in your company’s 401(k) plan or with IRAs before actually buying individual stocks or additional mutual fund shares. “Investors should not feel they are going to get rich overnight,” says Greer. “It could take years.”
Love, who describes himself as “everyday people,” knows it’s going to take many years before he reaches his extraordinary goals. Last January he established B.I.G. Inc. (B.I.G. stands for Best Investment Group), an investment club that he hopes will become a family trust fund. “We’re looking to create [a legacy], just like with the Kennedys,” he says with a laugh.
He and Roland have taken the first steps toward establishing the Love family trust fund by opening an online account for B.I.G. Inc. They opened the account with Sharebuilder (www.sharebuilder.com) in March, and they each contribute $250 every quarter. So far, they’ve invested in Exxon (NYSE: XOM), Philip Morris (NYSE: MO), Anheuser Busch (NYSE: BUD), and HealthSouth (NYSE: HRC).
Love believes this was the best approach to building wealth for his family because it allows any family member to participate no matter what their financial situation, and it is inexpensive to maintain the account. “You’re talking about minimum amounts of money to invest instead of dropping down thousands of dollars at a time,” he explains, “and it’s all for just three dollars a trade.”
At Sharebuilder (which can be accessed through www .blackenterprise.com), investors can set up online accounts with no minimum required, and use dollar-cost averaging to purchase stocks and mutual fund shares. The site also provides financial education, online tools and interactive calculators, research, and long-term investing strategies with an emphasis on diversification (see sidebar “Low-Cost Investing Resources to Help You Get Started”).
DISCOUNT VS. FULL-SERVICE BROKERS
Robert A. States, a registered representative and tax preparer for Fiducial Inc., advocates working with a broker as opposed to online investing since the market’s complexities might be too overwhelming for some people. “There is a high degree of people losing money, and there’s a danger you could lose big time if you are not exactly careful of what you are doing,” he says.
Marc R. Lippman, a vice president at Salomon Smith Barney Inc. in Washington, D.C., agrees. “Brokers are obsolete as a second step, but they are absolutely necessary to get started.” Lippman says an investor who has $10,000 to invest should be prepared to pay a broker a maximum of 4.5%, or $450, as a one-time commission. The sales charges decrease the more money you invest. When getting your feet wet in the stock market, Lippman says “the one-time commission is money well spent–especially during bearish markets. In a market like this, having experience is important.”
Online investors choosing discount brokers will save on fees, but Greer suggests that if you are not prepared to devote at least 10.5 hours a month to doing your homework–evaluating your holdings, researching new stocks, and reading financial news–then you should use a professional advisor to handle your portfolio. “If you make a mistake, you will have to eat that mistake,” she notes.