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ShareBuilder Review - Automatic Investing Plans

written by: Brian Nelson•edited by: Rebecca Scudder•updated: 4/21/2009

ShareBuilder provides a way for people to invest in individual stocks without having to commit large amounts of up front capital by setting up automatic recurring investments. Is it a smart way to invest in stocks?

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    Investing Via ShareBuilder For the Long Term with Automatic Investments

    Rating Average

    For investors using a buy and hold strategy, there are many different ways to build up a portfolio of stock positions. One method offered by ShareBuilder is to setup an automatic investing plan similar to automatic savings plans or the automatic investments made into your 401(k) by payroll deductions. These stock purchases start small but add up to big investments over time allowing the small investor to profit from a well timed investment but without having to save up a large amount of cash first.

    ShareBuilder works by crediting your account with partial shares of stock as you build up your investing positions. For example, an investor who wanted to invest $200 per month into IBM stock could setup an automatic investment plan with a ShareBuilder account and have money deducted directly from his bank account or if the company allows it, deducted automatically from his paycheck. ShareBuilder will automatically buy shares of IBM stock.

    If IBM stock is trading at $80 per share, then the investor would buy 2.5 shares of IBM stock on that day. Fractional shares continue to add up over time until they become whole shares.

    Buying every month or even every other month allows the investor to take advantage of dollar-cost averaging whereby investing a specific amount of money each month, the investor buys more shares when the stock price is low, and fewer shares when the stock price is high.

    Customers can manage their automatic investments online via a simple web-based interface that allows an investor to turn on or off their investments, or raise or lower them, or even start a new automatic investment.

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    ShareBuilder Cost and Fees

    No review would be complete without a look at costs.

    ShareBuilder is designed to accommodate many types of investors including the very small, but also including bigger investors. There are three different automatic trading plans. The standard entry-level plan costs just $4 per trade. For the investor who wants to make more investments, there is a $12 per month plan that allows for up to 6 trades which if fully used costs just $2 per trade. Additional trades are also charged at $2 each. A larger plan for $20 per month allows for 20 included trades bringing the per trade cost to just $1 per stock or investment if fully used.

    ShareBuilder also allows for real-time stock trading at a basic commission rate of $9.95 per trade. They also allow investors to buy eligible mutual funds with no commission at all! Option trading is also available.

    All of this adds up to a service that is competitive with other online discount brokerages for most retail level traders. As an added bonus, ShareBuilder is owned by ING who also offers online banking including a high-interest rate savings account which can be linked to the ShareBuilder account.

    Give ShareBuilder a try. There is no contract or commitment, so there is little to lose other than one of the things that is holding you back from starting to invest in stocks. If it ends up not being for you, you can always transfer those shares you bought to another account.