Wednesday, June 03, 2015

Buying Stocks Online

 Buying stock through a company’s transfer agent used to be a common way to accumulate wealth in American companies. Occasionally I see quite valuable certificates that were passed on after decades of investing. Today, however, buying stock this way is a cumbersome, expensive option compared to using a discount broker.

Discount brokers, such as Charles Schwab or TD Ameritrade offer low or no account minimums ($1,000 for Schwab, $0 for TD Ameritrade), access to just about any stock you might want and easy to open, user-friendly online accounts.

Most online brokers offer some sort of filter or screener to help you find stocks with characteristics you are interested in. After that, there is research and recommendations on many individual companies. Many brokers also offer education and training resources to help guide you through the process.

Discount brokers are a low cost way to purchase stocks. Commissions are under $10 for the most part and there are typically no annual fees. Between the online account and monthly statements, there are plenty of ways to monitor and analyze your purchases.

Opening an account at a discount brokerage is a practical way to buy and manage a stock portfolio. Only invest with money that you do not anticipate needing for at least 3-5 years. Never buy a stock unless you have done your own research into the risks and potential rewards that it offers. Additionally, for most investors, it may be more practical to invest in stocks through a fund, which I will discuss in more detail later.

Please note that besides a reminder to keep fees low, this is in no way actual investment advice. Selecting appropriate stocks and building a portfolio to match your needs is a process that is well beyond the scope of this article. While some people may invest for “fun” with small amounts of money, remember that all of your money in the stock market is at risk. Consult a professional if you do not understand the risks yourself.

Tuesday, April 21, 2015

How To Buy A Stock Directly

The other day, a friend asked me how to buy a stock. I do this for a living, and I am always excited to help someone else get started! There are a few ways to buy stocks, this is how to buy them directly from the company. Beware, though, this is the least advisable way to buy stock, which just happens to have most novelty value.

Many companies offer direct purchase plan or a dividend reinvestment plan through a transfer agent. The transfer agent, such as Computershare, AST or Broadridge, maintains records relating to ownership of the stock. To find your favorite company’s transfer agent, check the investor relations section of the company website. For this example, let’s look at Disney.

Disney’s transfer agent is Broadridge. To buy shares, you will have to open an account on The application will need your personal information and bank information to transfer funds to purchase the stock.

The exact process will depend on the company you are trying to invest in, but many large companies typically allow you to invest any day. Some companies restrict it to once a month, but the transfer agent will handle the trade.

Fees are unique to the company as well. In our Disney example, there will be a $20 account opening fee, plus $20 for each purchase order. Besides the tedium of opening accounts for each investment, fees are the biggest drawback of buying stock this way.

Once your money is invested, you may have the option to order a paper certificate. This is the ultimate novelty in investing and is actually a lot of trouble to handle. If you really want to be able to hold a piece of a company in your hands, this is the only way to do it!

Again, I do not actually advise buying stock in this manner except for the novelty value.  Additionally, do not buy a stock unless you have done your own research into the risks and potential rewards that it offers. I will follow up with more practical and effective ways to buy stock.

Tuesday, October 14, 2014

Remembering to Give Back

We have a lot of ways to express this sentiment. "Don't forget where you came from," some will say. Others remark that "it takes a village to raise a child."(While neither was the first to say these things) recording artist Jim Jones said he was a product of his environment while Isaac Newton likened his findings to merely standing on the shoulders of giants.

Who we are today depends greatly on the communities and institutions that we grew up in.

It is important to give back to those communities and institutions so that others can share and grow in towards the good fortune we have been offered. Colleges and universities are particularly good at this, with some schools raising billions to support their students, staff and mission. Many community organizations, on the other hand, have far fewer resources to start with, relying on minimal, or even volunteer staff to bring in grants and individual donations.

With many different causes begging for our attention, it can be difficult to really plan charitable giving. It can be difficult to pick out a charity to give to if you want to make it a part of your regular budget, or when a special need arises, we may not have the funds available to give. While the ultra-wealthy may set up their own foundation to have more clarity and control over their giving, that is not a practical option for most people. It is not possible, however, for almost anyone to have access to an account with similar benefits as a private foundation while remaining cost effective down to amounts as low as $5,000.

Donor-Advised Funds are an increasingly popular way to plan charitable giving. This is an account which essentially acts as a private foundation for any individual. These allow the account owner to make a gift to the fund, and allocate the final recipients later. Gifts can be made on a one time or recurring basis, and can consist of cash or tradeable securities. Whenever you desire to donate, you have an account specifically designated to give from.

Donor-Advised Funds have many benefits beyond simplifying charitable giving. The tax advantages of donating appreciated stock are immense. Not only do you avoid paying capital gains tax on the sale of the stock, you get an income deduction for the amount of the donation. This reduces the cost of giving to the donor, and increases the value of gifts to the charity! Not all charities are set up to accept stock transfers, but the Donor-Advised Fund can take the stock, and disburse cash to the charity. As the Donor-Advised Fund is a distinct entity, it can be named as beneficiary of other accounts, insurance policies and in your will. This makes it a valuable part of estate planning if a charitable legacy is important to you.

There are a few ways to open an account like this. The Jackson Community Foundation is set up to allow gifts like this, or if you prefer more visability and control, brokerages like Charles Schwab and TD Ameritrade custody this type of account as well. Don't hesitate to get in touch if you have any questions about setting up your own little foundation!