CAMBRIDGE, Mass. - Alternative investing methods offered online may replace mutual funds as the dominant investment vehicle for the masses, according to an Internet research firm.

In a brief released this month by Forrester Research Inc., senior analyst Jaime Punishill predicts that Internet offerings such as low-fee separate accounts and customized baskets of securities could steal over $1 trillion of assets from mutual funds in the next decade.

The new offerings include services from companies such as ShareBuilder, which lets investors buy individual equities through its Web site with as little as $20 a month; Folio, which lets investors purchase an unlimited number of securities through its Web site in investor-defined baskets; and MoneyPro.com, which gives investors with as little as $50,000 access to professional money managers through its Web site.

The advantages over mutual funds are lower fees, more tax benefits, and more flexibility, the brief says. The hurdles include many investors' continuing need for investment advice as well as opposition from government organizations that are trying to regulate alternative investment vehicles.

According to Forrester, three factors will cause alternative investing methods to prosper. Enterprising on-line brokerages will let investors create custom portfolios based on financial plans. Independent financial advisers will take advantage of the on-line services to implement their customers' portfolios. Finally, consumers seeking improved investment performance will adopt the alternative investing methods.

Faced with outflows and pressure on fees, the number of mutual funds will decrease from about 8,000 today to just 5,000 by 2010, Forrester concludes.

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