Sharebuilder?

[LuckyRobin]

Has anyone here used Sharebuilder to get into investing? Is it easy to use? I would like to start investing in stocks outside of retirement funds with an eye towards getting dividends, but the amount of money I will have to do it is fairly small, about $50 to $100 at a time (though this will get larger next year). I like the idea of being able to slowly but steadily invest in individual stocks. Is this the way to go? Do I have to put money in every month or just when I have it?

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I like the idea of being able to slowly but steadily invest in individual stocks. Is this the way to go?

Yes -- if you study the markets and are educated about the process. Investing in only one stock is pretty risky. The best way of accumulating wealth via the stock market for most people is simply to buy mutual funds.

[supercar]

It makes sense for people with no exposure to the market at all. But if you have any exposure...don't think it's a good fit.

[Petunia 100]

Robin, keep in mind the transaction costs will really eat into your returns. I had a ShareBuilder account once, a decade or so ago. While it was "only" $4 to buy, it was $16 to sell. I put only in quotes because when you are talking about investing $50, that is an 8% haircut right off the top.

Where do you have your retirement accounts? Are any of them brokerage accounts? Perhaps you are entitled to some free trades for other linked accounts? (Such as your new taxable account.)

If you really have your heart set on individual stocks, do you already know which ones? If so, you might consider just buying them directly. Many corporations will allow this, it is referred to as a DRiP account (dividend reinvestment plan). Typically, you have to own at least 1 share first. Some are easier to start than others.

[supercar]

This is not true anymore, its a $12 monthly and the $12 play as transaction costs, at the rate of $1 per transaction. Also, if you are doing something like this, it is assumed it is for long term and you wouldn't sell every now and then. So, this argument falls apart.

Robin, keep in mind the transaction costs will really eat into your returns. I had a ShareBuilder account once, a decade or so ago. While it was "only" $4 to buy, it was $16 to sell. I put only in quotes because when you are talking about investing $50, that is an 8% haircut right off the top.

Where do you have your retirement accounts? Are any of them brokerage accounts? Perhaps you are entitled to some free trades for other linked accounts? (Such as your new taxable account.)

If you really have your heart set on individual stocks, do you already know which ones? If so, you might consider just buying them directly. Many corporations will allow this, it is referred to as a DRiP account (dividend reinvestment plan). Typically, you have to own at least 1 share first. Some are easier to start than others.

[LuckyRobin]

I have no experience with stocks outside of a 401K allocation. I want to buy and hold, but I don't want to do a DRIP, because I want to recieve the dividends as a small income stream. I am thinking of solid companies like Coca Cola, Kimberly Clark, Proctor and Gamble, McDonalds, and maybe an oil company.

DH's old 401K is with Charles Schwab. He won't qualify for the new one until he's been with his company for a year (thought it was six months, but it's a year). I am not a big fan of Charles Schwab. He had been with Vanguard (and I loved them) before the old company switched to CS.

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I have no experience with stocks outside of a 401K allocation. I want to buy and hold, but I don't want to do a DRIP, because I want to recieve the dividends as a small income stream.

You can do that with different investments, not just stocks. However, if you want to invest a little bit at a time, why do you want the dividends returned? It might be easier to just keep what money you need and invest the extra. Remember that you will be taxed on dividends.

I am thinking of solid companies like Coca Cola, Kimberly Clark, Proctor and Gamble, McDonalds, and maybe an oil company.

I don't think many can argue with those blue chips, but is there some reason you want to invest specifically with individual stocks instead of spreading the risk among several different ones? The problem with an individual stock is that is something catastrophic happens to it (huge lawsuit, for example), then your stock plummets. With something like a mutual fund, it invests in numerous companies so that if something bad happens to one, your entire fund isn't destroyed.

I am not a big fan of Charles Schwab. He had been with Vanguard (and I loved them) before the old company switched to CS.

You are able to invest again with Vanguard, if you wish. Most of their funds have a minimum account balance. However, you can get around that if you have monthly contributions.

[Slug]

I have a Sharebuilder account, and a Schwab account, and an Ameritrade account, and a Fidelity account. My first choice among these is Ameritrade, followed by Schwab, Fidelity, and Sharebuilder. For your purposes, I would go with Schwab. You can buy their Schwab ETF's commission-free which have better expense ratios than Vanguard. Additionally, their ETFs' prices are in the $30 range so you can enter them easily in the increments you suggest.

I would advise against individual stocks for you. ETF's pay dividends too and offer better diversification at less cost.

[LuckyRobin]

Photo--What is wrong with getting individual stocks, especially when the companies are solid? I mean, if you have them all in different areas of the market, if one gets hit the others will probably be okay, I'd think. Why is it bad? Or is it just not diverse enough? I am very much a newbie when it comes to this stuff.

Slug, what's ETF mean? I'm assuming the F is for fund, but I am totally new to investing. I know what a REIT is and an Index Fund, but not an ETF.

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You can buy their Schwab ETF's commission-free which have better expense ratios than Vanguard.

Edit: I originally wrote that Vanguard is commission-free, but I checked it out, and you cannot buy an ETF directly at Vanguard. My apology. However, the following remains. I think you have to do a price-by-price comparison of various ETFs to see whose expense ratio is lower.

Vanguard's S&P 500 ETF (VOO) is merely 0.06%. From what I saw on Schwab's site, most ETFs are from .20 to .60%.

Vanguard's large cap ETF, for instance, has an expense ratio of .12% vs Schwab's .13%

[photo]

Photo--What is wrong with getting individual stocks, especially when the companies are solid? I mean, if you have them all in different areas of the market, if one gets hit the others will probably be okay, I'd think.

Because the risk is spread out more. Your overall fees for an index fund or an ETF will almost assuredly be substantially less than for an individual stock. Investing in a total stock market fund, which has hundreds of stocks in it, will have less risk than investing in the top ten of that stock market fund. It's simple mathematics. If you are trying to hit a target, you have a better chance if you aim 100 times as opposed to only 10 times. Now, if you are a sharpshooter, you may only need those 10 chances! But most of us aren't quite that good, so we take the statistically better chance.

[Petunia 100]

This is not true anymore, its a $12 monthly and the $12 play as transaction costs, at the rate of $1 per transaction. Also, if you are doing something like this, it is assumed it is for long term and you wouldn't sell every now and then. So, this argument falls apart.

So it is now a $12 monthly fee? What do you mean by "$12 play as transaction costs at the rate of $1 per transaction"? Are you saying you get 12 transactions per month for your $12 monthly fee? Thanks.

Robin, ETF is short for exchange traded fund. Basically, they are mutual funds which trade as stocks. They come in virtually every flavor you can think of. Perhaps a mega-cap fund or etf would provide what you are looking for?

[Petunia 100]

Supercar, I looked at ShareBuilder's website for their Basic and Advantage programs.

According to the website, the Advantage program is $12 per month and allows you to make up to 12 free automatic investment trades per month; other trades are $7.95 each. The Basic program is $4 for each automatic investment ; other trades are $9.95 each (an improvement from $16).

Since Lucky Robin is looking to invest $50 - $100 per month, these fees are substantial in my opinion. I would not want to pay them, I would look elsewhere.

[Petunia 100]

I'm sorry for the multiple posts.

Robin, many banks and investment custodians will give you a special deal based on your entire "relationship" with them.

For example, I bank with Wells Fargo AND they hold my mortgage. I also moved my traditional IRA (which is a brokerage account) to them. Because of my overall "relationship", I get 100 free trades per year. This is far more than I need. I buy ETFs, but could easily buy individual stocks if that is what I wanted to do.

In order to get this deal, you need to have a qualifying balance of 50k. That's not as much as it seems, because 10% of all outstanding debt with them counts towards your qualifying balance.

Wells Fargo is not the only bank or broker to have this sort of deal. Check with your bank and also your retirement account custodian. You may find that you qualify for free trades. If you don't, you might consider seeking out a new bank/custodian who WILL give you a similar deal.

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Robin, I thought of you today when I was leafing through a book at the library, Smart and Simple Financial Strategies for Busy People, by Jane Bryant Quinn. There was a section a few pages long that explained exactly why the average investor should not invest in single stocks. The book had some terrific basic financial information in it. It was published in 2006, so some of the specific information might not be relevant, but overall, it gave solid tips on how to organize your financial life and how to begin to build wealth.