Dollar Based Investing for the rest of us
Written: Jun 13 '02 (Updated Jun 13 '02)
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Pros: Dollar based investing makes jumping into the stock market a little easier.
Cons: Fees can add up and little flexibility with trade execution.
The Bottom Line: For long-term investing, ShareBuilder offers all the tools needed to plan and execute a good investing strategy.
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| rice75's Full Review: Sharebuilder |
For the longest time, day-trading and online investing seemed extremely hip and alluring to me (and most of the online world). College dropouts and business school flunkees making thousands sitting in front of their computers seemed like the dream way of life for all of us. Then harder times hit their utopian dreamland (and the stock market) and everyone was once again grounded in reality. Now that the market isn't as volatile, investing for the long-term is the way to go.
While I have no formal business training or experience with finance, I've always believed the average person could invest in the stock market long-term and make decent gains. Unfortunately, being a graduate student, I never had enough money in my savings account to open an account with the online investing companies I wanted to, so I never was able to get involved. That's when I started receiving information about a company called ShareBuilder.com that invested the way I wanted to: dollar based instead of share based. If you want to read a good article on this topic, go to www.sharebuilder.com and read the article about "Dollar-Based Investing" which goes in-depth about how it works.
In a nutshell, with ShareBuilder, you set a dollar amount to each stock you want purchased and the each time that particular stock is purchased, you will get a percentage of a share based on the amount you specified. For example, if you decide on $25.00 a month for IBM and when the trade was executed IBM was $100 per share, you would have 0.25 shares of IBM. In 4 months you would have one share of IBM if the stock price stayed constant.
With ShareBuilder you have many different options when it comes to setting up an account. Because the nature of the information you enter as you sign-up for an account for ShareBuilder, the process is a little long. Some of the choices you have when setting up an account are:
Accounts:
There are 5 different types of accounts you can have: Individual, Joint, Custodial, Traditional IRA and Roth IRA. Again, more in-depth information can be found on the ShareBuilder website.
Funding:
You can setup a your account to be funded through you personal checking or savings account and the money is transferred from you account each Monday before a trade takes place. You can also fund your account by a direct payroll deposit, mailing in a check, or a wire transfer. Also, if a stock you purchase pays dividends you can set up your account to re-invest them or deposit them to your money market account.
Trading:
All trades (other than real-time) take place on Tuesdays. ShareBuilder allows you can customize the frequency at which your trades take place. You can set up a one time investment, once a month, or weekly. With one time trades and once a month you can specify which Tuesday to execute the trade. Real-time trades (Market and Limit Orders) cost considerably more but are also available.
Fees:
Aside from the fees for real-time trades, the fees are reasonable if you are investing enough. For one-time trades it will cost $4.00 for each trade. So our example of a $25.00 investment in IBM would actually cost $29.00 a month. On the other hand, using ShareBuilder's "All you can Build" for $12.00 a month, you pay the fee once a month and all your trades are then the amount you set.
Stocks available:
The ShareBuilder website states over 4,000 different stocks and funds to choose from. Almost all the stocks listed in the major indices are available along with Index Funds, Closed-End Bond Funds and a handful of Foreign Companies.
Website:
The ShareBuilder website is easy to navigate, pleasing to the eyes and gives the user all the tools he needs to manage his account. The stock research tools are sufficient but not robust. The account information is always available and SharebBuilder is a paper-free company, i.e. all correspondence is done via email. There is a plethora of information, tutorials and a complete Q&A section.
Customer Service:
I personally have had no reason to contact Customer Service the whole time I've had my account there so I can't comment either way.
I have been investing with Sharebuilder for a while now and I'm enjoying it immensely. I use the "All you can Build" plan and my wife and I have chose stocks we feel are good long-term investments. I use my personal stock choosing theory that if I regularly use a product or service regularly, i.e. eBay, I purchase that stock. So far this strategy has worked for me. Everybody is different, so make sure you do a lot of research before you decide to open any online investing account.
Overall I would definitely recommend ShareBuilder to anyone looking for a safe and easy way to make dollar-based long-term investments. The Good far outweighs the bad with ShareBuilder
Recommended:
Yes
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rice75
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Member: Tony Rice
Location: Columbus, OH
Reviews written: 73
Trusted by: 66 members
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Resident Evil 4 will own your soul. Do not resist.
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