-
Several companies offer online stock trading accounts designed for individuals with limited funds or who want to economize on transaction costs. Accounts are available that require no minimum amount and do not impose inactivity charges if you fail to make a certain number of trades. Once you have some experience, you can apply for margin (borrowing) privileges or open an options trading account as well.
Two examples of solid online brokerages are Sharebuilder.com and BuyandHold.com (see Resources). Sharebuilder.com offers programs for investing, with fees starting at $4 per trade. BuyandHold.com has similar features. In addition, they offer subscription accounts starting at $7 per month with two free trades and $3 for each additional trade (2009 prices).
Opening an online account is simple. After you've reviewed the features of several online brokerages and made your choice, use the company's online enrollment facility to open an account. Provide your Social Security number and bank checking or savings account information to set up electronic funds transfer. Also provide your employer's name and address. Setting up an account takes a few minutes. Then use the online tools to add shares to your shopping cart much as you would do shopping with any other online vendor. -
Many major corporations allow you to buy shares of stock directly from then by opening an account with a transfer agent. Purchase fees for a direct stock purchase plan (DSPP) are usually only a dollar or two per transaction if you use electronic funds transfer. Some companies such as Exxon Mobil and Pfizer even pay the cost of buying (but not selling) shares. Minimum investments are low. Typical is $250 to $500, and most DSPPs allow you to pay in $50 monthly installments via automatic debiting of your bank account.
Finding out if a company offers a DSPP isn't difficult. Major transfer agents like ComputerShare.com, Wells Fargo and Bank of New York Mellon maintain online listings of hundreds of companies. Alternatively you can check the Investor Relations webpage of a company you are interested in. Details of their DSPP if any will be listed, usually under Shareholder Services. Be aware of two things with a DSPP account. First, the account can only be used for that company's stock. Second, sales fees are usually higher (ranging from $10 to $30 per transaction, plus a few cents per share, as of 2009).
To open most direct stock purchase plan accounts, you go to the transfer agent's online site and download the pan brochure (which discloses all the plan terms and conditions) and enrollment form. Fill out the form and include a check for the setup fee (usually $10-20). If you use automatic debiting you don't need to include the initial investment in most cases. Mail the form to the transfer agent. Once your enrollment is processed, you can carry out all your future transactions online.
