with today’s computers offer both 2-D and 3-D graphics. Even if you aren’t planning on turning your system into hard-core gaming platform, the extra cost is negligible. For quality 2-D and 3-D graphics, you should choose a computer with dedicated video memory.

As mentioned, some lower-end systems use “integrated video,” which means that memory is shared for video and other operations. Select a PC with a video board that has at least 64M of video RAM. This will benefit those who have monitors with high refresh rates and resolutions as well as those looking for optimal 3-D performance from games. Most video cards such as this cost between $45 and $100.

Printers

While not technically part of the computer itself, printers play an important role in any computer system. You will find this out when you want to print text, a Web page, or a chart. Printers, just like computers, come in many different kinds with numerous options and issues to consider and with varying price points.

Inkjet Printers

Inkjet printers work by squirting ink through a nozzle that forms the image of text or graphics on the page. They are fairly inexpensive, fast, quiet, and achieve good resolution. They support color, something you should strongly consider if you want to distinguish between data on printed graphs with multiple lines or bars—often a concern when printing reports from investment software and information from the Internet. A good-quality color inkjet will cost $40 and up, offering good quality, speed, and color at a reasonable price.

Laser Printers

Laser printers work by bonding powdered toner ink to high-quality paper under high-heat conditions. Laser printers are fast and produce the best output when compared to inkjet technology. Furthermore, over the years, laser printers have become less of a luxury item as their prices have fallen. Personal laser printers may or may not support color, although this technology is becoming more prevalent. Black and white laser printers start at around $150, while color personal laser printers start at around $500.

Printer Resolution

The standard for resolution today is 600x600 dpi (dots per inch) for lower-end laser printers. However, printers geared toward producing photos go as high as 9,600 dpi. You should avoid printers with resolutions lower than 600 dpi. Furthermore, there is no need for resolutions greater than 2,400 dpi unless you plan to print high-quality graphics or digital pictures. Keep in mind that many inkjets have different resolutions for color and black and white (monochrome) output.

Printer Cartridges

With printers, there is the extra consideration of the price of supplies, such as toner cartridges. For any given printer, take a look at both the price of an ink or toner cartridge and the number of pages it will print. An inexpensive cartridge that prints relatively few pages may actually be much more costly in the long run than a more expensive cartridge that prints more pages. High-capacity cartridges also mean you won’t have to change them as often, which can be particularly important depending on how much printing you plan on doing.

If you are using a color inkjet printer, look for a model that uses separate black and color cartridges. Some also now offer separate cartridges for each ink color. This makes it less expensive to use the printer since you don’t have to replace all of the ink colors when just one runs out.

Modems

A modem (modulator/demodulator) allows communications between computers over POTS (plain old telephone lines) and is generally used to access commercial on-line services, Internet service providers (ISPs), or the Internet. As of 2004, 29.7% of our members used a modem to connect to the Internet.

Today’s modems are capable of using advanced error correction and data compression to achieve much higher data transfer rates than their basic connection speed allows. A 28.8Kbps (kilobits per second) modem may actually allow data transfer at 115.2Kbps when correctly configured and accessing another equivalent, compatible modem.

Most new computers ship with 56.6Kbps modems. Until a few years ago, there were competing standards for modem technology. Finally, V.90 was adopted as the standard for 56Kbps modems. The latest generation of 56Kbps modems—V.92— offers several new features that improve their utility. V.92 modems boost the upstream data rates between the user and ISP to 48Kbps versus the previous 33.6Kbps maximum. In reality, due to FCC regulations, the modems are only capable of downloading at 53Kbps. Furthermore, when line conditions are taken into account, the average rate you will currently achieve is up to 46.6Kbps. Beyond improved uploading performance, V.92 modems also offer two new features: “quick connect” and modem-on-hold (MOH). With V.92 modems, connect times, on average, are 30% to 40% faster than with V.90. Quick connect “trains” the modem with the first call to an ISP to allow users to go from launch to connection in a much shorter period of time. Modem-on-hold (MOH) allows a single line to handle voice and data at the same time, something that could not be done before. Instead of having to disconnect from your modem in order to make or receive telephone calls over the same line, MOH allows you to receive an incoming call and stay connected to the Internet (all you need is call-waiting service from your local telephone company). MOH also works in reverse; you can initiate a call while connected and keep the modem connection. The amount of “hold time” is determined by your ISP, but the V.92 specification allows for hold times of 10 seconds to infinite. Once you end your voice call (hang up), you can return to your Internet browsing. New V.92 56Kbps Internal modems begin at under $10 and can go as high as $100. There are a number of ISPs offering dial-up Internet access. Depending on your location, the number of choices will vary. Dial-up access can cost from $5 to $50 per month or more. There may also be additional set-up fees.

Modem Alternatives

Over the years, a number of technologies have arisen as substitutes for modems. Overall, these “broadband” alternatives offer much greater connection speeds, but their availability depends on your geographic location. In general, broadband refers to a high-speed Internet transmission—usually greater than 256Kbps. There are several options for high-speed services, including ADSL (asymmetrical digital subscriber lines) or DSL, cable, and satellite. DSL comes in a variety of forms, but ADSL dominates residential service. DSL is offered by phone companies, although not in all areas. Even then, it depends on whether your phone lines qualify for the service. DSL uses standard phone lines and offers theoretical download rates of 128Kbps to 8Mbps. Most services offer download speeds of 1.5Mbps. However, a drawback with DSL is that the farther away you are from the phone company’s central office, the more performance drops. DSL service costs start at $25 per month for residential service, with the possibility of an additional $50 to $200 for equipment, installation, and start-up. In addition, many ISPs offering DSL require a one-year contract. DSL modems, on average, cost between $40 and $100.

Cable modems also offer an “always on” Internet connection with speeds ranging from 384Kbps to 4Mbps. Cable modem service, unlike DSL, usually does not allow you to choose your own ISP—which locks you into one service and fee structure. Monthly fees can range from $35 to $60. Setup fees vary by region and can be as high as $150. Also, note that upload speeds are lower than download speeds—128Kbps to 384Kbps for upload and up to 4.0Mbps for download. Cable modems, by themselves, start at $50.

If you intend to access the Internet using either a cable modem or a DSL modem, or if you are thinking about networking the computers you have at home, you will want to make sure your computer also has a built-in Ethernet networking connection. Most computers today ship with a built-in Ethernet card. A standard 10/100Mbps Ethernet card costs between $10 and $150.

Depending on your geographic location, your only high-speed Internet option may be satellite. Hughes Network Services DirecWay (www.direcway.com), EarthLink (www.earthlink.com), and StarBand (www.starband.com) provide download speeds of up to 500Kbps and upload speeds of 50Kbps. Satellite remains a pricey option, with installation and equipment fees of $400 to $600 and monthly access fees ranging from $50 to $70. Furthermore, most services require a one-year commitment, with early termination fees of up to $500. Lastly, the dish you install outside must have a clear view of the southern sky.

Security

In the past couple of years, security has become an important consideration when designing your computer system. This is partly due to the rise in the number of hackers and viruses looking to steal or damage your data, especially if you are using a Windows-based PC. Microsoft’s Windows operating system has become the favorite target of Internet vandals and pirates for a variety of reasons. First, the marketshare of Apple’s Mac is so small that there is no incentive for hackers and virus writers to focus on the Mac OS. Furthermore, the Mac operating system is based on Unix, the operating system of choice for engineers and servers. Unix is somewhat harder for viruses and spyware to work on than Windows-based operating systems. In fact, to date, there has not been a successful virus written for Mac OS X.

Also to blame are the numerous security holes that have been identified in the Windows operating system. Windows has been fraught with security problems the last few years. Microsoft has been accused of viewing security as a secondary concern, which has allowed hackers to exploit the various “holes” in the Windows operating system. Attempting to address this apparent lapse, Microsoft released Service Pack 2 (SP2) in August 2004. The key features of SP2 are a new firewall, a “Security Center,” and new protections, including a pop-up blocker, in Microsoft’s Internet Explorer Web browser. The problems experienced by a small group after installing SP2 were well-documented; however, you are better off installing the patch. For this reason, you should make sure that any new system you purchase with Windows XP has SP2 installed. However, with SP2, you are still not safe from attacks. The new Security Center has problems recognizing some third-party anti-virus software and the new firewall still cannot prevent rogue applications already on your system from transmitting data over the Internet. Therefore, it is a good idea to look to third-party providers of security software to protect your PC.

You have two options to protect yourself when on the Internet—either opt for an Apple Macintosh, or take the proper steps to protect your Windows-based PC from attack. For life-long Windows users, switching to a Mac is an expensive and scary proposition. In addition, as we have pointed out, the Mac OS is not the operating system you want to choose if looking to run a variety of investment-related software titles. That leaves taking steps to protect your Windows PC.

The first precaution to take is to purchase a firewall program that will not only prevent hackers from gaining access to your system, but will also stop suspicious programs from trying to send information over the Internet. ZoneAlarm, a free utility from Zone Labs (www.zonelabs.com) is a good choice. Viruses can wreak havoc on your system, so it is strongly recommended that you run an antivirus program and keep it updated. While many services offer a free trial period, it is worth the investment to pay to continue using it after the trial period. Norton AntiVirus (www.symantec.com), an industry standard, offers an automatic update system for $49.95, which includes a year of updates. Finally, you will want to have a program that takes care of spyware. The term spyware generically refers to software programs made by marketing companies that allow them to log on to your browsing activity, see what you purchase, and cause pop-up ads to appear on your computer. The problems with spyware are that, first, you do not know if it is on your system recording your activity, and secondly, it can have a negative impact on your computer’s performance. There are numerous anti-spyware programs available, with two of the more popular being Spy Sweeper from Webroot Software (www.webroot.com) and Lavasoft’s Ad-Aware SE software (www.lavasoftusa.com). These programs not only detect and remove spyware on your PC, they also watch for and block new spyware before it installs. Spy Sweeper costs $29.95 and includes a year of updates, while Ad-Aware SE Plus costs $26.95.

Desktops vs. Laptops

Once you have made the decision to purchase a new computer, inevitably you will be confronted with the question of whether to go with a desktop or laptop system. While both have their merits, their functionality (and usefulness) to you depends on what you intend to do with the computer.

The following checklist outlines the needs or situations that would lend themselves toward selecting a laptop:

• Do you work while traveling?
• Will you need to move the computer from location to location or room to room?
• Do you have space (desktop) constraints?

These situations are more conducive to you selecting a desktop system:

Table 3. Cost Comparison: Desktop vs. Laptop CLICK ON IMAGE TO SEE FULL SIZE.

• Will you be working on the computer at one location?
• Do you have budget constraints?
• Do you prefer a larger display?
• Are you interested in the best performance and the latest features computers have to offer?

When dealing with desktop versus laptop systems, be aware that you will face differing upgrade possibilities. Desktop systems tend to be easier to upgrade and repair, largely because there are a number of “generic” components available that can be installed with relative ease and without compatibility issues. Laptops, on the other hand, are more delicate creatures and, consequently, are more difficult and expensive to upgrade and repair. If you wish to upgrade a laptop, oftentimes you need to go directly to the manufacturer to obtain the component parts that will function properly with the system you have.

Lastly, there is a price difference between laptops and desktops, with a premium paid for mobility. Given two relatively identical systems in terms of computing power, the desktop system will cost several hundred dollars less than the laptop system (Table 3).

Where to Buy

In today’s marketplace, you basically have two choices of where to buy a computer—directly through a mail-order vendor or from a local retail store. While many systems, such as Dell, are only available from mail-order sources, several large and reliable manufacturers—such as Hewlett Packard and E-Machines (Gateway)—make computers available at retail outlets such as BestBuy, CompUSA, and Wal-Mart.

Mail Order

Most mail-order sources are reliable, but as is the case with any retailer, you must consider the possibility that not everything will work right out of the box. Companies like Dell and Gateway have a good reputation for delivering what they promise, when they promise.

One major trade-off with purchasing from a mail-order company is the lack of face-to-face assistance offered by retailers should something go wrong. You do, however, typically have free telephone support. In addition, most mail-order companies offer one year of free on-site service as part of any warranty. These two options should cover the majority of problems—at least for the first year. After that, should something go wrong, chances are you will have to ship the computer back to the manufacturer for repairs. For repair service coverage over a longer period of time, many larger mail-order companies have signed third-party agreements to provide continuing maintenance. However, these service contracts can be quite expensive and are not worth the additional cost to you beyond three years.

Mail-order manufacturers generally build their systems to buyers’ specifications. As a result, you are more apt to find the exact system you are looking for through a mail-order house. In addition, due to inventory practices, mail-order companies tend to bring new technologies to consumers in a more timely manner than retail companies, who usually have to move their existing inventory of older technology before restocking with the new.

Retail

Buying from a retail store doesn’t necessarily mean you will be paying much more for a system that does not meet your exact specifications or that it will become outdated soon. Popular stores such as CompUSA, BestBuy, and Circuit City are very price competitive with on-line vendors and usually offer a large enough selection for you to be able to find a system that closely matches your needs. On the other hand, once you have purchased the system, it may be difficult to get a retailer to offer free consultation and technical support. When you go to a retail store, you are typically confronted with several computers of various configurations. While it may be possible to find a system that offers almost everything you are looking for, be prepared to compromise your wants to meet the retailer’s offerings.

Putting It All Together

Table 4. Recommended Systems CLICK ON IMAGE TO SEE FULL SIZE.

Individual computing needs are just that and, as a result, are extremely diverse from person to person. The type of system you buy depends largely on what you need and what you can afford. Consider both the current and intended uses of the system and check the vendor’s reputation for reliability, service, and support.

Table 4 summarizes the recommended specifications for buying a computer today.

Given the rapid changes in technology that are taking place on seemingly a minute-by-minute basis, the only certainty is that what is top-of-the-line one moment may very well be relegated to mid-line in a matter of months. Some readers and users have voiced their concern that the recommended systems here are too advanced for their needs. Our goal is to recommend systems that will provide sufficient computing power for the next few years in the face of evolving computer technology. The ultimate purchasing decision, however, is yours to make.