Stock market bargain-hunting has seen the return of the online private investor this year, with a 20% rise in online trading in the first quarter and a customer overflow leaving some firms struggling to cope.

Stock market bargain- hunting has seen the return of the online private investor this year, with a 20% rise in online trading in the first quarter and a customer overflow leaving some firms struggling to cope.

The 45,000 self-service customers of Hoodless Brennan, which grew by pinching business from bigger rivals with an £8-per-trade pitch, have until next Friday to decide whether to transfer their accounts to TD Waterhouse, after Hoodless became a victim of its own success. Pressure of new business led to new account openings being suspended for a time in May, and days after the freeze was lifted customers were told the execution-only business was being transferred to Waterhouse. The decision had been made, the company said, following "a review of the business in 2008".

The new owner has agreed to honour Hoodless's rates, £8 a trade or £6.50 for frequent traders, for at least a year from the date of transfer. Waterhouse's normal prices are £12.50 and £9.95. The deal gives Waterhouse 200,000 customers, ahead of the 160,000 at Selftrade, which has also experienced service problems. It has a £12.50 standard rate (£6 for frequent traders) but is introducing an annual £40 fee from this month.

This, however, replaces the company's existing £25 annual fee for individual savings account (Isa) holders, and the broker is also offering three free trades as a sweetener.

Hoodless is the only broker to charge no annual fee. Barclays charges an inactivity fee, as does Waterhouse, but only on small accounts, while Hargreaves Lansdown charges a fee to active traders. The Share Centre charges a 1% commission, minimum £7.50, and a £2.50 quarterly fee which, however, like most other providers' quoted fees, does not include VAT.

Other regular trading fees include Barclays at £12.95, Halifax at £11.95 and E*Trade at £7.

Waterhouse reports a surge in interest for equities since March, with a 50% rise in account openings and a doubling of traffic on its website this year. But it says the phenomenon could be temporary, with the longer-term outlook one of decline rather than growth, prompting further merger activity. Halifax Share Dealing reports "a return of the day trader" at times, with extreme volatility offering opportunities to turn a quick profit, but creating service problems for providers.

Brokers report that large-cap defensive stocks paying dividends are still the biggest buys, though cyclicals - notably oil and commodity stocks - have been in strong demand, while the banks have been a regular target for speculative trading, including day trading, over the past year.

According to statistics from registrars Capita, private investors poured £900m into the market in April and May, and have reinvested £2.5bn since last October - more than half the £4.5bn they withdrew from the market between the start of 2007 and summer 2008.

Exchange traded funds (ETFs) are growing in popularity, with Barclays Stockbrokers reporting trades almost doubling between September last year and May 2009.

Despite the mystique, ETFs are basically tracker funds tied to an index or sector. You can go short as well as long, to make money in a falling market. Typically, one in five of Barclays' trades is a bet on the FTSE-100, with sterling corporate bond and emerging market funds each mopping up around 10% of business. More than 50% of trades are sheltered within an Isa or Sipp account, making them tax efficient.

Supporters say ETFs are a cheap way to get exposure to equity markets, as they do not attract stamp duty as shares do, but they are traded like shares throughout the day. Neither do they levy front-end charges, early redemption penalties or exit charges, like collective funds, and service charges are often below 0.5% a year. Critics however say that for sectors such as small-cap stocks, for instance, unit (or investment) trusts can be cheaper and more liquid.

Justin Urquhart-Stewart at Seven Investment Management says anyone venturing into ETFs should "keep it simple".

Meanwhile, fund supermarkets have also prospered since March, judging by figures from market leader Hargreaves Lansdown this week. The firm enjoyed a bumper fourth quarter on the back of higher dealing volumes and the positive impact of a 23% rise in the FTSE-100 in the past four months, with assets held in its Vantage fund supermarket platform up by 15% in April and May.

But fund supermarkets will not be offering the new low-cost range of tracker funds launched in the UK this week by US manager Vanguard. It is charging just 0.15% for its all-share index fund - compared with 0.4% for a typical ETF and 1% for Virgin's UK index tracker. Vanguard is also offering US, European, Japanese and emerging market trackers with no charge higher than 0.55%.

However, investors in the UK index funds will have to pay a 0.5% purchase fee to cover stamp duty while others will also incur start-up dealing costs. The funds are so far only be available through IFAs, triggering more potential cost.

The exception is Alliance Trust Savings, which will offer Vanguard funds, and charges £12.50 to open an Isa online.

Vanguard says: "We are committed to making funds available which do not erode returns through high charges."