Going to Invest Using Sharebuilder

[WORKEROUTER]

I'm trying to gain experience and knowledge about investing right now, and I've decided to begin doing small investments in Sharebuilder, which basically allows you to buy portions of a stock, and the investment is done automatically every Tuesday. It only costs 4 dollars.

I only have about $50 or so to play with, so this seems like the perfect thing for me to gain some experience.

Has anyone used this before? How did it work? Any advice?

Here's the website:

http://www.sharebuilder.com/about_us/affiliate/jump/sharebuild.htm

 

[LowPlainsDrifter]

If you're buying a single share of a $40 stock, for example, and you're charged a $4 commission, you have, in a sense, lost 10% of the value of that particular equity.

 

[A-Unit]

Re:

From my experiences...

Pro's.

*Cost effective: The $4 per deposit allows you to buy regular full or partial shares. I know of no brokerage firm that allows that, aside from direct investment programs.

*Low Entry: Allows you to get in with no real minimum balance aside from the $50/month.

*Buying/Selling of Stock/ETFS.


Cons.

*Trading Cost: I'm not referring to the $4, because that's automatic. The $15.95 is higher than most when trading shares, so it's a trade off between buying partial shares and paying a bit more for the occasional stock trade.


Recommendation. Use this as it says in the testimonials, to grow your "nest egg" to a real level where you can gain more freedom, lower commissions, and a variety of different options. They don't provide investment advice or stock screening as it appears, so you'll have to get that taken care of on your own, which is the way to go anyways.

All in all, a great place, outside of a mutual fund, which would charge more, and NOT allow you to buy partial shares of stocks or to learn about individual stocks. I dig it, when your balance is around $500, you can go to Scottrade, or a similar site. They don't offer automatic investing, but if you're bank allows WIRE transfer or BILL pay options ONLINE, then you can work around the automatic investing thing easier. There, you get lower commissions ($7/trade) and no maintenance fees. I'm sure there's others, but my balance is just getting up there to where I would move it. I also use outside software to screen stocks and scower the net for random recommendations.

Let me know how it goes for you.


A-Unit

 

[A-Unit]

Re:

It's true commission have to be accounted for in the GAINS, however, the POINT of AUTOMATIC investing or DOLLAR cost averaging (though I'd dispute it doesn't work well), that you're buying a company that's slated to grow quickly. Dollar cost averaging also works well with mutual funds and stocks that are cyclical. Stocks that are FLYING high, should just be bought outright, and then summarily BUY more when they're up 10%, and continue pyramiding UP until you're invested to your threshold.

The point here is to LEARN, to AMASS a balance, and to buy companies that MIGHT be on the point of a breakout after stalling for a period of time. LOTS of companies do this. Google did it, they rose meteorically, stalled, and would rise again. It's those consolidation phases where Dollar Cost Averaging works best, because you don't know when the breakout will come, but graphically and financially, the company appears to be TRENDING that way. NORMALLY it happens on a severe upvolume day when it breaks a 20 or 50 day moving average, or even it's 52 week high. When that happens, it will run until the steam is spent.

THAT's where dollar cost averaging works on stocks. OTHERWISE, why accumulate a company if it's not worth owning in the long-run?

I would AGREE to an extent, that losing 10% isn't attractive, but when I got started I was automatic investing $100/month into a brokerage accoun that charged $37.50/trade!!! If I bought SIRI shares with $60, I only $30 worth in return. Sure, that sucks, but what's the alternative?

You need to LEARN to select.
You need to get COMFORTABLE with investing and picking stocks.
You need to get familiar with the online investing world.
You need to develop the habit of DOING this, since it's all new.

I'd say I lost quite a bit on that old brokerage firm, but since moving my account and knowing the industry and what to do, the gains in my portfolio have FAR outstripped the high commissons I paid by buying GOOD stocks that are RISING now.


A-Unit

 

[Spook]

If you only have $50 to invest, don't use Sharebuilder. WIth that little cash, you should invest in a DRIP program via an actual bluechip company. You can purchase directly from Coca Cola or other companies.

That's what you should be looking at because $4 of a $50 investment is too large a commission.

 

[Bible_Belt]

Are you already maxing out your Roth IRA, regular IRA, and whatever work retirement you have? At least put 2K/yr or whatever it is now into a Roth; the money accumulates tax-free *and* the withdrawal is tax free when you get old. The IRA status is just the tax shield; you can own different investments within the IRA account.

You can trade odd lots of nasdaq stocks, even single shares. www.interactivebrokers.com is very popular among traders. Also check out elitetrader.com and siliconinvestor.com

 

[Egoist]

forget stocks and sh!t.

invest those $50 into yourself, knowledge, getting a better paying job, etc...

 

[STR8UP]

forget stocks and sh!t.

invest those $50 into yourself, knowledge, getting a better paying job, etc...

I think of the stock market for the most part as a middle class investment vehicle (it can make you money, don't get me wrong), but what kind of knowledge would be a better investment for $50?

 

[Spook]

Are you already maxing out your Roth IRA, regular IRA, and whatever work retirement you have? At least put 2K/yr or whatever it is now into a Roth; the money accumulates tax-free *and* the withdrawal is tax free when you get old. The IRA status is just the tax shield; you can own different investments within the IRA account.

You can invest in your IRA through Sharebuilder.

But, something tells me that if this guy only has $50 to invest, he's not maxing out his IRA...

 

[A-Unit]

Re:

All that financial planning hoopla is fine, but from what I recall, WORKEROUTER is in college. An ira or roth is TOO far off to be concerned with. He can't touch it until 59.5, or the for the roth, after 5 years and principal only. Sure, there's stipulations for disability, hardship, and first time home ownership, and it's NICE to know the nest egg is there, BUT, the 18-40 year time frame for average america will typically tap their 401ks, ira's, or even home equity to afford that HUGE expense boost period.

My honest opinion is if he wants to invest, invest. Learn. Grow build. Who knows if he's meant to be Warren Buffett or grow broke. What I do know is, I read and studied alot when I was 18 and so on, and never put to use what I knew until much much later.

I do agree with STR8UP on investing in yourself, but if you have some free file sharing software, or a library, go that route. You can build the library as you grow. Yes, I'd learn about credit, I think I own all the books you reco'ed STR8UP, but the stock market WHEN DONE RIGHT, awards major profits for the active trader, and knowledagble investor.

However, they normally leave it to the mutual funds to do on their behalf. With the right amount of money, you could get the prospectus' of the funds, and BUY what they own the best positions in, and company the fund with more returns.

One particular stock I've traced (though I did not own it) with a position of $5000 would have grown to over $100,000 in 2 years. If you go back further, to 2003, you would have $10,000,000, had you put $10,000 into it, given splits and the run up it's having.

So to say the market can't make wealth is false. If you're owning shares of a company that has STAYING power, that has A FUTURE of growth, has serious institutional ownership coming in, you can make as much if not more money QUICKER than in R/E with less effort and management. ALL investments are good, but SEVERAL companies, with proper due dilliegence would have given you the retirement funds to be DONE now.

-EMC
-MICROSOFT
-TASR (long gone now)
-GOOG had a nice run, too, from 100 to 450 (which was FORESEEABLE)
-metal sectors.

However, THERE's always stocks moving in the markets. BUFFETT makes his most money when the market is down, so did Jesse Livermore. I'm sure Real Estate Investor would say the same. When it comes time to pair back my portfolio, I would see diversification to Real Estate and REIT trusts (not publicly traded), or whatever your personal fancy is at the time.

The point is, to amass KNOWLEDGE and WEALTH now that is convertable to PASSIVE income now and in the future to REPLACE your WORKING/EARNING income. You either do this by:

-Growing current assets, such as stock, or other funds and using them to acquire R/E properties
-Learn to buy WITHOUT cash.
-Learn to operate a business (though you can develop passive income w/out directly owning a business).

However, MOST people aren't qualified to buy stocks directly. They can take the Peter Lynch route, and find stocks they "hear" about, as he did Old Navy's and Supercuts, and then would research and buy. This is more the "environment" approach, and I have a guy who bought Whole Foods Market, and it doubled for him, because he shops there. He didn't view charts, he didn't view earnings, he just asked for it because they are traded, he shops there, and likes the company. Granted he has dough to throw, but you can find buys, just by listening.

Another company Buffalo Wild Wings has been advertising like crazy on ESPN sports radio, but until today I didn't know they were public. They seem overvalued or overbought at the moment, but could rival hooters in terms of food and atmosphere, especially with the future sports season already upon us, and their growth.

In this world IT's tough to brokerage that makes serious wealth. Brokers don't get paid enough, and if they had GOOD information, they'd be privately trading, or managing a mutual fund. And the brokers who DO buy stocks, only buy those on approved lists represented normally by the firms investment banks, so stocks are the avenue of the solo investor, the instutional firm (i.e mutual funds, trust, foundations, pension funds, the governments pensions, etc), or brokers who on "approved" lists.

So most stocks that ROCKET up, are those you find at SMALL CAP level, $150,000,000. At that point they ARE CHEAP enough for you to get IN LOW, buy a few 100 shares, and then ride it up. As it gains momentum, a Small Cap fund will buy it, then the MID CAP FUND, then the LARGE cap fund will hop in,too. That's 1 reason you have to be diversified to an extent in the market because if you own the SMALL cap FUND and the LARGE cap fund, it's likely you own 2x the position, because the SMALL cap won't sell a winning position, and the LARGE cap has to stay on point with its prospectus.

But that momentum behooves you and me, because we get on the ride at the bottom and share IN THEIR momentum forward. They do present more risk, because their limited public shares allow market makers and short sellers MORE manipulation daily, BUT, if it's worth buying and the institutions hop on board, the market makers and short sellers will evaporate, since they'll get shut out.

I've studied the market near a decade, studying the BIGWIGS, viewing it from different angles of finding stocks, and it's very personal, unique, sexxxy, and alluring. But it's different THAN it was. It's propped up by institutions; over 70% of all buying is institutions. The other 30 accounts for mostly individuals, but individuals don't create the daily volume necessary to propel HUGE gains. That's why IBD shows accumulation distribution for the various stocks. As it gains toward ACCUMULATION, you can feel confident funds wants to own your stock.

This is also why TREND trading or trend following works, depending on the stock, volume and time period, because A TREND will persist as MUTUAL funds and other institution seek to create positions, but won't bite in big chunks.

I could go on, and did, and veered off topic, big time. Point is, it's not as all seems. Those who get savy, go and buy the options instead of the stock. Speaking of leverage, you can buy options for less than the equity position you'd need to control AS MANY shares, and gain more. Alot of RE investors like their options, as a way to leverage, just like flipping, well you can gain 30, 400, 1000%, just using $100 -1000 and controlling 100 shares or more.

So I guess the bottom line is, the stock market has as much or more profitability and opportunity for loss than the RE market.


A-Unit

 

[Bible_Belt]

I have a guy who bought Whole Foods Market, and it doubled for him, because he shops there. He didn't view charts, he didn't view earnings, he just asked for it because they are traded, he shops there, and likes the company.

Boston Market is a similar story with the exactly the opposite outcome. The businesses are still everywhere, but the stock went bankrupt. The market frequently makes little sense. When you go to a store and see the store doing well, those peoples' money have already been factored into the current share price. As you know, (most people don't), the share price is an estimation of the future earnings.

I am often against the traditional route, but the Roth IRA is no joke. Nowhere else can one get tax-free accumulation and tax-free withdrawal. They've upped the limits to $4k now http://en.wikipedia.org/wiki/Roth_IRA

imo, (this is not legal advice) your investing priorities at this stage should be first paying off credit card and high-interest debt, then saving cash for emergencies and eventually a down payment on a house, and then a Roth. If you want to buy and sell individual stocks, the tax treatment is so much better within the Roth. If you strike it big with the next google, and leave the gains within the Roth until later in life, by which time they will have grown tremendously, then you *never* have to pay tax on that money to the Federal Gov't.

 

[A-Unit]

Re:

I agree on the ROTH, as I own one, and given it's provisions, it helps with my age. But traditional planning has its inroads to accelerated planning, or planning for those who have financial independence as a goal NOW.

I'd never taken a look at Boston Market, but there's way to STOP loss on positions. You have background in finance, from what I recall, Bible, and if you'd ever read any of the books regarding the "turtles'' Or Turtletraders, or John Henry, and Stock market masters, you know they develop a personal system suited to their personality, put in stop loss, many of them pyramid profits on the way up, ratcheting the stop loss as the stock moves forward.

The Buy Hold strategy doesn't really work in total, unless you're buffett and can sit on a stock, and can control the cash flow of the business and reallocate it elsewhere. The market CAN be a crap shoot, and when the WHOLE market is rising, everybody is a hero, and is making money. We might be approaching that point now.

Worse, the baby boomers are going to be FLOODING the markets, influxing TONS of cash into funds, possibly running up companies ARTIFICIALLY given the fact mutual funds WILL have to place that cash somewhere. Most funds won't have a cash position larger than 10%, but some creep up to 30% or more. I can see that happening, which will make OVERSEAS investing more important, since that's where new opportunities will arise.

If our economy is bad, and to me, it's very bad despite the numbers (we're balance sheet broke, and if we were a company, NOBODY should buy us and foreigners are learning not to), then all the buying will be just mutual funds pushing prices up because baby boomers have advisers putting money SOMEWHERE, and with rates where they are, the only places are the stock market, and real estate markets, because nobody has the capability to hop into currencies, or futures, or commodities.

This is why STR8UP's advice will be as important as ever, as well as my own suggestions.

-To learn to operate as self employed (s)
-To learn to invest in or utilize real estate
-To learn about the stock market and other markets available and what their entry requirements are.
-To learn about alternative investments.
-To buy golf in some way.
-To own direct stocks as well as mutual funds.
-To making investing and learning about it a priority today.
-To understands laws and government so you know your own Federal and State protected rights.

Gl,


A-Unit

 

[LowPlainsDrifter]

I started investing in IRAs at the age of 18, and everyone in finance, business, financial planning or accounting I've spoken to says the same thing: "It's great that you did that" followed by "I wish I did that at your age."
IRA compound over time - the earlier you start, the more powerful the compounding effect.
Another nice thing about IRA accounts is that if they're with a firm like Fidelity or Wells Fargo, you can trade stocks within those accounts and not get hit with any capital gains.