Buying stocks in the smallest possible amount?

[KennesawNemo]

I am thinking about starting something fun for DS and DD. I want to buy them some stocks in the smallest possible amount every Christmas, maybe one company each year. I will give the "portfolio" to them when they grow up.

I am not interested in buying paper certificates with frames from websites like oneshare.com. I want it to be a real investment and digital will be fine.

What's the best way to do this? Thanks.

 

[LJSquishy]

I don't have any input other than I think that's awesome!

 

[manning]

You can buy any amount. However find out what the trading fees are. Usually if you buy in even lots (at least 100 shares) the cost per share can be less than if you buy in odd lot.

 

[crisi]

You can buy a single share of stock - but its a real pain when you file taxes once you sell to have to fill out a line for each company sold with the gain and loss information.

You'll want a low cost broker - Ameritrade or Scott Trade - something that offers low fees per trade (you'll pay when you buy and you'll pay when you sell) and has no minimum account requirement. I don't know what those two currently offer - my broker gives me free trades because of my balance, and that has kept me from shopping for a broker. Here is a comparison of online brokers you can evaluate: http://www.fool.com/how-to-invest/broker/index.aspx

 

[RitaE]

You need to check out the discount brokers and just figure out which one suits your needs best. What you are basically looking for is low/no account minimums and minimal trading fees.

Off the top of my head Fidelity charges $8.95 per trade I think and Schwab has a similar structure?? TradeKing charges $4.95 plus a few miscellaneous fees but they have some account minimum and activity requirements.

eTrade
ScottTrade

There are a bunch of them.

You also need to figure out how you want to hold this account. A custodial account, part of a trust?, some sort of educational savings account???

 

[crisi]

You could also look at something like sharebuilder, which isn't a typical brokerage and see if that is a better deal - it wouldn't likely have the minimum requirements.

 

[Green Tea]

Sharebuilder is great and if you sign up through Costco's link, you get a bonus, if you are a club member.

The real benefit there though is the ability to put a set amount into whichever stock you want on a set day each month (or week) and you can purchase fractional shares that way, and I think each trade is about $2.

You can also buy and sell traditionally whenever you'd like but I think the trade fee is $6.95 then maybe, and you can't buy fractional shares.

It is definitely less per trade for Costco members. Not sure what the fees are for non members.

 

[wiigirl]

You could also look at something like sharebuilder, which isn't a typical brokerage and see if that is a better deal - it wouldn't likely have the minimum requirements.

 

[Jeff_G]

It would be better tax wise to open a 529 plan and give them the gift of a debt free college education.

Also be aware that buying single company stocks is very high risk, if that one company goes bankrupt or even had a string of bad years you could loose money.

A better way is to purchase very small amounts of every single stock traded on the stock market.
This is called an index mutual fund. This protects you from one company doing badly.

 

[manning]

A better way is to purchase very small amounts of every single stock traded on the stock market.
This is called an index mutual fund. This protects you from one company doing badly.

Yes, it's called diversify

 

[crisi]

It would be better tax wise to open a 529 plan and give them the gift of a debt free college education.

Also be aware that buying single company stocks is very high risk, if that one company goes bankrupt or even had a string of bad years you could loose money.

A better way is to purchase very small amounts of every single stock traded on the stock market.
This is called an index mutual fund. This protects you from one company doing badly.

but if what she is doing is developing a sample portfolio to teach kids that it goes up and down, buying individual stocks in companies they understand is a far better learning experience.

Not the best investing experience, or administrative experience, but its a good learning experience.

 

[KennesawNemo]

but if what she is doing is developing a sample portfolio to teach kids that it goes up and down, buying individual stocks in companies they understand is a far better learning experience.

Not the best investing experience, or administrative experience, but its a good learning experience.

OP here. Thank you all for your wonderful suggestions.

Both kids already have a 529 Plan. This is just something on top of that. It will be a "fun" investment for us with more emphasis on the "fun" part. I won't spend too much on it. Cici just said what I want to say.

I did some research this afternoon after I posted. I think here is what I will do.

1. I will buy only once a year before Christmas time.

2. I will spend about $250 on each kid. I might increase this amount later as our disposable income grows. I might spend double on DS8 initially because I want him to get about the same as DD-5month.

3. I will buy stocks from one and only one company that my kids know about each year. Disney will be a great starter this year. I will let the kids pitch in as to what to buy.

4. Each year, we will review all the stocks around Christmas time or during the year if we want to.

5. Both kids will get the cash-equivalent of all the stock worth on their 21st birthday. (Or the Christmas of their 21st year. I'll decide that later). They are welcome to spend the cash or buy a same portfolio on their own.

6. I have a Costco membership so I will go with Sharebuilder as I get discounted fees. Just opened an account this afternoon.

I am very excited to start this for my kids.

BTW, my parents buy a small piece of gold for both kids each year as well. It's a very small piece. Both kids will get their share on their 18th birthday.

None of these gifts will pay for my kids college or make them rich, but it'll give them some fond memories and stories to share with their kids.

 

[crisi]

If you can take another suggestion.

Focus on your eight year old right now. The baby is far too young to get any value from it as a learning exercise - and there are far better investments - as you know - if this is for fun, put the money where it will be fun and valuable.

You'll have a few years of overlap where you need to fund the baby and your soon to be adult, where the deal will be twice as expensive. But only a few. If its problematic to fund two, turn over portfolio management and contributions at 18. The baby will benefit from the learning you and the older child will have done.

That way you won't need to worry about catching up. You won't anyway because if the kids get some choice in investments there will be differences in how each portfolio performs.

 

[KennesawNemo]

If you can take another suggestion.

Focus on your eight year old right now. The baby is far too young to get any value from it as a learning exercise - and there are far better investments - as you know - if this is for fun, put the money where it will be fun and valuable.

You'll have a few years of overlap where you need to fund the baby and your soon to be adult, where the deal will be twice as expensive. But only a few. If its problematic to fund two, turn over portfolio management and contributions at 18. The baby will benefit from the learning you and the older child will have done.

That way you won't need to worry about catching up. You won't anyway because if the kids get some choice in investments there will be differences in how each portfolio performs.

Thank you! This suggestion is so very helpful! I will definitely take it into consideration.

 

[msp2mco]

This is a bit OT, but we gave our kids an ounce of gold on their golden birthdays. It seemed like a good idea at the time when gold was about $500/ounce for the first child, but when the second child had her birthday, gold had gone up to over $1200/ounce. Now they each have a shiny little bar of gold and an interesting story to go with it.

 

[crackerjack21]

Have you looked into DRIPS [Dividend Reinvesting Plans]? Many companies allow you to buy stock directly from them at very small amounts and low or no fees at all. Exxon and P&G are two that I own. Each company has different rules so you have to research it, but if you google DRIPS you'll find lots of web sites.

Some companies DRIP plans are high on fees, so you would be better off going through a low cost broker like shareholder. But others (like Exxon) have no fees.

 

[EMAW_KSU]

There are a number of companies that have a Direct Stock Purchase Plans or Dividend reinvestment plans that allow you to purchase stocks for no fees.

I should have looked at the second page prior to posting.

 

[crisi]

From a learning perspective, I wouldn't do DRPs. Not enough companies offer them with low fees to make the stock picking part (the part that an eight year old is going to get excited about) interesting. An eight year old doesn't want to own Exxon. They want to own Disney and Hasbro and McDonalds and Coke - companies with products and brands they understand and use and like. (I haven't looked at Hasbro, but any of the others won't make you rich, but are pretty safe long term investments last I looked - small dividend payouts, fairly stable, if slow, growth. Disney did really well last year - which is a good reason not to buy it this year if you are looking to make money on it - but for what you want, its fine.)

From an investment perspective, its a good idea.

 

[crackerjack21]

I was just trying to offer the poster another option. I was not suggesting an 8 year old buy Exxon. Just mentioned it as an example of one that I happened to own. Disney has a Drip as well. There are lots of "kid" Drips out there, and lots of websites that actually cater to "kid" drip investing which is why I suggested she do the research which she seems willing to do since she is on this board asking questions.