PC Buyer's Guide for the Individual Investor

by Wayne A. Thorp

While industry experts continue to worry that the cycle of businesses and individuals purchasing new computer systems and replacing obsolete systems is coming to end, reality indicates otherwise. The year 2005 looks to be another record year for the PC industry. Based on third-quarter PC sales, information technology industry research firms IDC and Gartner, Inc. estimate worldwide PC sales will grow by over 17% for 2005. This should place 2005 unit sales above 210 million. The trend away from commodity desktop computers and toward mobile, notebook computers has helped to fuel this continued strength. High-speed wired and wireless (Wi-Fi, or wireless fidelity) Internet connections have become more mainstream, no longer a luxury.

Consumers continue to enjoy cutthroat pricing among computer manufacturers. This has led to revenue growth in the industry lagging unit sales—manufacturers are selling more systems but at lower prices. In such an environment, only computer manufacturers that can contain costs can succeed. Last year, Gartner predicted three of the top 10 computer manufacturers will be forced out of the global marketplace by the end of 2007.

For the first-time computer buyer, the plethora of terms, computer types, brands, and configurations can be a bit overwhelming. The prices you can pay for a new system are just as diverse. Walmart.com offers Microtel Linux-based systems for under $300, while many of the major manufacturers offer high-end gaming systems for over $3,000. The price the typical consumer will pay for a new PC lies somewhere in between; however, even the middle ground is quite expansive. With a little research and education beforehand, you should be able to reduce the time and headaches that might otherwise arise in selecting a new system that offers the right blend of power, flexibility, and affordability to serve your current computing needs as well as your needs in the years to come.

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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.

Outlining Your Needs

The worst thing you can do when buying a new computer is to select a system that is inadequate. Buying a system with marginal hard disk capacity or a low-end processor will force you to have to replace your computer more quickly than if you had gone with higher-end system. On average, a mid-to-high-end desktop system purchased today should be functional for about three or four years (laptops tend to be replaced more rapidly). The rate of advancement in computing technology, ever-evolving operating systems, and always-declining prices makes system viability much past three years unlikely.

Alternatively, you do not want to fall into the trap of buying a system with all the bells and whistles if you do not need them. 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 access 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 manipulate digital music and images, as well as perform advanced technical analysis such as trading system development and backtesting, or run more system-intensive applications, a basic system is a waste of money as well.

The OS Battle: Windows vs. Mac

A paramount issue when buying a personal computer is choosing one that supports the software you wish to use. This is dictated by the underlying operating system (OS) that is running the computer. As has been the story for many years, the two “competing” operating systems on the market today are Windows from Microsoft and Mac from Apple.

Windows is used by more than 90% of the world’s computers, so it is not surprising that software makers will focus on this market. The frustrations among Mac users trying to locate specialized investment programs for their systems are well founded. The dearth of software investment titles for the Mac OS means that Windows XP systems are better suited for members looking to run a wide range of investment-related software titles. The majority of Mac offerings are personal finance programs such as Quicken—but even then, 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 MSN Money (investor.msn.com) use technology that renders the most popular features useless to Mac users. With Windows emulation software, which allows Mac-based systems to run programs designed for Windows, there tends to be a significant drop-off in performance that makes this option less than optimal and a Windows-based system the preferred choice for investment analysis. Apple’s greatest impact these days is on the music industry with its iPod music player and iTunes software system—both of which are compatible with Windows and Mac.

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 previous Windows versions. Windows XP also supports a wider range of hardware add-ons and software programs than previous Windows versions.

Windows XP comes in various versions—Home Edition, Professional, and Media Center Edition. The fundamental core and interfaces are the same for both the Home and Professional operating systems, but the Professional version has additional security, networking, file sharing, and multi-processor support. The Media Center Edition is an entertainment version of Windows. It is similar to other versions of Windows XP, but offers a second interface that can play and record movies, music, digital pictures, or television and allows the system to be operated via remote control. For the average user, Windows XP Home Edition will suffice, unless you need to connect to a corporate network or are looking to turn your PC into a home entertainment center.

Windows XP was released in October in 2001, and since then Microsoft has not made a major overhaul of the operating system. That will change with the next release of Windows, named Vista, which Microsoft expects to have in broad distribution in time for next year’s holiday shopping system. Numerous delays have pushed back Vista’s final release two years and have forced Microsoft to scale back the features and enhancements Vista will offer. Among the new features Vista will offer is a new file searching mechanism, a new graphics engine (Avalon), security improvements, parental controls, better home networking, and several enhancements for laptop users, including seamless connectivity to external devices such as projectors. Only time will tell whether Vista is the quantum leap from XP that Microsoft claims it is.

Mac OS
There is no question that Apple has revolutionized PC design with its eMac, iMac, Mac mini, Power Mac, iBook, and PowerBook systems. Apple has seen its market share increase over the past couple of years, due largely to the popularity of its iPod personal music systems. Despite this, Apple still controlled only 2.9% of the U.S. desktop and 5.0% of the laptop markets at the end of 2004, according to IDC. Worldwide, the results are even smaller, with Apple controlling 1.8% of the worldwide desktop market and 2.9% of the laptop market. Among AAII users (Table 1), Mac usership has been in steady decline since 1992, with 3.5% currently using a Mac. This is compared with 96.1% of members using Windows-based systems. Another 0.4% employ other operating systems such as Linux.

Table 1.Computer Usage Among AAII Members
Percentage of AAII Members 2005 2004 2002 2000 1998 1996 1994 1992
Percent of members that own a PC 99.3% 99.2% 95.7% 90.3% 84.0% 80% 80% 73%
Type of system used:
Windows 96.1% 92.5% 92.4% 91.0% 90.4% 80% 84% 76%
Macintosh 3.5% 6.9% 7.2% 9.6% 9.6% 19% 14% 16%
Other 0.4% 0.6% 0.4% 1.8% 2.4% 5% 3% 12%
Regularly use the Internet 99.8% 99.8% 89.1% 84.0% - - - -
Internet Connections: Modem 17.5% 29.7% 68.2% 88.0% - - - -
Internet Connections: Broadband 82.5% 70.3% 33.9% 15.0% - - - -

In April of this year, Apple released Mac OS X version 10.4, titled Tiger, which Apple claims has over 200 new features. The most notable addition to the new release is an embedded desktop search feature, Spotlight, that indexes your entire hard drive for file data and metadata (information underlying a particular file). This means that users can search for content, editing history, and file size for test files as well as images, calendar events, contacts, and E-mail. Another interesting new feature is Dashboard, an interface accessed via a hot key that contains “widgets,” applications such as a dictionary, translator with a dozen languages, flight tracker, weather updater, and stock ticker. An upgrade to Tiger costs $129 for a single user’s license. The Mac OS X Tiger 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, a topic covered later in this article.

Intended Uses

No matter what kind of tool you are looking to buy, it is always a good idea to know what you will be doing with it and then buy the appropriate tool to do the job in the most efficient manner. The same is true with a 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 data and 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 necessary to examine and print charts and graphs.

If you are looking to store a large amount of historical data for a large group 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 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.

The Sum of the Parts…

In business, synergy is the buzzword when discussing mergers. It is the concept that the sum of the parts will yield value greater than the value of the individual components (companies). The same concept holds for a computer. While most people view a computer as a singular item, in actuality it consists of various types of hardware, such as a processor, hard drive, disk drives, and video and sound cards—each of which is useless without the others. 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 pieces of hardware are discussed below.


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 system performance than the processor.

Chip manufacturers are continually trying to outdo each other for the title of fastest processor. This year marks the 40th anniversary of Moore’s Law (named after the co-founder of Intel), which states that the number of transistors on a microchip will double every one to two years—which in effect doubles the processing speed. Remarkably, this statement has managed to hold true for 40 years. While chip manufacturers expect to be able to continue this pace for the next several years, they are approaching a limit as to how small they can make the transistors and how much heat is thrown-off as chips become faster. Numerous technologies are in development that, if successful, will extend the useful life of Moore’s Law.

The two main competitors in the processor industry continue to be Intel, the market leader, and Advanced Micro Devices (AMD). AMD has stepped up its challenge to Intel in the marketplace over the last few years. Despite claiming to have chips that can process data more quickly than Intel’s chips, AMD continues to lag as a distant second in terms of sales. The competition between the two firms has led to the courtroom as well. In June, AMD filed a federal antitrust lawsuit against Intel, claiming that its rival has a monopoly on the PC industry. Intel continues to have the “fastest” processor, at least in terms of clock speed (which is a key determinant of overall processing speed). The Pentium 4 processor 670 has a peak clock speed of 3.8GHz (gigahertz). However, even with a maximum clock speed of 3.73GHz, Intel claims that its Extreme Edition offers the fastest processing capabilities of any chip on the market today.

AMD’s Athlon 64 rivals the Pentium 64 and has been shown to outperform the Pentium 64 in certain benchmarks. The fastest desktop processor in the Athlon 64 family—the Athlon 64 FX-57—runs at 2.8GHz.

The Athlon 64 is one of several “next generation” processors on the market today that offer 64-bit capabilities. Others include AMD’s Opteron and Turion processors, Intel’s Pentium Itanium 2, Xeon, Extreme Edition, Pentium D, and selected Pentium 4 and Celeron D processors. The reason 64-bit processors are so important is because 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. In April, Microsoft introduced 64-bit versions of its Windows Server 2003 and XP Professional operating systems. Microsoft’s Vista operating system that is expected to be released late next year will come in 32- and 64-bit versions.

AMD and Intel are relative newcomers to 64-bit processors. IBM was the first company to introduce 64-bit chips for desktops with its PowerPC G5 processor for Apple in June of 2003. However, Apple announced in June that it is dropping its partnership with IBM and switching its computers to Intel microprocessors. Apple plans to begin the transition with its lower-end systems, such as the Mac mini, in mid-2006 and eventually higher-end models—although this timeframe has become muddled since Apple recently announced that it was using IBM’s PowerPC chip in its new Power Mac G5 line. The switch is significant from a software standpoint, because programmers will have to rewrite their software to take full advantage of the new Intel processor(s). It has also left Mac users pondering whether they should be investing in new systems until the transition is complete.

In the meantime, the PowerPC G4 (G4 for short) and G5 processors prevail. The G4 is found in the bulk of Apple portable systems, including the consumer-oriented iBook notebook, the low-end Mac mini and eMac, and Power Book G4 laptops. The 64-bit G5 processor is currently found in the Power Mac and iMac systems with clock speeds up to 2.7GHz. In head-to-head comparisons, the G4 and G5 rival and often surpass the performance of equivalent-speed Pentium processors. For most, any of the G4 chips should be adequate. As you move up the eMac, Mac mini, iMac, and Power Mac ladder, faster processors, additional memory, and larger and better displays are available. The eMac and iMacs are available in packages that provide a good balance of power, memory, storage, and features. The Mac mini is attractively priced, starting at $499. However, keep in mind that it is also BYODKM: bring your own display (monitor), keyboard, and mouse, because the cost includes only the PC, peripherals are not included.

Another trend in microprocessors is toward “dual core” chips. A dual-core processor, as the name implies, has two processor cores on a single chip—in effect, placing a dual processor on one. AMD’s Opteron and Athlon 64 X2 processors are both dual-core processors. Intel currently offers dual-core processors within the Extreme Edition, Pentium D, and Xeon families of processors. At this point in time, dual-core processors are found primarily in servers and workstations. Dual core does not mean double the speed; however, users who multi-task will notice the greatest benefits of a dual-core processor.

Most of the processors found in today’s PCs should suit your needs. Raw processing speed should not be an overriding concern unless you plan to use heavy-duty gaming, video editing, or other processor-intensive applications with your system. If money is an issue, you are better off foregoing a high-end processor in favor of additional memory or dedicated video memory (better video card).

Data Storage Media

As computer software continues to increase in sophistication, so do the requirements for the amount of hard disk space they need for proper installation. In addition, as security gains in importance due to a growing barrage of attacks from hackers and virus-writers, backing up your data has also become an important issue. To ensure your computer meets the storage needs of today’s and tomorrow’s software, make sure it has plenty of data storage media capabilities.


In computers, temporary memory is just that—temporary. In other words, when the computer is turned off, data that has not been saved to permanent memory, such as a hard drive, 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 the computing experience—specifically, what kind and how many programs can be simultaneously 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 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 that are always running can quickly use up a system’s memory and processor resources. Most low-end systems now ship with at least 256M of RAM, with many offering up to 512M. Some systems, especially on the lower end of the spectrum, share video and program memory, a.k.a. “integrated memory.” 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 a system with at least 512M of RAM, although with memory costs at all-time lows, 1G (gigabyte) of RAM is a more optimal amount as the price difference is less than $100 for twice the amount of memory. To upgrade a 128M system to 256M would cost under $30, while adding an additional 256M will probably cost anywhere from $25 to $50. Memory is the last place where you should try to save money—upgrading your memory is a worthwhile investment. If you are looking for ways to lower the cost of a new PC, you are better off going with a less powerful processor in favor of additional memory.

Hard Drives

Temporary memory, as we discussed, is an important element of a computer. However, just as important is the ability to store 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 again later. 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 size (storage capacity). Today’s operating systems and many applications consume a great deal of available disk space.

One other consideration in regard to hard drives is the speed at which they spin. This is measured in RPMs (revolutions per minute). The higher the RPM, the faster the data can be read from the platters (hard disc), which increases overall performance. RPM values range from about 5,400RPM to 15,000RPM. Most PCs come with hard drives that operate at 7,200 RPM, which is the lowest you should go.

When looking at new computers, most entry-level systems offer at least 80G of hard disk space, which is the lowest amount you should accept. Ideally, you should go with 160G, with high-end systems having hard drives with capacities in excess of 250G.

Laptop users may have to settle for a slightly smaller drive, although more than likely this will be with value systems. Higher-end laptops offer up to 100G of hard disk space.

While gigabytes of hard disk space may seem like an infinite amount of storage space, keep in mind that if you intend to use any type of historical data service for technical analysis or stock or mutual fund screening, oftentimes this data is saved directly to your PC, and you will want to have enough capacity. Outside the context of computerized investing, if you want to work with multimedia files—music, digital photos, and especially digital videos, you will need substantial amounts of free hard disk space.

Floppy Drives

In today’s computing world, where gigabytes and even terabytes are used to describe storage capacity, the importance of the 1.44 megabyte 3.5" floppy drive is fading. The main reason to have a floppy disk on a computer these days is its usefulness 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. However, this function may be performed using a boot CD as well. Many computer manufacturers no longer automatically include a floppy drive. If you have the ability to opt for a floppy drive, it may be a good idea, especially when the additional cost is usually less than $30.

Apple desktop and laptop systems have been sans a floppy drive for some years now. So if you opt for a Mac system, be prepared to spend between $20 and $30 for a floppy drive that connects to the USB port of Mac systems.

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 rapidly graphics and video are read from the CD and displayed on or copied to the system. With slower drives, you may experience pauses in the video playback from time to time as the data is transferred. CD-ROM drives range in speed from eight-speed (8x) to 72-speed (72x), while most consumer models top out at 52x, and can either be 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 apiece when the jewel case is included and 25 cents to 80 cents each when purchased in bulk. While CD-Rs have the advantage of being able to write data to CDs, once the disc is burned, or written, it cannot be used again to store additional data. CD-Rs are popular for individuals creating custom audio CDs.

The shortcoming of not being able to re-record (re-write) 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 drive 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 range 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 52x/32x/52x CD-RW drive is less than $70 (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 high-capacity storage option for delivering large quantities of data, such as audio and video. 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.

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 playback 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 $20 and $100. DVD discs can contain up to 4.7G.

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 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 has become clear that neither format would become the accepted 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 offered by companies such as Sony and Hewlett-Packard (HP) that supports all of these competing DVD standards. These drives cost between $70 and $250. Single-format writeable DVD drives can be purchased for as little as $30.

Table 2. CD and DVD Drive Formats
Format Recording Compatibility
CD-ROM Read only Standard music and data 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-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 only be written once and are compatible with most consumer DVD players. DVD-RW and DVD+RW discs can be written about 1,000 times.

Just as DVD-R and DVD+R are competing standards for today’s DVD drives, a battle is being waged over the next generation of DVD drives, with two competing standards—HD DVD and Blu-ray. Blu-ray was created by Sony and has backing from Hewlett-Packard, Dell, and Paramount movie studio. Toshiba’s HD DVD format gained formidable support in September from Intel and Microsoft. Both formats offer higher storage capacities than today’s DVDs, with Blu-ray supporting both 25G and dual-layer 50G, while HD DVD starts at 15G with 30G dual-layer discs. Just this October, analyst firm Forrester predicted that Blu-ray would end up winning the battle, with the final shakeout possibly taking years unless the two sides can find a compromise. Consumers can expect to see Blu-ray drives around the spring of 2006 while Toshiba announced plans to launch the first HD DVD drives in Japan by the end of this year and worldwide in the first quarter of 2006.

Portable Drives & Storage

Universal Serial Bus (USB) is a type of connection found 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 a diverse collection of 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 reboot the PC, a process called “hot swapping.” Additionally, 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 is not supported at all in DOS, but 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 480Mbps (megabytes 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 easy access.

For easy and highly portable data transfer and storage, a variety of USB Flash memory devices is available. Unlike a hard drive, Flash-based devices store content on a chip and contain no moveable parts. Flash devices carry with them the advantage of using less battery power than hard-drive players do as well as being much smaller and more durable. However, flash memory chips have a limited storage capacity.

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. A 512M USB 2.0 flash drive costs between $30 and $150. Apple’s iPod nano has flash memory instead of a hard drive as found in other iPod models. The iPod nano currently comes in 2G and 4G models, and costs $199 or $249, respectively.

Ultraportable Hard Drives

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, with IEEE-1394b (FireWire 800) 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 is better suited for digital video and audio devices, external hard drives, and other high-speed peripherals. Hard drives offering FireWire connectivity have become a popular choice for high-capacity data storage. Capacity is a key feature for these types of drives, which can reach up to 500G. This high capacity is also offered in a reasonably small package. LaCie (www.lacie.com) offers 40, 60, 80 or 100G Mobile Hard Drives with FireWire connectivity that are a mere five inches long and as wide as a cell phone. Compared to Flash memory, the price per megabyte for this type of drive is a fraction of the cost. The 80G Mobile Hard Drive costs $169.99, or $0.002 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.


Few computer owners bother backing up their PC, mainly because the process is somewhat time consuming and costs money. 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 have, thankfully, 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 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.

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 II line has drives ranging in size from 100G to 300G and costing $149.95 to $319.95. Acronis True Image and Norton Ghost are also disaster-recovery software packages.


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 starting over with a 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

Not too long ago, the only display option you had for a new system was CRT (cathode ray tube) display. CRT is the technology used in most televisions and computer monitor displays. Up until a few years ago, LCDs (liquid crystal displays), while superior in their display quality, were beyond the budget of the average home PC buyer. However, as prices have fallen, LCDs are now found with many new computer systems.

One advantage LCD monitors hold over CRT displays is overall size—in terms of both 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 a fraction of the desktop space that CRT displays do, meaning they can fit in places where a larger CRT display could not. On average, LCD monitors take up less than one-third of the space of an equivalent-size 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 such as DVD players.

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


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". Monitors that are larger than 20" are generally reserved for desktop publishing and computer-aided design (CAD) applications. Most new computers today come with a 17" CRT monitor, although free upgrades to a LCD are becoming commonplace.

At the retail level, respected name-brand 17" CRT monitors cost between $90 and $150 and 19" monitors between $190 and $270. The extra cost will be more than recovered in reduced eyestrain over several years of use. If you decide on a larger monitor, keep in mind the amount of desk 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 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 are priced at a declining premium relative to CRT displays. Expect to pay $180 to $280 for a 15" name-brand LCD panel. Seventeen-inch LCD panels are selling for between $200 and $500.


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 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 quite small and difficult to view. A benefit of CRT displays is that they are easily able to adjust to a variety of resolutions. LCD monitors, however, 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 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 lessons 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 dot 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" LCD. In addition, 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 $130. A 15" comparable LCD display will cost under $300.

Sound and Video

Computers have long since stopped being viewed as merely boxes that crunch numbers. With the advancements that are continually being made in PC audio and video, you have the potential of turning your PC 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 come with built-in audio suitable for typical users. Sound cards supporting Dolby sound are often additional options for new systems and cost around $50.

Most of the video boards that ship with new systems offer both 2-D and 3-D graphics. Even if you aren’t planning to turn your system into a hard-core gaming platform, the extra cost is negligible. For quality 2-D and 3-D graphics, you should choose a computer with a dedicated video memory. As mentioned before, 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 128M 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 $50 and $125.


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, digital picture, or price chart. Printers, just like computers, come with numerous options and issues to consider and with 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 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. A good-quality color inkjet will cost $30 and up. Inkjet printers designed to print color photos begin at around $150.

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 $400.

Printer Resolution

The standard 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 photos. Keep in mind that many inkjets have different resolutions for color and black and white (monochrome) output.


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. As of 2005, 17.5% of our members used a dial-up modem to connect to the Internet.

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.

Most new computers ship with 56.6Kpbs modems. The latest generation of 56Kbps modems—V.92—offers several new features that improve their utility compared to older V.90 modems. V.92 modems boost the upstream data rates between the user and ISP to 48Kpbs 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 experience is up to 46.6Kbps. Beyond improved uploading performance, V.92 modems allow the user to place a data transmission on hold to take a voice call, and then re-establish the data transmission without losing the connection. This is called “modem on hold” or MOH. V.92 modems also offers “quick connect.” Quick connect “trains” the modem with each dial-up connection to determine the most efficient route to connect. By remembering the information, the V.92 standard allows connections in about half the time.

New V.92 56Kpbs 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.

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. Most residential services offer download speeds of 1.5Mbps. One 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 $20 per month for residential service, with the possibility of an additional $50 to $200 for equipment, installation, and start-up fees. In addition, many ISPs offering DSL require a one-year contract. DSL modems, on average, cost between $40 and $80.

Cable modems also offer an “always on” Internet connection with speeds ranging from 484Kbps to 6Mbps. 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—128Kpbs to 384Kbps for uploading and up to 6.0Mpbs for downloading. Cable modems, by themselves, start at $40. 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 $100.

Depending on where you are located, your only high-speed Internet option may be satellite. Hughes’ DirecWay (www.direcway.com), EarthLink (www.earthlink.net), and StarBand (www.starband.com) provide residential packages with download speeds of up to 700Kbps and upload speeds of 128Kbps. Satellite remains a pricey option, with installation and equipment fees of $100 to $1,000 and monthly service fees ranging from $50 to $100. 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 has become an extremely important consideration when designing a computer system. This is partly due to the number of hackers and viruses looking to steal or 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. While, to date, there has not been a successful virus written for Mac OS X, security experts have been voicing their concern about vulnerabilities found in the OS. This is an outgrowth of the growing popularity of Apple’s low-cost platforms, such as the Mac mini. As Apple’s market share grows, it will undoubtedly come under a greater number of attacks.

Microsoft also 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. So great was this undertaking that Microsoft was forced to pull most of its programmers working on the next release of Windows, Vista, to help with SP2, thereby delaying Vista’s release by over a year. 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. Microsoft claims that any PC running SP2 is 15-times safer than one running Windows XP SP1. However, the highly publicized problems some Windows XP users experienced after SP2 was released has led to fewer than one-third of Windows XP users installing SP2, according to Microsoft. 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. Even with SP2, you are still not 100% safe. 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 hardware and software to protect your 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 receiving up-to-date virus signatures after the trial period is over. Norton AntiVirus (www.symantec.com), an industry standard, offers an automatic update system for $39.99, 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 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 secondly, they can adversely affect your computer’s performance. There are a number of anti-spyware programs on the market, with two of the more popular ones being Spy Sweeper from Webroot Software (www.webroot.com) and Lavasoft’s Ad-Aware SE Plus 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.

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 (Table 3).

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 with 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.


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

Table 4. Recommended System
  Wintel Mac
Operating System Windows XP Mac OS X
Processor 2.4GHz Celeron D, Pentium 4, Athlon 64 1.9GHz PowerPC G5
Memory 512M RAM 512M RAM
Hard Drive 80G 160G
Video Card 64M 2D/3D graphics accelerator 128M 2D/3D graphics accelerator
Sound Card built-in audio built-in audio
Modem 56K 56K
Network Adapter 10/100 BASE-T Ethernet 10/100 BASE-T Ethernet
Monitor 17" CRT or 15" LCD 17" flat panel LCD
Price $500 – $1,000 $1,348

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.

In the past, some readers have voiced concerns 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 computing technology. The ultimate decision, however, is yours to make.

Wayne A. Thorp, CFA, is associate editor of Computerized Investing and AAII’s financial analyst.

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