Individual Investor's Guide to PCs

Buoyed by demand for low-cost and portable computers, 2006 is firming up to be the fourth consecutive year of double-digit growth in worldwide PC shipments. Leading industry analysis firms IDC Worldwide and Gartner expect worldwide PC shipments to rise by just over 10% this year to roughly 230 million units. The current competitive environment strongly favors consumers, as retailers are looking to price cuts (not innovation) to spur demand.

As always, there are a variety of (new) terms, computer types, brands, and configurations awaiting you. Each configuration comes with a different price, and there is wide dispersion of PC prices. The Microtel Web site (www.microtelpc.com) offers Linux-based systems for under $300, while many of the major PC makers offer high-end gaming systems for over $5,000. For most, the price you pay for a new computer will be somewhere between these price points, which still leaves a lot of territory to cover. With a little education and a little planning beforehand, you can narrow your search and, hopefully, reduce the time and headaches you may otherwise experience in trying to locate the system with the proper mix of power, flexibility, and affordability you are looking for.

This annual PC guide is intended for mainstream computer users and investors looking to perform investment tasks or analysis such as portfolio tracking and management, stock and mutual fund screening and analysis, and technical analysis and charting, along with general-purpose Web surfing, E-mail, word processing, and spreadsheet building.

Defining Your Needs

The biggest mistake anyone can make when shopping for a PC is to select one that does not meet their current needs, let alone their future ones. Buying a marginal system at the onset will force you to upgrade components such as the hard drive, memory, or processor more quickly than if you had gone with a higher-end system. On average, a mid-to-high-end desktop system today will offer adequate capabilities over the next few years, although laptops tend to be replaced more quickly. For some, it may be disconcerting to know that something that potentially costs thousands of dollars today will be obsolete in three years, but the rate of advancement in computing technology, ever-evolving operating systems, and ever-falling prices makes system viability beyond that highly unlikely.

Alternatively, you are wasting money by purchasing a fully loaded system with functionality well beyond your needs. To avoid these possible 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 new system accordingly.

In the area of computer-assisted investment analysis and tracking, technical analysis is probably the most system-intensive. This type of analysis involves the manipulation and graphical display of a large quantity of data—typically open, high, low, and closing prices as well as volume data over varying time periods. In order to perform such tasks, a computer requires a processor that can quickly perform calculations. In addition, a high-quality, high-resolution monitor and possibly a color printer are must-haves to examine and print charts and graphs.

If you are looking to store a large amount of historical data for a large universe of companies, as is typical of most disk-based fundamental screening and analysis programs, a high-capacity hard drive would be useful. For day-to-day downloading of data or for extensive Web-based research, a high-speed connection (if available in your area) is desirable.

In contrast, most portfolio management programs require less complex processing capabilities and, likewise, a comparatively less-advanced computer. However, an Internet connection is still required to receive periodic updates of your holdings.

OS Hunting: Tigers and Leopards and Vistas, Oh My!

The first step in the PC selection process is to choose a system that supports the software you wish to use. This is dictated by the underlying operating system (OS) that is running the computer. The two most popular consumer operating systems on the market today are Windows from Microsoft and Apple’s Mac OS.

Windows is installed on over 90% of the world’s personal computers. Given its overwhelming market position, it is not surprising that most of the software titles on the market today are for Windows. This leads to a frustrating dilemma for Mac users looking to perform higher-function investment analysis—a dearth of specialized investment software titles.

The majority of Mac offerings are personal finance programs such as Quicken. However, even then, the advanced features found in their Windows-based counterparts are not always found in the Mac versions. To add insult to injury, some popular Web sites such as MSN Money (investor.msn.com) use technology that renders the most useful features unavailable to Mac users.

For this reason, Windows XP systems are currently better suited for those readers looking to run a wide range of investment-related software titles.

Windows XP

At this point in time, Windows XP is the latest-generation Microsoft operating system available to consumers. Windows XP comes in three versions—Home Edition, Professional, and Media Center Edition. The fundamental core and interfaces are the same for both the Home and Professional editions, but the Professional version has additional security, networking, file sharing, and multi-processor support. The Media Center Edition of XP is an entertainment version of Windows. It is similar to the other versions of Windows XP, but offers a second interface that can play and record movies, television, music or digital photos and allows the system to be operated via remote control. For the average user, Windows XP Home Edition will suffice. If you are looking to connect your PC to a corporate network or intend to turn it into a home multi-media/entertainment center, you will want the Professional or Media Center Edition, respectively.

Microsoft Vista

Windows XP was released in October of 2001 and has not seen a major upgrade since then, except to enhance security. Over the years, the platform has been a favorite target of hackers and virus writers looking to exploit the countless number of “holes” that were found with disturbing regularity.

In early 2007 (no specific date has yet been set), Microsoft will release the newest consumer incarnation of Windows, called Vista. Microsoft plans to offer no less than five versions of Vista—Home Basic, Home Premium, Business, Enterprise, and Ultimate.

The biggest difference most will notice between Windows XP and Vista is the look and feel of the user interface, as Microsoft has built high-end graphics effects into Vista with the enhanced Avalon graphics engine. Vista’s Aero Glass interface adds depth with transparent icons and program windows that allow you to see what is going on behind the scenes. Vista also offers integrated search capabilities throughout; users can now save searches as virtual file folders that they can access later without having to relocate or copy the desired files.

Many in the computer industry are anxiously waiting to see if Microsoft has succeeded in creating a more stable and secure operating system, as they claim. Additional improvements and new features in Vista are intended to protect your PC from viruses, spyware, and other malicious software. One important security change within Vista is the shift away from the Administrator as the default user, which has opened XP to hackers looking to hijack the system. Every user will create an account, and those needing Administrator access will log in separately. Vista also provides integrated spyware protection with the new Windows Defender and has an enhanced firewall that will also help block hackers, viruses, and spyware from gaining access to your system via the Internet.

Vista’s enhanced graphical improvements and features require significant computing power. In fact, systems only a couple of years old may not be able to make use of Vista’s Aero Glass graphics interface, one of its greatest features, and instead will only be able to run a “watered-down” Basic version of Vista. Later, we will discuss the specific hardware needed to properly run Vista. If you buy a new Windows-based PC before Vista is released and wish to upgrade to Vista down the line, be sure you purchase a system that is either “Vista Capable” or “Premium Ready.” Vista Capable systems do not offer as high-end hardware configurations as Premium Ready systems and will not be able to run the full-featured version of the new operating system. If you purchase a Windows XP Media Center or Professional Edition system between now and March, you will be eligible for a free upgrade to a comparable Vista edition. Users purchasing a system with XP Home Edition will be entitled to purchase Vista Home Basic or Vista Home Premium for 50% off the retail price. Keep in mind that you will be responsible for installing the new operating system when it arrives, something not everyone feels comfortable doing. For this reason, we recommend that you postpone buying a new Windows system until Vista is released. That way you will receive a computer with the components to match the latest operating system.

Mac OS X

Apple continues to be an innovator in the realm of personal computers as well as personal music systems. Over the last five years, the company has enjoyed a resurgence that coincides with the release in 2001 of the iPod digital personal music player.

Despite generating less than 50% of its revenue from computer-related items, Apple is a “true” computer company, making software and computer hardware. The success of the iPod and the so-called “halo effect”—the migration of satisfied iPod users to the Mac platform—has helped Apple expand its market share in recent years. According to industry analysis firm Gartner, Apple ended September 2006 with 6.1% of the U.S. PC market, up from 4.6% a year ago. IDC analysts have Apple’s U.S. market share at 5.8%. The halo effect seems to have carried over to AAII members as well, as Mac usership among members jumped from 3.5% in 2005 to 7.4% in 2006 (see Table 1), the highest level in four years. Windows usership slid to 91.8% among members, and the remaining 0.8% employ other operating systems such as Linux.

For as good as the last few years have been for Apple, there are few signs that its run will end anytime soon. In June 2005, Apple announced that it was adopting Intel processors for all of its notebook and desktop systems. This means that Windows can run Apple hardware. In addition, software packages are now on the market that allow Mac users to run Windows and Windows-based applications, chief among them being Boot Camp Beta from Apple and Parallels Desktop from Parallels, Inc. The benefit of both is that you can run Windows-based applications on a Mac without the degradation in performance that was common with earlier Windows-emulation software.

Boot Camp, which is available as a free beta download from the Apple Web site (www.apple.com), allows you to install and run Windows XP on an Intel-based Mac computer along with the existing Mac OS. One not-so-insignificant flaw with Boot Camp is that you cannot run the latest Mac operating system, Mac OS X, and Windows simultaneously—you must shut down the PC in order to switch between the two operating systems.

Parallels Desktop (www.parallels.com) offers the flexibility of running Windows on a Mac OS X system without having to reboot. Again, you must have a Mac system with the new Intel processors. The company is offering a free 15-day trial; a permanent copy of Parallels Desktop costs $79.99. Both of these solutions require that you own a copy of Windows to install onto the system. Retail versions of Windows are priced from $199 to $299.

Mac OS X version 10.4, titled Tiger, was released in April of 2005. Historically, the Mac OS has been recognized as being much more stable than Windows and less prone to attacks by viruses and spyware. Apple is quick to point out that several of the “new” features in Microsoft’s upcoming Vista release closely match features already found in Mac OS X. One example is OS X’s embedded desktop feature, called Spotlight by Apple, which indexes your PC’s entire hard drive for file data and metadata (information underlying a particular file, such as the author). This means that users may search for content, editing history, and file size for text files as well as images, calendar events, contacts, and E-mail. Another interesting feature in OS X is the Dashboard, an interface accessed via a hot key, that contains Widgets (similar to the Gadgets in Vista), applications such as a dictionary, translator supporting over a dozen languages, flight tracker, weather updater, and stock ticker.

Just as Windows is planning an upgrade to its operating system with Vista, Apple is planning to release an upgrade to OS X next spring: the Mac OS X 10.5 Leopard. Apple is playing the release of Mac OS 10.5 close to the vest at this point and is not offering many details as to enhancements or new features, supposedly to keep from giving Microsoft any additional ideas. From what Apple has released thus far, one of its most interesting upgrades is Leopard’s Time Machine feature. Time Machine is a totally new system backup and version-control application. With it, users can select an item, launch Time Machine, and see a time scale with past versions of the item. Users can then scroll back in time to review past versions and drag them to the present if they so desire. Time Machine can also automatically back up an entire system as well as changes made to an external hard drive or server. The intent is that if the hard drive dies, Time Machine can be used to restore your system to a new drive.

For those looking to buy a new Mac, the reasons to wait until Leopard is released are not as compelling as those related to Vista’s release. First, Leopard is not set for release until spring 2007, so the wait will be longer than for Vista. Secondly, and perhaps more importantly, Leopard won’t be as “disruptive” of an upgrade as Vista. Leopard is Apple’s fifth major revision to the OS since 2001, whereas Vista represents the first. That being said, be aware that Apple isn’t offering holiday buyers any discounts or free upgrades to Leopard, although Apple promises that all Macs currently being sold will be able to run Leopard. Apple’s pricing of OS X is more attractive than that of Windows—$129 for a single-user copy and $199 for a five-user license.

PCs: Synergy in Action

The concept of synergy is that the sum of the parts is greater than the value of the individual components—in other words, 1 + 1 = 3. Synergy in PCs means that while you may look at a computer as a singular item, in actuality it consists of various types of hardware—such as processor(s), hard drive, disk drives, and video and sound cards—each of which relies on one or more of the other components in order to function. Therefore, you need to have a basic understanding about each component to make sure the finished product—your computer system—is right for you and the tasks at hand. The major pieces of computing hardware are discussed below.

Processors

It’s the smallest piece of a computer system, but it is by far the most important. The central processing unit (CPU)—or simply, the processor—is the engine 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 system performance than the processor.

Chip manufacturers are constantly locked in the battle for the title of fastest processor. Moore’s Law, named after the co-founder of microprocessor-maker Intel, states that the number of transistors on a microchip will double every one to two years—which in effect doubles the overall processing speed. Amazingly enough, this statement has held true for over 40 years. Whether or not chip manufacturers will be able to continue this pace remains to be seen, but technologies currently in development may extend the validity of Moore’s Law well into the future.

The two biggest names in the processor industry are Intel and Advanced Micro Devices (AMD). Over the last few years, AMD has chipped away at Intel’s market share, with its share of the worldwide PC processor market climbing to 27% during the second quarter of 2006 compared to 18% a year ago, according to market tracking company Mercury Research. This may have contributed to Intel’s announcement in September 2006 that it would lay off thousands of workers as part of a strategic overhaul aimed at cutting annual costs by over $3 billion. AMD also made quite a splash when it announced in July its $5.4 billion acquisition of ATI Technologies, one of the top makers of graphics chips sets and cards.

In May 2006, AMD captured the mantle of world’s fastest processor for a few months when it unveiled the Athlon 64 FX-62 processor. The FX-62 tops out with a clock speed (a key determinant of overall processing speed) of 2.8 GHz (gigahertz). Other processors AMD produces for the consumer market include the Athlon 64 and Sempron lines for desktop systems and the Turion 64 and Sempron lines for mobile PCs, such as laptops and hand-held devices.

Intel reclaimed bragging rights in July 2006 when it offered up a counter-punch with its new Core processor architecture used in the Core 2 Extreme and Core 2 Duo processors, both of which have been shown to outperform the Athlon FX-62 in various independent benchmark tests. Currently, the Core 2 Extreme processor has the fastest clock speed at 2.93 GHz. While Intel makes chips with higher raw clock speeds, the new Core 2 architecture allows the processor to handle more instructions per clock cycle, which increases overall performance, even at lower clock speeds. In addition, the Core 2 processors provide this increased performance while consuming less power.

Other desktop processor lines on the market today from Intel are the Pentium family, which includes the Pentium Extreme Edition, Pentium D, Pentium 4 Extreme, and Pentium 4; and the Celeron family, which is composed solely of the Celeron D processor. For laptops, Intel offers Core 2 processors as well as Pentium (Pentium M and Pentium 4) and Celeron M processors. For mobile devices, Intel offers the Core 2 mobile, Core Duo mobile, and Core Solo mobile processors.

There is a growing interest within the computing industry in 64-bit processors, which include the Athlon 64 and Core 2 families of processors. This interest stems from the fact that 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 a maximum limit of four gigabytes for 32-bit processors. While 64-bit processors are not overly new, a lack of 64-bit operating systems and software applications rendered their advantages useless. However, Microsoft’s Vista platform will offer full 64-bit capabilities (Apple’s OS X is also 64-bit capable), which in turn, should spur software writers to create programs that can make use of 64-bit processors.

Another trend sweeping the microprocessor industry is toward “dual core” or “multi-core” chips, which were first introduced by Intel in 2005. A dual-core processor, as the name implies, has two processor cores on a single chip. Currently, AMD’s Athlon 64 FX, 64 X2, and Turion 64 X2 Dual-Core chips along with Intel’s Pentium Extreme and Core 2 Duo chips offer dual-core technology for consumer PCs. While dual core does not mean double the speed, users who multi-task will notice an improvement in performance with a dual-core processor.

The capabilities of today’s software and operating systems tax a computer’s processor more then ever. Both new operating systems—the Apple OS 10.5 Leopard and Microsoft Vista—offer 3-D interfaces and always-on indexing and search tools, all of which can monopolize processing power. Microsoft states that you will need an 800MHz or better processor to run the stripped-down Vista Home Basic. In order to run Vista Home Premium with the Aero Glass interface enabled, Microsoft recommends at least a 1GHz 32- or 64-bit processor. Apple has not yet provided recommended system specifications for Leopard, but they say that any system they currently sell will be able to run the new OS when it is released in 2007.

When looking for a new computer, especially if you are shopping on a budget, do not be seduced by raw processing power. Unless you are looking to do some heavy-duty gaming, video-editing or iPod video converting, or other processor-intensive tasks, most of the mid-level processors on the market today will suit your needs. If you are tight on cash, you are better foregoing a top-of-the-line processor in favor of additional memory or dedicated video memory (discussed later).

Data Storage Media

As software packages become more sophisticated and more people get involved with digital music, photos, and video, the amount of hard disk space needed to store all of this keeps increasing as well. In addition, as security becomes more of a concern due to a growing number of attacks from hackers and virus-writers, having an effective and thought-out data back-up process is important. To ensure your computer meets today’s storage needs and tomorrow’s software requirements, make sure it has plenty of data storage media capabilities.

Memory

Computers have two types of memory—temporary and permanent. Temporary memory is just that: When the computer is shut off, data that has not been saved to permanent memory, such as the hard drive, is lost. In PCs, RAM (random access memory) is the most common form of temporary memory. The amount of RAM a system has impacts several aspects of the computing experience—specifically, what kinds and how many programs can simultaneously be used on a system.

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 require. Even with a top-of-the-line CPU, a lack of memory can seriously degrade your system’s performance. Programs such as anti-virus applications that are always running can quickly use up a system’s memory and processor resources.

Most systems today—even low-end PCs—ship with at least 512M (megabytes) of RAM. However, we recommend a system with at least 1G (gigabyte). If you will be running Windows Vista, Microsoft recommends a minimum of 512M of memory to run the basic version and 1G to run the full-featured version. Memory prices have been at record-lows for some time now. The cost for 512M of the latest RAM chips, on average, is under $75. Given the low-cost of additional memory, and its importance to the overall performance of your system, this is the last place where you should try to save money. Again, you are far better offer scaling back on the processor in favor of additional memory.

Hard Drives

Temporary memory, as we have discussed, is an important element of a computer. However, it is just as important to store data for future use. This is where permanent memory comes into play. With permanent storage, your data is retained when the computer is shut off so that it can be accessed at a later time. The primary type of permanent storage in personal computers is the hard drive.

The most important consideration when selecting a hard drive is size or storage capacity. Today’s operating systems and programs consume a great deal of available disk space. Window Vista Premium, according to Microsoft, will require at least 40G of hard disk capacity.

When looking at today’s new computers, most entry-level systems offer at least 80G of hard disk capacity, which is the lowest you should accept. If you want to run the latest operating systems, or if you are interested in digital photography and videos, you will be amazed how quickly your hard drive will fill up. Furthermore, if you intend to use any type of historical data service for technical analysis or stock or mutual fund data for screening, oftentimes this data is saved directly to your PC, so you want to make sure you have enough hard disk capacity. Taking all of this into account, you should consider a minimum of 160G of hard disk space.

Notebook users may have to settle for slightly less hard disk capacity, although this possibility is the greatest with value systems, which usually ship with around 80G of hard disk space. Higher-end notebook computers typically offer up to 160G of hard disk space.

Optical Drives: CD and DVD

Another type of data storage device is an optical drive. Optical drives use lasers to read data from and write to optical discs such as CDs and DVDs. Today, the most common types of optical drives found in PCs are CD writeable/rewriteable drives, multi-format CD/DVD writeable/rewriteable drives, or DVD writeable/rewriteable drives.

CD-Rs (recordable compact discs) allow you to write data to them. CDs are an attractive option for those looking for cheap, high-capacity storage—CD-Rs can hold up to 800M of data and, when purchased in bulk, can cost around 70 cents each when the jewel case is included and between 20 cents and 80 cents apiece without a jewel case. CD-RW (re-writable) discs can be reused and read in any standard multi-session drive found in PCs. CD-RW drives can handle CDs, CD-Rs, and CD-RWs. The average cost of an internal 52x/32x/52x CD-RW drive is less than $40. (The first number of 52x/32x/52x is the number of times per second a CD-R disc spins while recording, the second is the number of times per second a CD-RW disc spins while recording, and the third number is the number of times per second the disc spins when being read.) CD-RW discs can be purchased in bulk for less than 50 cents apiece.

DVD or DVD-ROM, which stands for digital versatile disc, has become the preferred optical drive on the market today. ROM designates the disc as read-only, meaning the user cannot write data to the disc. DVDs are probably best known to consumers through movies, as software development in the area has been limited mainly to gaming and reference applications such as encyclopedias. Today’s DVD drives can read all types of CDs—standard music CDs, CD-Rs, and CD-RWs. While their usefulness is limited on desktop systems, with the exception being media center PCs that provide a more cinematic viewing experience, many laptop users like the ability to view DVDs while traveling. Oftentimes CD writing and DVD reading capabilities are merged into a “combo drive.” 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 $20 and $80.

Recordable and re-writable DVDs come in a variety of fashions and offer an impressive storage capacity of up to 4.7G for single-layer (SL) format and 8.5G for dual-layer (DL). A number of competing DVD standards can read and write to special DVD discs, with DVD-RW and DVD+RW being the most prevalent. Both formats have major manufacturer support, but are not fully compatible with each other or with existing drives and players. A DVD+RW drive can’t write to a DVD-RW disc, or vice versa (unless it is a combo drive that writes both formats). Over time, as it has become clear that neither format would become the de facto standard, manufacturers now produce 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 that supports all of these competing DVD standards. These drives cost between $40 and $150.

As if this were not enough to digest, consumers now have additional choices when it comes to DVD players and recorders. As mentioned in last year’s PC buyer’s guide, a new generation of DVD players based on “blue-laser” technology are on the horizon, with the first models hitting store shelves in 2006—albeit it with more of a thud than a bang. Two new formats are based on blue lasers, HD-DVD and Blu-ray. Blue light has a shorter wavelength than the red light used in CD and DVD systems we use today, allowing the laser beam to make a smaller spot on the disc surface. With each bit of data taking up less space on the disc, more data can be stored. As a result, discs can hold between 15GB and 30GB of data, depending on the variant of the format used, compared to current DVDs that can hold between 4.7GB and 8.5GB of data.

Further complicating the matter is that Blu-ray and HD-DVD players only work with movie titles recorded in their respective formats. This stands in contrast to the multi-format DVD-RW/+RW drives. On the computer side of things, there are only a handful of systems offering either HD-DVD or Blu-ray drives. Computer manufacturers, like the majority of consumers, appear to be taking a wait-and-see attitude toward blue lasers—waiting to see if one standard gains a leg up on the other before committing.

Portable Drives & Storage

Universal Serial Bus (USB) 2.0 is a high-speed connection technology for connecting peripherals such as mice, keyboards, printers, external hard drives and DVD burners to a computer. USB 2.0 supports theoretical data transfer speeds of up to 480Mbps (megabits per second) and is supported by both Windows and Macintosh systems. USB distributes power to many peripherals, allowing the PC to provide the required power to the peripheral, thus eliminating the need to separate power supplies.

USB’s high-speed competitor is IEEE-1394, also known as FireWire (or FireWire 400), which was developed by Apple. FireWire offers data transfer speeds of 400Mbps, while IEEE-1394b (FireWire 800) is capable of transferring data at rates up to 3.2Gbps (gigabits per second)—over seven times faster than USB 2.0. With this higher data transfer rate, FireWire 800 is better suited for digital video and audio devices, external hard drives, and other high-speed peripherals.

For a variety of reasons, however, USB 2.0 has become the more popular choice in the industry for connecting most peripherals, including external hard drives, to a PC. However, FireWire is still the preferred means of connecting digital-video-related items—digital camcorders as well as external DVD players and writers. Therefore, if you ever intend to do video editing on your PC, get a FireWire card, which will cost around $30 for the upgrade. Otherwise, no matter what type of system you purchase, make sure it has several USB 2.0 connectors, including at least one on the front of the system for easy access.

For easy and highly portable data transfer and storage, a variety of USB Flash memory devices are available. Unlike a hard drive, Flash-based devices store content on a chip and contain no moveable parts, which among other things make them more durable. Flash devices also carry with them the advantage of using less battery power as well as being much smaller. However, their small size also limits the storage capacity of flash memory chips.

Flash media 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 offer serious storage capacity. These devices have even evolved enough to the point of doubling as MP3 personal media players. One gigabyte (1G) USB flash drives, on average, cost between $25 and $100. Apple’s iPod shuffle and nano have flash memory instead of a hard drive as found in other iPod models. The shuffle has 1G of capacity and retails for $79. The iPod nano currently comes in 2G, 4G , and 8G models, and costs $149, $199, and $249, respectively at Apple.com.

Ultraportable Hard Drives

Today’s external hard drives offer capacities in excess of one terabyte (1T; one trillion bytes or 1,024G). Oftentimes, high capacity is also offered in a reasonably small package. LaCie (www.lacie.com) offers 80G, 120G, and 160G Mobile Hard Drives with FireWire connectivity that are a mere five inches long and three inches wide. The price per megabyte for this type of drive is a fraction of the cost of Flash memory. The 100G Mobile Hard Drive for USB 2.0 or FireWire costs $159.99, or $0.0016 per megabyte.

Backups

Many computer owners have never seriously thought about backing up their PC, mainly because of the perceived time and effort that it would take. However, to save yourself a tremendous amount of mental anguish, it is highly recommended that you establish an effective, and consistent 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. Whereas the need to have a backup system has increased exponentially in recent years as more and more hackers and viruses attempt to corrupt, destroy, or steal your files, the days of having to feed dozens of floppy drives into your PC to create a backup have, thankfully, passed. Don’t wait until it is too late to implement a backup system for your computer.

For very large amounts of data, backups are usually performed on high-capacity tape drives, but DVDs and high-capacity external drives can also be used to create effective backups. Using an external hard drive as well as automated backup software to copy data from your PC to the backup drive is probably the easiest way to ensure you perform regular system backups. Acronis True Image (www.acronis.com) and Norton Ghost (www.symantec.com) are two well-regarded disaster-recovery software packages available today.

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 labors.

When shopping for your new computer, make sure that the quote you receive includes the cost of a monitor; some companies claiming “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, such as memory, can be upgraded or expanded upon simply by adding more, a monitor can only be upgraded by buying an entirely new one. The increased viewing area and clarity of a larger monitor will be well worth the money, and a relief on your eyes.

LCD Versus CRT

The CRT (cathode ray tube) display may be headed the way of the 3.5” floppy drive as LCDs (liquid crystal displays) have come to dominate the computer landscape. In only a few years, LCDs have gone from luxury item to commonplace due to their superior display quality and, now, affordable prices. To give you an indication, Dell and HP, the two largest computer makers in the world, each offer only one CRT monitor option for all of the desktop systems they sell. Furthermore, a search of the CompUSA Web site while writing this article found five CRT monitors versus 103 LCDs.

Size

The size of a monitor determines how much “real estate” you have for displaying data. Typical monitors for personal computers range from 15" to 20", with larger monitors generally reserved for desktop publishing and computer-aided design (CAD) applications. Almost all new computers today—even at the low end of the spectrum—come with LCDs, with 17" or 19" being the most common size. We recommend that you opt for the LCD, as the premium you pay is well worth it given its superior display quality and subsequent reduction in eye strain.

At the retail level, respected name-brand 17" LCD panels are currently selling for between $170 and $350.

Resolution

A monitor’s resolution is measured in number of pixels, both horizontally and vertically, and determines the relative size of objects displayed on the desktop. A higher resolution means that objects will appear more clearly, albeit possibly smaller as well, 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" display, the objects are quite small and difficult to view. One benefit of CRT displays is that they are easily able to adjust to a variety of resolutions. LCD monitors, on the other hand, usually have what is called a “native resolution”—generally the highest resolution that the LCD panel can display and the display resolution that appears the sharpest. A good resolution for 17" CRT and LCD displays is 1024 by 768.

Sound and Video

Over the years, the personal computer has come to resemble a pseudo home-entertainment center, what with the continuous advancements being made in PC audio and video. At the extreme are “media center” systems that double as home theaters and can cost in excess of $3,000.

Audio

Most systems today come with built-in audio, which should suffice for typical users. This integrated audio is the more simple audio solution and allows the system to send sound through speakers, record sound from a microphone connected to the computer, or even manipulate any audio files stored on a disk.

For enhanced audio playback and recording, you may wish to opt for an add-on sound card. Sound cards supporting Dolby sound are often additional options for new systems and cost between $50 and $100.

Video

Earlier we discussed the CPU, which is the brain of a computer. However, PCs also have a GPU, or graphics processing unit; these chips build the images you see on the monitor. Most of the video boards that ship with new systems offer both 2D and 3D graphics. However, even if you aren’t planning to turn your system into a hard-core gaming platform, you will want to ensure that you have adequate video capabilities, especially if you are planning to run Windows Vista Premium and its Aero Glass interface.

For quality 2-D and 3-D graphics, you should choose a computer with a dedicated video memory instead of “integrated video,” a feature common in most lower-end desktop systems and many notebook computers. Integrated video means that memory is shared for video and other operations. If you are not sure which is being offered, 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 and video memory.

Select a PC with a video board that has at least 128M of video RAM. This will benefit those who have monitors with high refresh rates and resolutions as well as those looking for optimal3-D performance from games. In order to run Windows Vista Premium, you will need to have a dedicated video card that supports DirectX 9 graphics (Microsoft’s 3D graphics technology) and has a minimum of 128M of graphics memory. Upgrading to such a card from the manufacturer will cost you around $100.

Printers

While not technically part of the computer itself, printers, like monitors, play an important role in any computer system. You will find this out when you wish to print text, a Web page, a digital picture, or a price chart. Printers, just like computers, come with numerous options and issues to consider and are offered at varying price points. Keep in mind that the quoted price for a computer system rarely includes a printer. This is usually something you need to purchase separately.

Inkjet Printers

Inkjet printers are the most common printers on the market today for the average PC users. They work by squirting ink though a nozzle that forms the image of text or graphics on the page. They are inexpensive, reasonably fast, quiet, and achieve good resolution. They support color, something you should strongly consider, especially 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. Good-quality color inkjet printers cost $40 and up. Inkjet printers designed to print color photos begin at just under $100.

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-quality output when compared to inkjet technology. While the prices of laser printers have fallen over the years, the prices may still be too high for the average computer buyer. Black and white laser printers start at around $100, while personal color laser printers start at around $300.

Printer Resolution

The standard resolution today for lower-end laser printers is 600x600 dpi (dots per inch). 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 photos. Keep in mind that many inkjets have different resolutions for color and black and white (monochrome) output.

Internet Connectivity

Dial-Up

A modem (modulator/demodulator) allows communications between computers over POTS (plain old telephone service) and is generally used to access commercial on-line services, Internet service providers (ISPs), or the Internet. Over the past year we saw a slight up-tick in the percentage of our members using dial-up to connect to the Internet, from 17.5% to 18.4%.

Today’s modems are capable of using advanced error correction and data compression to achieve much higher 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.

Given the popularity of high-speed connections (DSL, cable, Wi-Fi, and satellite), some computer makers no longer offer modems as standard equipment. Those that do come with modems more than likely offer 56.6Kpbs V.92 modems.

New V.92 56Kpbs internal modems generally cost between $10 and $50. In order to access the Internet via modem, you will need to subscribe to an Internet service provider (ISP) offering dial-up Internet access. Depending on your location, the number of choices will vary and the cost could range from $5 to $50 per month, excluding possible phone charges.

High-Speed Alternatives

Dial-up modems continue to live on mainly because they can be used wherever there are phone lines. In addition, there are typically no additional service fees or set-up procedures required with dial-up access.

Over the years, however, a number of technologies have arisen as substitutes for dial-up modems. 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 128Kpbs to 8Mbps. One drawback with DSL is the drop-off in performance the farther away you are from the telephone company’s router. The average cost for residential DSL service is around $30 per month, but will vary depending on where you live and the subscription level you choose. Along with this there is the possibility of having to pay additional fees for equipment, installation, and start-up. In addition, depending on the ISP, you may be required to sign a long-term contract with a hefty fee for early termination.

Cable modems offer an “always on” Internet connection with speeds ranging from 484Kbps to 8Mbps. 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. Also, note that upload speeds are lower than download speeds—128Kpbs to 384Kbps for uploading and up to 8Mpbs for downloading.

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 has a built-in Ethernet networking connection. A standard 10/100Mbps Ethernet card costs between $10 and $90.

Wi-Fi has become a popular option for connecting wirelessly to the Internet, especially for portable devices, such as notebook PCs, and hand-held devices such as PDAs. Almost all notebooks (and handhelds) include built-in antennas for wireless networking so that you can access wireless hot spots to connect to the Internet, check E-mail, etc.

There is also a move toward offering the ability to connect to high-speed cellular networks for Internet access. Wide Wireless Area Networking (WWAN) gives you Internet access anywhere your cellular service provider has a signal. In order to access a WWAN, you will need a notebook PC with built-in WWAN connectivity or a cellular wireless access PC card.

Verizon Wireless offers unlimited wireless broadband access in over 50 major metropolitan areas with average download speeds between 400Kbps and 700Kbps for $79.99/month with a one- or two-year contract. Cingular Wireless offers its Laptop Connect for $79.99/month for unlimited access. Sprint MobileBroadband service boasts the nation’s largest mobile broadband network with speeds between 400Kbps and 700Kbps; it also costs $79.99/month for unlimited access, along with $99 to $250 for the broadband card.

Depending on where you are located, your only high-speed Internet option may be satellite. HughesNet (www.hughesnet.com), EarthLink (www.earthlink.net), and StarBand (www.starband.com) provide residential packages with download speeds of up to 1.5Mbps and upload speeds of 256Kbps. Satellite remains a pricey option, with installation and equipment fees of $250 to $1,000 and monthly service fees ranging from $60 to $130. Furthermore, most satellite service subscriptions require a one-year commitment, with early termination fees of up to $500. Lastly, the dish you install must have a clear view of the southern sky.

Security

Security has become an extremely important consideration when designing a computer system. This is partly due to the number of hackers looking to steal and viruses trying to damage your data, especially if you are using a Windows-based system. Microsoft’s Windows operating system has become the favorite target of Internet vandals and pirates because host systems are Windows-based. While Mac users are fond of saying that there has never been a successful virus written for Mac OS X, security experts have been voicing their concern about vulnerabilities found in OS X. This is an outgrowth of Apple’s rebounding popularity, and if Apple’s market share continues to grow, it will undoubtedly find itself the target of attacks. As a result, it is a good idea for Mac users to take the necessary precautionary steps to protect themselves. Mainly, make sure your Mac OS X firewall is operating and automatic patching is activated. In addition, it is a good idea to run some type of anti-virus software and make sure the virus signatures are updated on a regular basis.

Microsoft receives a great deal of criticism for writing code that is fraught with security flaws and for viewing security as a secondary concern. This has allowed hackers to exploit the various “holes” in the Windows XP operating system. Attempting to address this apparent lapse, Windows released ServicePack 2 (SP2) in August of 2004. Any new system purchased today should have SP2 installed, but it is a good idea to double-check. If you have not installed SP2 on your existing system, it is highly recommended that you do so. However, be aware that, even with SP2, you are still not 100% safe. Therefore, it is a good idea to look to third-party providers of security hardware and software to protect your PC.

The following are some steps you can take to improve the security of your PC.

Firewall

The first precaution is to install 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 from your system. ZoneAlarm, a free utility from Zone Labs (www.zonelabs.com) is one of the best available.

Anti-Virus

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 receiving up-to-date virus signatures after the trial period is over. Norton Internet Security 2007 (www.symantec.com) offers an automatic update system for $69.99, which includes a year of updates.

Anti-Spyware

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 monitor your browsing activity, see what you purchase, and cause pop-up ads to appear on your system. The problems with spyware are that, first, you do not know they are on your system recording your activity and, second, they can adversely affect your computer’s performance. One of the more popular anti-spyware programs today is Spy Sweeper from Webroot Software (www.webroot.com). This software not only detects and removes spyware on your PC, it also watches for and blocks new spyware before it installs. Spy Sweeper costs $29.95 and includes a year of updates.

Desktop or Laptop?

Once you have made the decision to buy a new computer, inevitably you will be confronted with the question of whether to go with a laptop or desktop 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 highlights situations where a laptop would be most desirable:

• Do you work while traveling?
• Do you want to be able to move the computer easily from place to place?
• Do you have space (desktop) restraints?

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

• Do you have budget constraints?
• Do you prefer to have a larger display?
• Are you interested in having the best and most powerful features computers have to offer? When pondering desktops versus laptops, 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, 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 definite price difference between laptops and desktops, with a premium paid for mobility. Expect to pay several hundred dollars more for a laptop system compared to a relatively identical (in terms of computing power) desktop. See Table 2 for a cost-comparison chart.

Where to Buy

When looking for a new PC, you basically have two choices of where to buy—directly through a mail-order vendor or from a local retail store. While many systems, such as Dell, are available from mail-order sources, several large and reliable manufacturers such as Hewlett-Packard and eMachines (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 exactly as you would like right out of the box. Companies such as Dell and Gateway have a good reputation for delivering what they promise, when they promise. One major trade-off when purchasing from a mail-order company is the lack of face-to-face assistance offered by retailers should something go wrong. Dell offers home installation service for $150 where a third-party technician will come to your house and set up your new PC. Furthermore, 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 you may face—at least for the first year. For repair service coverage over a longer period of time, many larger mail-order companies offer continuing maintenance through third parties. Realistically, there is no reason to pay for additional service beyond three years, as at that point it may be time for a completely new system.

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 fashion 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 does not necessarily mean you will be paying much more for a system that does not exactly meet your needs or that it will become outdated more quickly. 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 the 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 everything you are looking for, be prepared to compromise your wants, and possibly your budget, to meet the retailer’s offerings.

System Recommendations

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 can afford and what you need. Consider both the current and intended uses of the system and check the vendor’s reputation for reliability, service, and support.

Table 3 summarizes the recommended specifications for buying a desktop computer today. For Windows systems, we used Microsoft’s recommendations for running Windows Vista Premium as a guide. Given the rapid changes in technology that are taking place on a seemingly minute-by-minute basis, one certainty is that what is top-of-the-line today may very well be relegated to mid-line in a matter of months.

Inevitably, some readers will voice their concerns that the recommended systems here are too advanced for their needs. While this may be true, our goal is to recommend systems that will provide sufficient computing power for the next few years in the face of evolving computing technology. The ultimate decision, however, is yours to make.