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Buying a few shares
Question: I am 20 years old and am working and going to school part time. My question is, I want to invest a little money, somewhere between 100 and 200 dollars. The purpose would be to buy into some of these historically low stocks in company's that are still pretty solid. It would be for the personal fun of watching what will happen over the upcoming years since I don't plan on doing and serious monetary investments for several years. Now to get to the question. Is there an easy way for me to do that myself online? And what sites would that be? And can I even by shares with such a little investment? Thank you for your advice. I really enjoy your program. TJ, Finlayson, MN
Answer: I like your idea and your approach. Investing a small amount of money is a good way to learn about the markets and to have some fun. However, if you could up the amount you can invest a bit it would help. The cost of an online trade will run you about $10 or so. But I don't want to discourage you. It's the kind of curiosity and educational opportunity I'd love more young adults to pursue. Its money well spent. I also agree that there are intriguing values in the market.
You can do what you want to do online. One low cost provider is sharebuilder.com. It's owned by the ING Direct, a U.S. subsidiary of the giant Dutch financial conglomerate.
Another option if you're going the buy-and-hold route is to purchase stock directly from a company rather than through a broker. "Direct Purchase Plans" are mostly offered by large, blue chip companies. The typical plan allows you to buy stock for small amounts of money, usually the value of a share. You can get more information about companies that offer a DPP option at enrolldirect.com.
There are a number of good options for researching stocks. The major business newspapers and magazines like the Wall Street Journal and Businessweek offer a wealth of detailed information, as do online sites like morningstar.com, finance.yahoo.com, and google.com/finance. Have fun.
I'm curious. Does anyone have a different suggestion or alternative for a novice investor who wants to learn about the markets with a small amount of money?
About the author
Christopher Farrell is economics editor of Marketplace Money, a nationally syndicated one-hour weekly personal finance show produced by American Public Media.
I have the exact same strategy that I've been doing for years now. I started with only $40 per month (mostly for the fun) and now am at over $400 per month. I use Buy & Hold, who only charges $6 per month for the account which includes two trades. My little experimental portfolio has grown into a nice asset. I have never sold a stock. One note: these are not 2 "real time" trades, but trades designated at set times of the day from which you select. I consider the account a bargain and I have learned a lot over the years.
I would recommend you minimize your trading cost as much as possible. There are many low cost trading options – sogotrade and zeccotrade come to mind. I started my foray into the markets with a similar strategy (learn with a little). I learned valuable lessons (buy, sell, sell short, buy to cover, market, limit, stop, stop limit, GTC, EOD etc) for a fraction of the cost a full service broker charges ($10/trade and up).
Why bother with individual companies when you can buy stocks in thousands of companies in a diversified index mutual fund? Open an account at AARP Funds (aarpfunds.com, AARP membership not required). $100 minimum to start. You can be aggressive, moderate, or conservative, all of which are indexed and diversified, with a low expense ratio of 0.50% a year. It sure beats $4 a trade or collecting a few shares here and there. No, I don't work for AARP. I learned about this from Jonathan Clements when he was still writing for Wall Street Journal.
