FOOLISH FOUR PORTFOLIO
Dealing With Brokers

By Ann Coleman (TMF AnnC)

TAMPA, FL (Dec. 20, 1999) -- My daughter's favorite book is Dealing With Dragons, the story of a plucky princess who takes no guff from anyone -- not from her marriage-minded parents, dorky suitors, or the dragons she runs away to when she decides she needs to get away from said suitors.

How do you deal with Dragons? Very carefully.

You deal with brokers the same way.

"Broker" is almost an outmoded term. Yes, there are a number of stock brokers still in business, but hopefully, most of you are using discount brokers, i.e., a process not involving actual human beings. You deal with these electronics brokers very carefully, too.

If it is your first time placing a trade, the process can be very intimidating. I have yet to find two online brokers whose websites work much alike, so I can't be terribly specific about the process, but the good news is that most (not all) discount brokers also offer phone order service. If you find the process uncomfortable, you can usually get a live person on the phone to walk you through it the first time. It will cost more, but that's better than finding you bought another 54 shares of 3M (NYSE: MMM) when you really meant to sell them.

An excellent resource for novice investors is our FAQ on Types of Orders. It has definitions of stop orders, limit orders, AON, GTC, and other arcane broker terminology. For Foolish Four trades, a simple market order is usually all you need although if you are investing in an IRA, you might want to use a limit order for the last trade to make sure you don't exceed your available cash. Terrible things happen if you go over in an IRA account, but the worse one is that the IRS might treat the incident as an excess contribution, which means filling out a bunch of forms, selling a few shares to get you back to where you were (minus the extra commissions, of course), and the possibility of being caught in a special IRS Endless Aggravation Loop.

For your first time I suggest a nice cup of hot cocoa, soothing music, and a relaxed time of day (or, better yet, night). Cultivate the attitude that this is a learning experience and there is NO rush. Even veteran online traders know that this is not something you should do in a hurry -- day traders excepted, of course. If you've traded a few hundred times, it probably gets pretty routine. But for us infrequent traders, slowly and carefully is the key.

Have you visited Foolanthropy yet? I'm excited about this year's charity drive, and that's saying a lot. In fact, this year is the first time in many, many years I've contributed to organized charities. I'm of the "do it yourself" school of charitable endeavors, preferring a more personal approach (figuring that, if everyone did that, we wouldn't need very many organized charities), but this year I'm really impressed with three essentially unknown charities: Grameen Foundation USA, the Heifer Project International, and Foodchain are wonderfully innovative charities that make very efficient use of resources. I was really happy to have the opportunity to contribute to these groups.

Here's a helpful hint. If you want to contribute to more than one organization, just hit your browser's back button when you get to the "Thank You" page. Then you don't have to enter all the details again -- you can just select a different charity from the drop-down box.

And by the way, your contribution goes even farther now -- a couple of generous Fools have offered challenge grants. They are doubling all contributions made between now and next Monday up to a limit of $40,000. (Hey, do you think I have a future in public television? At least we don't have an 800 number. Call NOW! I mean click NOW!)

Fool on and prosper!

Read More Foolish Four Reports


Top Dow Stocks
( RP Order )

12/20/99

1. Philip Morris
   (NYSE:MO)
2. * Caterpillar
   (NYSE:CAT)
3. * Eastman Kodak
   (NYSE:EK)
4. * General Motors
   (NYSE:GM)
5. * JP Morgan
   (NYSE:JPM)
6. SBC Comm.
   (NYSE:SBC)
7. DuPont
   (NYSE:DD)
8. Int'l Paper
   (NYSE:IP)
9. 3M
   (NYSE:MMM)
10. Exxon Mobil
   (NYSE:XOM)

NOTE: Today's Foolish Four stock selections are marked with an asterisk.

Foolish Four Portfolio

12/20/99 Closing Numbers
Ticker Company Dly Pr Chg Price
CATCATERPILLAR INC3/16$45.13
IPINTL PAPER-7/8$52.63
JPMMORGAN (JP)-2 1/4$125.88
MMMMINNESOTA MIN'G/MFG-1 3/8$93.75

  Day Week Month Year
To Date
Since
12/24/98
Annualized
Foolish Four -1.12% -1.12% -2.01% 18.38% 20.14% 20.34%
S&P 500(DA) -.21% -.21% 2.09% 15.94% 16.01% 16.16%
NASDAQ .82% .82% 13.42% 72.57% 74.17% 75.04%
DJIA (DA) -1.01% -1.01% 2.45% 22.77% 22.93% 23.15%

Trade Date # Shares Ticker Cost/Share Price LT % Val Chg
12/24/9814MMM73.571$93.7527.43%
12/24/9822IP43.551$52.6320.84%
12/24/989JPM105.514$125.8819.30%
12/24/9824CAT43.083$45.134.74%

Trade Date # Shares Ticker Cost Value LT $ Val Ch
12/24/9814MMM$1,030.00$1,312.50$282.50
12/24/9822IP$958.12$1,157.75$199.63
12/24/989JPM$949.63$1,132.88$183.25
12/24/9824CAT$1,034.00$1,083.00$49.00
  Cash: $119.51  
  Total: $4,805.64  

Key
• S&P 500 (DA) = dividend adjusted. Dividends have been added to the total return of the index.
• DJIA (DA) = dividend adjusted. Dividends have been added to the total return of the DJIA.

Note
The Foolish Four Portfolio was launched on December 24, 1998, with $4,000. Additional cash is never added, all transactions are discussed and explained publicly before being made, and returns are compared daily to the S&P 500 and the Dow. (Dividends are included in the yearly, historic and annualized returns.) Stocks are chosen once per year using a formula based on dividend yield and price. See The Foolish Four Explained for details.