How to start buying stocks
A Teen's Guide to Personal Finance
Updated Dec. 30, 2001 12:01 a.m. ET
With holiday cash in hand, this is a great time to start investing in the stock market. The trouble is, it can be confusing to figure out how to buy stocks.
Luckily, however, there are a few places kids (and their parents) can go to get started.
A number of brokerage firms allow young investors -- and others without tons of dough -- to buy stocks for small fees on the Web. There are also ways to buy stock directly from companies, avoiding brokerage fees altogether.
First things first: If you are under 18, in order to tool around in the market, you will need your parents' permission. To arrange that, you should have them open what is known as a custodial account, which allows you to buy and sell stocks under their supervision.
One place for kids to buy stocks is Sharebuilder.com. Sharebuilder is designed for investors who plan to hold stocks for a while -- a good strategy for youngsters who have a long time before they will need to cash in on their investments.
Sharebuilder has no minimum investment and lets you buy as little as $20 worth of a particular stock, even if an individual share is worth more than that. You also can arrange for an automatic investment plan, which takes a set amount of money from your or your parents' bank account and invests it each month.
Investors can choose between two purchase plans. For $12 a month, you get unlimited purchases of stock or exchange-traded index funds. (It doesn't offer actively managed mutual funds.) The other option has no monthly fee, but instead charges $4 a purchase. You can switch between the two plans at no cost if you expect to increase or reduce your buying.
When you buy stock here, however, trades aren't executed immediately. All stock purchases by Sharebuilder customers are pooled together and take place on Tuesday mornings. That means you might not always get the price you were looking for. If you are in it for the long term, however, weekly fluctuations
in price shouldn't matter too much.
The site does offer immediate execution of orders, but you'll have to pay a little more -- $15.95 a trade. All sales of stock are also $15.95 per sale, and are executed immediately.
The site can help you pick stocks, with research tools, stock charts and short primers on how the market works.
As an added incentive to get that holiday money invested, Sharebuilder will give a $25 bonus to any custodial account opened before midnight tonight.
Another place to start trading stocks is Buyandhold.com. It has many of the same features as Sharebuilder.com, including research tools and an automatic investment plan, though its fee structure is different. Instead of charging a fee each time you trade, you pay a fee of $6.99 a month. That gives you two trades per month. Additional trades are $2.99 each. Trades are pooled, as on Sharebuilder.com, but take place more often -- three times a day. You also can buy or sell stocks right away, for $19.99 a trade.
If you want more flexibility when buying and selling stocks, consider opening an account at a more traditional online brokerage outfit such as Firstrade or Trading Direct. Both charge relatively low fees to trade and have no minimums to open an account. These sites process trades immediately. They also have research and advice areas on their Web sites for picking stocks, and they both offer mutual funds.
Another option is to cut out the middleman, and buy stock directly from a company. Not all corporations participate, although blue-chip companies such as General Electric. GE -2.38 % Wal-Mart Stores WMT -2.76 % and Ford Motor F -3.95 % do offer stock directly to investors.
Netstockdirect.com, a site owned by the same company as Sharebuilder, has a directory of companies that offer stock directly to investors. The site displays minimum investments and other fees charged for buying a company's stock. It also gives advice on buying stock directly, and on how to navigate each company's direct-investment requirements.
Dripinvestor.com, a subscription-based site, provides similar information, in addition to a monthly newsletter and stock-picking advice.Source: www.wsj.com