Author Topic: How to invest as little as $25 a month in individual stocks [Dividends]  (Read 2042 times)

StudentEngineer

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Hi everyone.

I found a video that I thought could be useful for beginning investors who want to invest in individual stocks for dividends. 

The gist of it is that big companies typically have transfer agents who control how their stock is bought and sold, and who has what shares.  A number of companies allow for individuals to sign up directly with them to purchase stock with no commission and you can put in an amount less than share price and buy partial shares.

I'm considering opening up a couple of these DRIP's with companies like Exxon Mobil.

Has anybody used this before?



Here's the link: https://www.youtube.com/watch?v=WWdptrcEKGo





*Many on this forum subscribe to index fund investing but for those who don't this is a neat way to get into dividend growth investing.
« Last Edit: August 30, 2017, 10:56:20 AM by StudentEngineer »

Telecaster

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Re: How to invest as little as $25 a month in individual stocks [Dividends]
« Reply #1 on: August 31, 2017, 12:55:31 AM »
Hi everyone.

I found a video that I thought could be useful for beginning investors who want to invest in individual stocks for dividends. 

The gist of it is that big companies typically have transfer agents who control how their stock is bought and sold, and who has what shares.  A number of companies allow for individuals to sign up directly with them to purchase stock with no commission and you can put in an amount less than share price and buy partial shares.

I'm considering opening up a couple of these DRIP's with companies like Exxon Mobil.

Has anybody used this before?



Here's the link: https://www.youtube.com/watch?v=WWdptrcEKGo



*Many on this forum subscribe to index fund investing but for those who don't this is a neat way to get into dividend growth investing.

Dividend growth stocks are all the rage these days.  For that reason alone, you should run away screaming from dividend growth stocks.

But if you decide to DRIP, be aware your tax bill will be way complicated. 

StudentEngineer

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Re: How to invest as little as $25 a month in individual stocks [Dividends]
« Reply #2 on: August 31, 2017, 08:16:49 AM »

Dividend growth stocks are all the rage these days.  For that reason alone, you should run away screaming from dividend growth stocks.

But if you decide to DRIP, be aware your tax bill will be way complicated.

Interesting.  I see indexing as all the rage today, maybe we should run from that? ;)
If you did DRIP these companies would give you the needed information for taxes so I'm unsure about how complicated it would be.  Just several entry points, so more tedious than anything.

TheAnonOne

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Re: How to invest as little as $25 a month in individual stocks [Dividends]
« Reply #3 on: August 31, 2017, 09:43:30 AM »

Dividend growth stocks are all the rage these days.  For that reason alone, you should run away screaming from dividend growth stocks.

But if you decide to DRIP, be aware your tax bill will be way complicated.

Interesting.  I see indexing as all the rage today, maybe we should run from that? ;)
If you did DRIP these companies would give you the needed information for taxes so I'm unsure about how complicated it would be.  Just several entry points, so more tedious than anything.

Indexing is broad enough that it really wouldn't matter, there isn't a sector to run from, unless it's entirely out of stocks.

Telecaster

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Re: How to invest as little as $25 a month in individual stocks [Dividends]
« Reply #4 on: August 31, 2017, 12:34:37 PM »

Dividend growth stocks are all the rage these days.  For that reason alone, you should run away screaming from dividend growth stocks.

But if you decide to DRIP, be aware your tax bill will be way complicated.

Interesting.  I see indexing as all the rage today, maybe we should run from that? ;)
If you did DRIP these companies would give you the needed information for taxes so I'm unsure about how complicated it would be.  Just several entry points, so more tedious than anything.

These companies might give you the needed information.  I have a friend who is a tax attorney.  One of his specialties is calculating the cost basis for AT&T stockholders.  You can see why people turn to tax attorneys for help with such things: 

https://en.wikipedia.org/wiki/History_of_AT%26T#Post_break-up_restructuring

In my own case, I owned a U.S. utility stock which I was happily DRIPing.  That company was purchased by a British utility.   Then for some reason I don't fully understand, the British utility spun off my shares into a Spanish utility along with some cash.  The only records available prior to the Spanish utility are the ones I maintained.  And I didn't maintain as many as I should have.

That isn't a reason not to DRIP.  But you should maintain careful records for tax reasons.  Companies merge, are acquired, spun off, etc.  You might be able to retrieve your records later, but you might not as well.

I made the "all the rage" comment because while some of the "dividend champions" are reasonably solid blue chips like ExxonMobile (which by the way, used to be part of the same company, were spun off, and then later merged.  Keep your records, folks) but a lot of them are real dogs. 

Which brings up a related point:  lack of diversification. The OP was directed to beginning investors.  I'm not sure investing in just one stock is good advice for new investors, or any investors for that matter.   Bad things can happen to even good companies.  Sears used to be one of the bluest of the blue chips, the largest retailer in the world, headquartered in the tallest building in the world, and a member of the Dow Jones 30 for 80-ish years.  Now they are on life support.  I suppose if you only have couple hundred or couple thousand bucks in one stock, then a loss is recoverable.  But more than that, and you should really consider diversifying into the broader market.   It takes about 15-20 stocks to become reasonably diversified. 

Speaking of which, that's pretty easy to do, even if you only have $25 a month.  Fidelity and other companies have a number of no transaction fee ETFs with no minimum purchase.  If you are interested in dividends, there are specialized dividend ETFs also available with no transaction fee. 





StudentEngineer

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Re: How to invest as little as $25 a month in individual stocks [Dividends]
« Reply #5 on: August 31, 2017, 04:54:44 PM »

Dividend growth stocks are all the rage these days.  For that reason alone, you should run away screaming from dividend growth stocks.

But if you decide to DRIP, be aware your tax bill will be way complicated.

Interesting.  I see indexing as all the rage today, maybe we should run from that? ;)
If you did DRIP these companies would give you the needed information for taxes so I'm unsure about how complicated it would be.  Just several entry points, so more tedious than anything.

These companies might give you the needed information.  I have a friend who is a tax attorney.  One of his specialties is calculating the cost basis for AT&T stockholders.  You can see why people turn to tax attorneys for help with such things: 

https://en.wikipedia.org/wiki/History_of_AT%26T#Post_break-up_restructuring

In my own case, I owned a U.S. utility stock which I was happily DRIPing.  That company was purchased by a British utility.   Then for some reason I don't fully understand, the British utility spun off my shares into a Spanish utility along with some cash.  The only records available prior to the Spanish utility are the ones I maintained.  And I didn't maintain as many as I should have.

That isn't a reason not to DRIP.  But you should maintain careful records for tax reasons.  Companies merge, are acquired, spun off, etc.  You might be able to retrieve your records later, but you might not as well.

I made the "all the rage" comment because while some of the "dividend champions" are reasonably solid blue chips like ExxonMobile (which by the way, used to be part of the same company, were spun off, and then later merged.  Keep your records, folks) but a lot of them are real dogs. 

Which brings up a related point:  lack of diversification. The OP was directed to beginning investors.  I'm not sure investing in just one stock is good advice for new investors, or any investors for that matter.   Bad things can happen to even good companies.  Sears used to be one of the bluest of the blue chips, the largest retailer in the world, headquartered in the tallest building in the world, and a member of the Dow Jones 30 for 80-ish years.  Now they are on life support.  I suppose if you only have couple hundred or couple thousand bucks in one stock, then a loss is recoverable.  But more than that, and you should really consider diversifying into the broader market.   It takes about 15-20 stocks to become reasonably diversified. 

Speaking of which, that's pretty easy to do, even if you only have $25 a month.  Fidelity and other companies have a number of no transaction fee ETFs with no minimum purchase.  If you are interested in dividends, there are specialized dividend ETFs also available with no transaction fee.

I absolutely 100% agree with keeping good records.  That's something that I need to work on myself so thank you for the nudge.

I agree having a portfolio of a handful of stocks is not wise, however there has been research showing that past owning ~3 companies from each sector = 30 companies total, more diversification does not necessarily help. 

And yes there are definitely ways to index with low costs as well.


Dividend growth stocks are all the rage these days.  For that reason alone, you should run away screaming from dividend growth stocks.

But if you decide to DRIP, be aware your tax bill will be way complicated.

Interesting.  I see indexing as all the rage today, maybe we should run from that? ;)
If you did DRIP these companies would give you the needed information for taxes so I'm unsure about how complicated it would be.  Just several entry points, so more tedious than anything.

Indexing is broad enough that it really wouldn't matter, there isn't a sector to run from, unless it's entirely out of stocks.

You can run from the strategy by not adhering to it :p