DRIP PORTFOLIO
Building Value With ShareBuilder

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By Jeff Fischer (TMF Jeff)

ALEXANDRIA, VA (Jan. 11, 2000) -- Yesterday, George took a look at the main services provided by synthetic direct investment provider BuyandHold.com. George asked how easy is it to open an account, what is the minimum investment, what kind of fees exist, and how often can you buy or sell. Today, we consider another new service called ShareBuilder.com, which is offered by the online direct stock program provider Netstock Direct.

Let's take a look!

How easy is it to open an account?
Netstock has taken advantage of the electronic medium to make opening an account simple. To use Netstock's ShareBuilder service, you merely need to open a Netstock Investment Account, which is their central brokerage account that allows you to use both Netstock and ShareBuilder. You can enroll completely online (there are no papers to mail) in just a few minutes, and no minimum balance is required.

What is the minimum investment?
ShareBuilder buys stock once a week in its optional cash purchase program (on Tuesdays) and you can buy as little stock (even $1 worth) or as much stock as you want. You can also have stock bought automatically (electronically) from your bank account, paycheck, or by other electronic means. Most people do the automatic investing monthly or bimonthly. The fees are lowest using this option.

What are the fees?
It costs $2 for electronic, automatic purchases. If you ever need real-time trades, those are provided at the site for $19.95. It costs $19.95 to sell, as well.

If you're trying to keep your fees below 2% of your total investment (as the Fool suggests), you'll need to buy about $100 worth of stock whenever you electronically invest at the $2 fee. If you have a custodial account (for a minor), the fee is only $1 per automatic purchase. Finally, if you make an occasional purchase in a stock that isn't part of a regular automatic program that you've set up, you can do that by lumping it into the program's weekly buy cycle. For these purchases, the fee is $5.

There is also a $5 one-time fee to begin to invest in a new stock, and there is an $11.95 annual fee for all services and to have a Netstock Investment Account. However, for your first year there is no annual fee.

How often can you buy or sell?
Using the real-time trading option, you can buy or sell whenever you like. Using the much cheaper regular investment service, you can buy weekly if you wish. This is what the service is truly meant for. Real-time trading is provided as a convenience, mainly, to use when necessary or under unusual circumstances. Most people use the service to invest monthly (or every paycheck, so typically every other week) with electronic cash transfers.

What is offered for purchase?
ShareBuilder offers over 2,000 stocks for purchase as well as baskets of index funds such as the S&P 500 and the Nasdaq 100 (these funds are a nice service for those who want to simply buy an index, rather than a handful of different stocks). On the more traditional Netstock Direct service, all companies with direct stock plans and dividend reinvestment plans are offered, as well as mutual funds.

What is the best way to utilize this type of service?
As with BuyandHold.com, I believe that using ShareBuilder makes the most sense when buying stocks that don't offer direct stock plans or dividend reinvestment plans, or when buying stocks that have expensive purchase plans. Meanwhile, using Netstock's traditional service -- that is, what it offered before it offered ShareBuilder, too -- is a convenient way to buy stocks with traditional direct stock plans or dividend reinvestment plans as long as the fees are the same or less than what you'd pay to do it directly through the company. To see everything offered from ShareBuilder, visit it here.

Finally, as George Runkle shared yesterday, GLSmyth (George Smyth) offered a comparison of the main features (and costs) from new synthetic direct investment services online. Visit George's convenient synopsis here.

Until tomorrow, be Foolish!

What do you think about the AOL-Time Warner merger? Have a question for Yahoo! President Tim Koogle? Another investment question? The Motley Fool Radio Show wants to hear from you. If you're interested in participating on this week's show, please e-mail macg@fool.com with your question or comment. Please include a daytime phone number.

Drip Portfolio

1/11/00 Closing Numbers
Ticker Company Dly Pr Chg Price
CPBCAMPBELL SOUP3/8$36.19
INTCINTEL CORP15/16$89.69
JNJJOHNSON & JOHNSON5/16$94.38
MELMELLON FINANCIAL CORP-1 1/4$29.69

  Day Week Month Year
To Date
Since
7/28/97
Annualized
Drip 1.42% 1.74% .79% .79% 30.95% 11.59%
S&P 500 -1.31% -.20% -2.09% -2.09% 53.24% 18.96%
S&P 500(DA) -1.31% -.20% -2.09% -2.09% 55.86% 19.78%
S&P 500(DCA) n/a n/a n/a n/a 28.88% 10.87%
NASDAQ -3.17% .99% -3.64% -3.64% 149.82% 45.12%

Trade Date # Shares Ticker Cost/Share Price LT % Val Chg
9/8/9722.3909INTC44.603$89.69101.08%
11/14/9711.292JNJ80.007$94.3817.96%
11/5/9828.3741MEL34.416$29.69-13.74%
4/13/988.174CPB54.586$36.19-33.70%

Trade Date # Shares Ticker Cost Value LT $ Val Ch
9/8/9722.3909INTC$998.70$2,008.18$1,009.49
11/14/9711.292JNJ$903.44$1,065.68$162.25
11/5/9828.3741MEL$976.51$842.36($134.16)
4/13/988.174CPB$446.18$295.80($150.39)
  Cash: $24.32  
  Total: $4,236.34  


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

Note
Drip Port launched with $500 on July 28, 1997, adds $100 to invest every month, and the goal is to own $150,000 in stock by August of the year 2017. Due to the slow nature of dollar-cost-averaging and our relatively significant starting costs, we do not expect to seriously challenge the S&P 500 for the first three to five years as we build an investment base. The long-term advantages of dollar-cost-averaging still overcome the short-term disadvantages, however. Final note: our investment in Campbell Soup is frozen due to fees instituted in its investment plan. Click here for a history of all Drip Port transactions.