On money

Personal Finance editor HELEN HUNTLEY E-mail: Click here Archive

By HELEN HUNTLEY

© St. Petersburg Times,
published September 23, 2001

Start with the basics before jumping into investing

Q. If a person had a small amount of money ($500 to $1,000) and wanted to invest in the stock market, how would he do it? Do you look in the phone book for a stockbroker? Do people buy on the Internet now? Do stockbrokers charge a certain fee or percentage? How would a person who knows nothing about the stock market find out basic information? After talking to my friends, I get the impression that there are many people like me out there.

A. Start with the same sources you would tap for information on most any other topic: libraries, bookstores and the Internet.

A lot of the information available is aimed specifically at beginners like you, such as the "Dummies" series of paperback books, which includes Investing for Dummies and Personal Finance for Dummies. There are books written for specific groups, such as women, teenagers and retirees, and for people with specific goals, such as getting out of debt or saving for retirement.

Start your reading with basic information on personal finances and saving because there may be other financial issues you should address before you get involved with the stock market. For example, paying off credit card debt and setting up an emergency fund should come first.

Beginners should start out investing in mutual funds rather than trying to pick individual stocks. Information about choosing funds can be found at Morningstar's Web site (www.morningstar.com). Many of the fund companies also have great information on their Web sites. Check out Fidelity Investments (http://www.fidelity.com>www.fidelity.com), Vanguard (www.vanguard.com) and T. Rowe Price (www.troweprice.com).

There are two ways to buy funds: through a broker or directly from a fund company. Funds that are sold directly without sales charges tend to have higher minimum investments. The minimum for a regular account often is $2,000 to $3,000, although most funds will open an individual retirement account for $500 or $1,000. Also, these fund companies often waive or reduce the minimum requirement if you sign up for a regular program of automatic investing through electronic transfers from your bank account.

Broker-sold funds typically involve some type of fee or commission. It may be a percentage of the investment paid upfront or as a redemption fee when you sell. Or it may be a periodic fee (monthly, quarterly or yearly) based on the size of your account. These fees can make it expensive to maintain a small account, so be sure you have a good grasp of the costs before you sign up. You can get your brokerage services in person, by telephone or over the Internet.

Opening an account is as simple as filling out an account application (available by mail or even on the Internet) and mailing in your check. But don't do that until you've done your homework.

Q. I have an account with a brokerage firm with $50,000 in stocks and $50,000 in a money market fund. My stocks aren't doing well and I want to get out of the market because I think it will be a couple of years before stocks recover.

I want to close my account. Can I simply write and tell them to close my account and send me a check? What is the proper procedure to get out of the market and close my account?

A. Although people speak of getting "in" or "out" of the market, what they are referring to is buying or selling stocks or stock-related investments such as mutual funds, options or futures. To get out of the market, all you have to do is call your broker and direct him or her to sell your stocks.

Your question about the procedure for closing your account should be directed to your broker. A telephone call may be all that is necessary.

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If the trauma our nation has been through has made you think about lending a helping hand, be sure that any charities you are considering are worthy of your support. Check out the BBB Wise Giving Alliance (www.give.org), a project of the National Charities Information Bureau and the Council of Better Business Bureaus' Foundation.

- Helen Huntley writes about investing and markets for the Times. If you have a question about investments or personal finance, send it to On Money. We'll try to answer those we think are of greatest reader interest. All questions must be submitted in writing, but readers' names will not be published. Send questions to Helen Huntley, Times, P.O. Box 1121, St. Petersburg, FL 33731.

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