Buying stock online is safe, secure

Q: I've been thinking about buying some stocks for my kids and my sister's kids as a gift. But, I'm what you'd call a new comer to the whole idea of buying things on the internet. You listed ShareBuilder.com as a way to purchase stock cheaply online. How does the whole internet stock broker work? I'm used to having a broker I can see and call on the phone, receiving stock certificates in the mail, and actually having a physical place to go in when needed. What happens if the site goes out of business? Do I receive the certificates? What I really want to know is are these sites a safe place to let stocks sit with for ten or more years?

 

 

 

A:Yes, it's safe and secure to buy stocks online. Your account is insured by SIPC -- the Securities Investor Protection Corp -- up to $500,000, just as it would be with any other broker. I know it's hard to get over the fear of financial transactions done through the internet. But whether you're doing online bill pay or buying something from Amazon.com, there is a very high level of security. When you think about it, if you pull out your Visa at a store, the transaction goes over the same telecommunications system with the same level of security!

But you'll have to get used to a paperless society as more and more transactions are handled online. When you open an account at Sharebuilder, you authorize them to debit your checking account for the purchase. And you don't receive a physical stock certificate (those will soon be ancient history, and very collectible.) Also, because you are typically buying a "dollar amount" instead of a specific number of shares, your account will be credited with fractional shares. That is, if you buy $250 worth of a $17 stock, you'll buy about 14.7 shares. Your online account will reflect that "fraction" of a share.

If you're going to continue buying stocks on a monthly basis, this is an excellent way to invest with a fixed dollar amount. And even if you're going to hold for ten years, pretty soon there won't be physical stock certificates to hold on to. Just make sure you keep records of your purchases. And if you're really addicted to paper, you can always push the "print" button on your computer screen and print out a statement for yourself every month!

 

 

 

 

 

Q: I was wondering why you chose to recommend Sharebuilder.com and not Buy and Hold? I use Buy and Hold, which provides the same services as Sharebuilder but allows for increased flexibility. Is there something that I don't know about Buy and Hold?

 

A:I used to recommend Buy and Hold but they changed their model. Yes, you can get two trades for $6.99 a month -- but you have to keep paying $6.99 every month to keep the account active. Or else you have to pay a fee of $30 to get a certificate issued. I like the ShareBuilder model better because there are no "inactivity" fees. That means you can visit your portfolio online, no more charges, until you decide to buy or sell stock.

 

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