A Stock Market for the Rest of Us?

This is a pretty interesting concept. Imagine being able to buy shares for virtually nothing...but the cost of the shares.

Rather, the goal is to expand the opportunity to people who today are largely shut out because the brokerage industry insists on charging dollars for transactions that cost fractions of a penny to execute.

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http://online.wsj.com/article/SB10001424052970203358704577237353576597194.html

http://bits.blogs.nytimes.com/2011/06/01/investing-online-10-at-a-time/

Not a new concept- there have been share purchase plans administered by companies for a long time. Not widely advertised because no one makes money at them. Coke has, I think, had it for a really long time. Many also run DRIPs, or Dividend Re-Invetment Plans, where any dividends that get paid out go to buy more stock, and they'll even let you own fractional shares. Mostly, the companies get the benefit of holding treasury stock that someone else pays for.

I don't know why "the rest of us" would ever try to invest in individual companies. "The rest of us" should be in mutual funds. Index funds if you want to really go crazy. And of course, non-stock market plans as well. Any one with the know how to play the market with individual share purchases probably has enough money to buy full shares. It is not likely anyone smart at investing is buying the most expensive stocks on the market (unless they have very good reason). Fire up that 401k match to the max, use an age based mutual fund plan, max out a roth, and you're set.

I don't invest in stock market but I hope it goes up for the country.

Scotty said:

I don't invest in stock market but I hope it goes up for the country.

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Despite the headlines and pundits, what happens in the stock market doesn't actually affect the economy. At least, not on a day to day volatile way. If stock prices are down, it may be tougher for a company to raise capital to grow. If they're not looking to spend a chunk of cash on an acquisition or a new factory or something, then the stock price doens't really matter.

It is possible to have your own portfolio of individual stocks, but it does take some dedication, patience, and will power. First to decide what 15-20 stocks to buy, and then to make rational decisions regarding holding or selling.

While target date funds are an interesting idea, they don't really work all that great (except for the fund managers). Index funds and ETFs are fire-and-forget, largely, though you can pretty easily reconstruct them yourself and not pay the management fees. Max the 401(k) match and put as much away tax deffered as you can is the great way to go.

DRIPs are actually somewhat interesting if done over a really long time- a couple of thousand in a high-dividend stock put away as a 1st birthday present can turn into meaningful 1st house downpayment money.

I've done fairly well investing in individual stocks over the years. Yes I've lost sometimes but overall it's been very profitable. I do the other things to mutual funds, 401k etc. I might be a little different than most since I spent 25 years working on the NYSE floor. It takes a little nerve sometimes but without risk there is seldom reward.

ctenidae said:

While target date funds are an interesting idea, they don't really work all that great (except for the fund managers).

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There was a bit of fallout after the market dumped on the target date funds. Seems that a number of people close to retirement weren't too happy to find out their target date fund(s) still had some equity exposure. Oops. We'll probably see a disclosure rule on that soon. If only they had looked into it in the first place.

Glenn said:

There was a bit of fallout after the market dumped on the target date funds. Seems that a number of people close to retirement weren't too happy to find out their target date fund(s) still had some equity exposure. Oops. We'll probably see a disclosure rule on that soon. If only they had looked into it in the first place.

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I'm not aware or following that story but approaching retirement, you should be taking a closer look and not making assumptions that they are getting the mix right. You don't want to go totally into low risk too early because you want things to at least keep pace with inflation. But if they have target date funds doing +10% in stocks for retirement age people, I hope whichever companies hiring them to manage retirement funds dropped those firms right fast. Theoretically, risky fund managers should loose accounts wholesale for screwing that up, so they should have long term incentive to be cautious on the upper age targets. Should be the key word, I guess.

Regardless, when I hit 55-60, I'll probably be looking to take an active roll in allocation or at least review closely what the fund is doing with my money.