A Low-Budget Way To Invest in Stocks: DRIPs Plus ETFs
Almost two decades ago, when I first invested in the market, I bought half a dozen individual stocks. It wasn't a smart move.
After all, my pathetically small nest egg was riding on the success of just six companies. Indeed, today I tell low-budget investors (and everybody else, for that matter) to shun individual stocks and instead invest exclusively in no-load, low-expense mutual funds.
But what if you distrust funds after the recent scandals? What if you think you can earn better returns by picking individual stocks? Even if you don't have much money to invest, you can still build a decent portfolio at low cost by combining dividend-reinvestment plans with exchange-traded index funds. But to make the strategy work, you've got to put up with a few hassles.
DRIP by DRIP: When I bought my six stocks, I may not have paid much attention to risk. But at least I was careful about costs. Instead of buying through a broker, I used dividend-reinvestment plans, often known as DRIPs.
THE BARE MARKET
Looking to put together a portfolio of individual stocks? Check out these Web sites.
Enroll in dividend-reinvestment plans with help from
www.better-investing.org or
www.directinvesting.com.Get information on DRIPs at
www.netstockdirect.com.Buy stocks cheaply at
www.buyandhold.com or
www.sharebuilder.com.These plans, which are offered by more than 1,000 companies, allow you to build up your stock positions by reinvesting your dividends in additional shares and by sending in optional cash investments of just $25 or $50. As an added bonus, many DRIPs charge little or nothing in investment costs.
Intrigued? Unfortunately, to enroll in many DRIPs, you need to own at least one share. To get around that problem, contact the National Association of Investors Corp. in Madison Heights, Mich., or Temper of the Times Investor Services in Rye, N.Y. Both organizations will help you enroll in DRIPs by buying the necessary shares and then getting you signed up.
Alternatively, you could avoid such headaches by buying so-called no-load stocks. These are DRIPs that allow you to enroll even if you don't own any shares.
Problem is, this convenience comes at a price. "The bulk of the companies that offer direct-stock-purchase plans have fees," warns Charles Carlson, editor of DRIP Investor, a newsletter in Hammond, Ind. For instance, McDonald's charges a $5 enrollment fee, $6 on one-time optional investments, $1.50 on each automatic monthly investment and $15 plus 15 cents per share to sell.
These fees can put a big dent in your return, especially if you are investing small amounts. To find out which companies offer DRIPs and what fees are involved, go to
www.netstockdirect.com.Stocking Up on Funds: By picking your DRIPs carefully, you can keep costs low. But there is still the question of risk. Few investors have enough money to buy the hundreds of companies needed to get broad diversification.
Faced with this dilemma, many stock jockeys have earmarked a portion of their portfolio for exchange-traded index funds, or ETFs. Like a regular index mutual fund, each ETF tracks the performance of a benchmark index, such as the Standard & Poor's 500 or the Russell 2000, thus giving you broad diversification.
But to buy an ETF, you don't go directly to the fund company involved. Instead, you have to purchase the exchange-listed shares, which means you incur brokerage commissions and other trading expenses.
Despite that cost, ETFs have developed a loyal following -- in part because they often have lower annual expenses than regular index funds, they have the potential to be more tax-efficient, and they aren't open to the sort of trading abuses that have tarred the mutual-fund industry. Given all these advantages, you might stash 60% or 70% of your stock portfolio in a broad mix of ETFs and then surround this core position with your favorite individual company stocks.
But, as you might have gathered, things are never easy for low-budget investors. What's the catch? Unfortunately, managers of exchange-traded index funds, such as State Street Global Advisors and Barclays Global Investors, don't offer dividend-reinvestment plans, so you will have to find another way to buy your ETFs.
One option is to use a discount broker. But many discount brokers will slap you with a quarterly fee if your account is too small and you don't make a lot of trades. And when you do trade, you might incur a commission of $5 to $30. Like DRIP fees, these costs will crimp your performance if you are investing modest sums.
What to do? My advice: To buy your ETFs, check out BuyandHold (
www.buyandhold.com) and ShareBuilder (
www.sharebuilder.com). These two Internet stock-purchasing services allow you to buy thousands of individual stocks, including ETFs, while paying only modest commissions.
For instance, ShareBuilder has three pricing plans. Investors can pay $4 a trade, $12 a month for six trades or $20 a month for 20 trades. There is no investment minimum and no account-maintenance fee. ShareBuilder saves money by bundling buy orders from its 960,000 accounts and investing the money once a week, on Tuesday mornings.
ETFs are one of the most popular investments with ShareBuilder clients. "We don't give advice," says ShareBuilder President Jeffrey Seely. "But we try to make it pretty obvious throughout the site that ETFs are something you should consider. They provide diversity across market sectors, they're easy to buy or sell, and they are extremely cost-effective."
Even if you use BuyandHold or ShareBuilder's low-cost service to buy your ETFs, your overall costs will likely be higher than with regular low-cost index mutual funds. Still, if you prefer ETFs, using one of these two firms is probably your best bet.
股市的小本投资之道
大约二十年前初涉股市时，我买进了六只个股，而这并非明智之举。
毕竟，我那少得可怜的积蓄都押在这六家公司的成败上了。我现在要劝说那些低预算的投资者避开投资个股，把资金全部投入免佣金、低成本的共同基金上。
但如果近期发生的丑闻让你对基金的可靠性产生怀疑怎么办？如果你认为选择个股能获得更好的回报又怎么办？即使你没有很多钱用于投资，只要将股息再投资计划与上市指数基金相结合，你仍能以低成本建立良好的投资组合。但要让这一策略发挥作用，你就必须面对一些小麻烦。
股息再投资：当年买入那六只股票时，我大概对风险没多加考虑。但至少我仔细考虑过成本。我没有通过经纪人买进股票，而是采用了股息再投资计划（通常被成为DRIP）。
有一千多家公司提供DRIP计划，这些计划让你能够用股息购买更多股票或自行交纳25或50美元的现金进行投资，从而扩大投资头寸。作为一种额外的优惠，许多DRIP收取极少的投资成本或分文不收。
感兴趣了吧？不幸的是，许多DRIP要求至少持有一股股票才能加入。要解决这个问题，可以与密歇根州麦迪逊高地的National Association of Investors Corp或纽约州Rye的Temper of the Times Investor Service联系。这两个组织都能帮助你买进所需的股票，从而让你成为DRIP的在册投资者。
另外，要想避免这些麻烦，你还可以买进所谓的无佣金股票。这些DRIP允许你在不持有任何股票的情况下加入。
问题在于，这种便利是有代价的。印第安那州哈蒙德的简报DRIP Investor编辑查理斯?卡尔松(Charles Carlson)告诫说："大多数提供直接购股计划的公司是收费的。"比如，McDonald's收取5美元注册费，一次性可选择投资收取6美元，每一笔自动月度投资收取1.5美元费用，每卖出一股还要交纳15美元外加15美分的费用。
这些收费会令你的回报大打折扣，特别是在小本投资的情况下。要了解哪些公司提供DRIP以及收费情况，请访问网站
www.netstockdirect.com。
投资基金：通过仔细挑选DRIP，你能够维持低成本。但风险问题仍然存在。有足够资金买进数百家公司股票而充份实现多元投资的投资者凤毛麟角。
面对这样的难题，许多股市参与者将投资组合的一部份专门用于上市指数基金（简称ETF）。像常规的指数共同基金一样，每个ETF追踪一种基准指数的表现，如标准普尔500种股票指数或罗素2000指数，从而帮你实现了多元化投资。
但要购买ETF，你不需要直接与相关的基金公司联系，而是必须购买在证交所上市的股票，也就是说，会产生经纪人佣金和其他交易费用。
尽管要付出这些成本，但ETF还是有了一批忠实的追随者，其部份原因在于它们的年支出低于常规的指数基金，具有更好的节税潜能，且不会与共同基金业内一些不正当交易同流合污。鉴于所有这些好处，你可能会将投资组合的60%或70%投资于多种ETF，之后让你喜爱的个股点缀在这一核心投资的周围。
但正如你所了解到的，对低成本投资者来说做什么都步履艰难。问题出在哪里呢？不幸的是， State Street Global Advisors和Barclays Global Investors等许多指数股票型基金管理公司都不提供股息再投资计划，因此要想购买ETF，你将不得不另觅途径。 一个可供选择的方案是利用折扣经纪商。但如果你的帐户太小而且交易量不大，许多折扣经纪商会向你索取季度费用。当你交易时，可能会产生5至30美元的佣金。像DRIP收费一样，如果你的投资数额不大，这些成本会对你的投资收益造成影响。
该怎么办呢？我的建议是，要购买ETF，就到BuyandHold(
www.buyandhold.com)和ShareBuilder(
www.sharebuilder.com)上办手续。这两个网上购股服务公司让你能买进几千种个股，也包括ETF，而只需支付少量佣金。
以ShareBuilder为例，它有三种定价方法。投资者可以选择每次交易支付4美元，每月六笔交易支付12美元或每月20笔交易支付20美元。没有投资最低金额限制，也不收取帐户维护费。ShareBuilder通过捆绑96万个帐户中的买盘指令，每周二上午进行投资，从而节省费用。
对ShareBuilder的客户来说，ETF是最受欢迎的投资工具之一。该公司总裁杰弗里.西里(Jeffrey Seely)说："我们不提供建议，但我们努力通过整个网站，让投资者感到ETF显然是值得考虑的。它们跨越行业，为你提供多样化选择，它们买卖方便，而且极其划算。"
即使你利用BuyandHold或ShareBuilder的低成本服务投资于ETF，你的总成本也很可能会高于常规的低成本指数共同基金。尽管如此，如果你偏爱ETF，上述两家公司中的一家或许是你最好的选择。
