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ShareBuilder
Fast Facts:
Innovative easy to use investing service
No account minimums
No minimum investment
$2 per recurring transactions
($1 for custodial accts)
Invest at your own pace and budget
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| Investing
101 |
This
is the best kept secret of investing in stocks and no Wall
Street broker will ever tell you about it......
You think you'd like to own a piece of McDonald's, the Gap,
Kellogg's, IBM, Hershey's, Sara Lee, AT&T, or your local
utility company and get back some of those dollars you've
spent on their products and services in dividends, but you
can't afford the big expense of buying 100 shares and paying
high commissions to a broker? Relax, here's the best kept
secret in the investing game that can have you playing the
market with the high rollers without having to sell your soul
or your first-born child to get into the game.
You can make use of a DRIP - a dividend reinvestment plan.
DRIPs are the best kept secret that no stockbroker will ever
tell you about. They have been around for more than 50 years
and are the smartest move you can make toward getting rich the
slow and easy way on a few dollars a month. Once you own stock
in company, the transfer agent, usually a bank, will take your
dividends and use them - reinvest them - to buy more shares of
stock for your account. You don't buy the additional shares
through a stockbroker, so you don't pay a commission for the
purchase.
Many companies require that you buy your first share of stock
from a broker, for which you have to pay a commission, and you
must have the stock sent directly to you. If you don't request
that when you place the order for the stock, the brokerage
firm will hold the stock in an account for you and keep it
listed "in street name," meaning in the name of the
brokerage house. And if it's not in your name, you can't use a
DRIP. It takes about 5 to 10 business days for this
transaction to be settled through a transfer agent, which is
usually a bank that handles the documents and paperwork for
the brokerage firm and the corporation.
Over 900 companies have established these investment plans for
shareholders, and many utility companies make this service
available to their local rate payers, without going through a
stockbroker; see table below for some of the more well-known
companies that offer DRIPs. The drawback is the amount of
paperwork you will find filling up your mailbox each quarter
and at the end of the year.
Here's some advise if you're thinking of using a DRIP:
- Start
small. Choose one or two stocks for companies that are
familiar to you.
- Invest
where you spend. Don't look for exotic stocks in strange
industries that you don't understand, like biochemical
technology or genetic engineering.
- Consider
the various products you use in your daily life. What kind
of car do you drive? What toothpaste do you use? Where do
you do your banking? If you are willing to buy these
products, why not buy their stocks?
- Some
utility companies allow their customers to invest directly
in their company stock for a minimum of $250 without even
using a stockbroker for the first buy. You know you will
always pay the gas and light bill, so why not get back
some of that money by investing in stock.
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Important Articles by
Brooke
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