Each has a BRK-A) taking the prize with a $155,000 asking price.price above $500, making it nearly impossible for small-time investors to buy their . And 29 other companies in the United States are similarly out of reach, with the "A" class of Berkshire Hathaway (
But we'll tell you how to get around that. You can own these priceyfor as little as $50 a month.
The truth is, a loftyprice isn't a barrier to entry -- if you're willing to own a partial of these companies.
Until my editor enlightened me to thisangle, I had no idea it even existed. After a little digging, I think more investors should take heed of this barrier-breaking method.
In 1999, Sharebuilder.com started year, hordes of new investors were buying into the surging market, even if they had only $50 or $100 a month to invest. Fast-forward to 2013, and Sharebuilder is among the top 10 online brokerage sites and oversees 1.3 million accounts.investors the chance to buy a fraction of one share of a company. That
It was a bumpy road at the beginning, as investors shunned Capital One Financial Corp. in 2012, which has helped boost the company's visibility further.)after the painful dot-com meltdown. Though Sharebuilder managed to slowly build a customer base, the business really took off when Netherlands-based bank ING bought the company in 2007. (ING sold Sharebuilder.com to
Although Sharebuilder also direct deposit.traditional brokerage services, it's best known for its automatic plan. Investors can arrange to send a fixed amount of every week, two weeks or month directly to Sharebuilder.com through various methods, including
Other discountsuch as TD Ameritrade and Charles Schwab re-invest your payments into new , even on a partial share , though they don't have a formal partial share program as Sharebuilder does.
Let me explain how to buy partial shares.
First, decide how much you want to invest each period. Then select the ETFs that you would like to buy. Sharebuilder, for example, divvy your into the various choices, buying a fraction of a share at a time. Companies like Apple (AAPL) and GE (GE), along with ETFs such as S&P 500 (SPY), are among the most popular., mutual and
The charm of this approach lies in what is known as dollar-cost averaging, which is the process of investing a fixed amount on a regular and can minimize your risk.
Rather than commit a large sum of market exposure over time.into the market at one time (as many investors unwisely did in 1999 and 2000), you can slowly build up your
Who is the target audience for this automaticplan?
"It's great for investors that are just getting started," said Brandon Potter, head of Sharebuilder's product development team. He added that "our core demographic is investors in their late 30s and early 40s, which is a bit younger than our rivals."
That's the age when investors typically begin to build up portfolios, whether it is for retirement planning or toa child's education.
Indeed, Sharebuilder's easy-to-use website guides investors into seven different types of accounts, including:
- Individual accounts
- Joint accounts
- Traditional IRAs
- Roth IRAs
- Rollover IRAs
- Custodial accounts
- Education Savings Accounts (ESAs)
Looking to the day when these portfolios need to be cashed in? Sharebuilder reverts to the traditional brokerage model. Considering the average age of the typical client (about 40),likely won't be sold off for several decades because retirement is far off.
And dividend re- plans, known as DRIPs, are offered by many companies. For example, if you register your of Coca-Cola (KO) with the company, new dividends not be paid out in cash but instead in the form of new (or partial) share purchases. This is a savvy move for investors who prefer to see their grow in value, rather than produce regular income.
If you would like to know more about DRIPs, you can read about them here.
The Investing Answer: Investors naturally gravitate toward lower-priced, believing them to hold greater value than high-priced . Of course, the price of a has no actual bearing on value, which means that investors are unfortunately missing out on great companies such as Google, Priceline, MasterCard and others.
Although the ability to buy fractionalis a plus, it's the dollar-cost averaging approach employed by Sharebuilder's automatic plan that is the real charm. Investors can simply decide in advance which great companies they want to own, and then let the program shift into auto pilot. Many years down the road, tiny acorns might grow into large trees.
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