Investing 201

How to find the best low-cost methods for buying stocks and mutual funds

many beginning investors, Valencia Roner’s commitment to long-term investing was tested as the markets began to slide in the spring of 2000. Roner, a single mother who owns VXR Enterprises, a marketing and public relations firm in Culver City, California, opened an account at Etrade (www.etrade.com) with $3,000 in March 1999, and immediately made several successful trades. Initially, she tried to use the account to generate extra income, selling her winning stocks even though the gains were modest.

“After 1999, I stopped doing active trading because I started hearing stories about day traders getting hooked and losing all their money,” says Roner. Instead of getting out of the market altogether, she invested a total of $2,500 in Dell Computer (Nasdaq: DELL), Capital Crossing Bank (Nasdaq: CAPX), Novell Software (Nasdaq: NOVL), Intraware Inc. (Nasdaq: ITRA), and Venator Group (NYSE: Z) in February 2000, and decided to hold for a while. “Overall, I didn’t mind losing what I had already invested in an attempt to make money,” she reasoned. Unfortunately, the market’s free fall began in March 2000, and her portfolio dwindled to about $1,250 in October 2001.

Lucky for Roner, she has been able to land the Tavis Smiley Group and the City of Los Angeles Workforce Investment Board as clients, which have allowed her to establish a Simplified Employee Pension IRA (SEP-IRA) through her business. The SEP-IRA works like a regular IRA account and allows her to use dollar-cost averaging to invest in mutual funds or stocks.

DIVIDEND REINVESTMENT PROGRAMS
Love has several ot
her online accounts from which he says he will eventually transfer assets into the B.I.G. Inc. account. One of those accounts is with Equiserve (www.equi serve.com), a company that allows investors to make direct investments in publicly traded companies through Dividend Reinvestment Plans (DRIPs). In September, Love invested about $14,000 in Wal-mart (NYSE: WMT), saving on broker’s fees.

Vita Nelson, publisher of The Moneypaper (www.moneypa per.com), a newsletter that offers information about, as well as lists, companies that have DRIPs, says DRIPs are a key resource for people who want to invest but don’t have a lot of money. “You can start investing now while you only have a few hundred dollars. Just pick a variety of stocks that make up a balanced portfolio and open an account.” Nelson emphasizes that with DRIPs, the strategy is to accumulate shares of companies you believe in so that “you are investing in the company, and not speculating on the price of shares.”

Although Love opened his account with Equiserve, Nelson says you can open an account with Temper Enrollment Service (800-295-2550). Temper charges $30 per company to set up an account, but if you subscribe to The Moneypaper, you’ll pay $15.50 per company (a subscription costs $90 annually, but first-time subscribers receive a promotional price). Then, you can purchase up to 100 shares at a time for the cost of the shares plus a $5 fee. Some companies also charge additional fees to participate in their direct stock purchasing programs. “The reason we like

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