Sharing the Wealth

A New (and Cheap) Way for Novice Investors to Buy Stocks

By Kara Stefan

“For so long I had been missing out on the benefits of investing in the markets because I don’t have large sums of money to play with. But with Sharebuilder, I was able to start right away with a very small amount of money. I also plan to start investing for my toddler daughter and let the power of time work for her.”

- Leslie A. Cox,
Nashville, Tennessee

So you don’t own shares of Yahoo and you didn’t get in during the early days of IBM. And well, okay, maybe you live pretty much paycheck to paycheck and don’t have much discretionary income to invest. And with the little you do have--what’s the point?

I know that I get embarrassed buying only five shares of Microsoft at a time. I feel like a pauper trying to scrape together enough money for a decent meal. Well, the point is this: a little can go a long way. And there’s a Web site that can help you get there.

Sharebuilder takes the automatic investment strategy and applies it to stocks. If you contribute to your 401(k) plan at work, you’re already using this technique. Just as money is taken out of each paycheck and invested in your retirement plan, the Sharebuilder process works the same way.

Only with Sharebuilder, you don’t need a lot of money. There’s no minimum investment like there is with mutual funds. To open an account, you don’t need the minimum $5,000 like you do with, say, a Schwab account. You can start today with as little as you can afford to commit on a monthly basis.

My 13-year old son, the mower of all lawns, has committed to $20 a month. Not a bad deal for me, because once the season changes and the grass stops growing, he’s going to do chores around the house to maintain his income flow.

A particularly nice feature about Sharebuilder is that it encourages your children to invest. You can open a custodial account for each of your children, and the trade price is half the normal price--$1 a buy. Not that doubling the price for grown-ups--$2 a share--is going to break anyone.

“Sharebuilder is just like any other broker-dealer,” says Brian Ratzliff, vice president of marketing at Sharebuilder.com. “We’re governed under the same laws like Charles Schwab or Merrill Lynch.” Only this online investing Web site actually encourages business from lower net worth investors whom other brokerages tend to view as a nuisance--as evidenced by their high minimums.

Sharebuilder is also the only broker out there who’s handling partial shares. So if you can’t afford to cough up $110 for IBM’s going rate per share, you can buy a fraction of a share. And next month, a fraction more. And in a few months, you’ll be a full-fledged owner of a whole share. Then you start working on your next share.

Ratzliff explains that what distinguishes the Sharebuilder account holder is while they may not have a substantial amount of income to invest, they know they should be doing something. “It’s that mindset--‘Sure I’ve got my 401(k), but I should be investing in the stock market as well’,” he observes.

There are several reasons why you should get started:

If you hope to buy a house or send your kids to college some day, you need to have a non-retirement investment plan so you may withdraw money without incurring tax penalties.
Sharebuilder allows you to take advantage of the dollar cost averaging strategy when prices fluctuate--in the long run, investing small bits every month can lower your overall cost per share.
Systematic investing develops a forced discipline that will stay with you throughout your life and help build your net worth.

More Than a Trading Site
Sharebuilder also has a host of innovative tools that prompt you to think about money and your future. For example, there are separate calculators that allow you to input variables and come up with answers to questions such as:

"What will it take to save for a car, home, etc.?”
“What will it take to save for a college education?”
“What will it take to become a millionaire?”
“Which are better: Income or growth stocks?”

Personally, I benefited from the college calculator. Since my son will be ready for college in 6 years, and I’ve been a little lax in this area, I’m throwing all of my resources towards this particular goal for the time being. When I entered my monthly contribution, years to invest, and expected rate of return, it turns out I’ll overhit my mark. The tool actually recommended I decrease my monthly investment to reach my goal! Tell me that doesn’t feel good.

Another thing you should know is that you can get started online in less than 10 minutes. All you need is to know your Social Security number and have your checkbook on hand--the Sharebuilder prompts show what numbers to input to set up an automatic contribution.

Like my son, you can start out with $20 a month. Who can’t afford that? Or you can be a worrywart, like myself, and go overboard. Either way, you can officially become a stock investor today. Nice to finally have something in common with the Bill Gates of the world.