How should I introduce my child to the stock market?
Start by playing a stock market simulation game, such as the The Stock Market Game.
A school-based game in which students try to increase virtual portfolios of $100,000.
Other resources to consider:
Investing
for Kids. An excellent primer produced by kids, for kids, that grown-ups will
appreciate, too.
Young Fools. Teen-focused site, courtesy of the Motley Fool.
Just ask the kids themselves, who intuitively live by the principal of "invest in what you know." If your kids are still young, choose something you know.
If you're uncomfortable picking individual stocks, you may want to consider one of the many mutual funds managed specifically with kids in mind.
Regardless of whether you or your kids are buying the stock, purchases for minors under age 18 must be made through a custodial account. Don't worry: All you do is fill out a form from the broker with the child's name and social security number and the name of the custodian.
How can we get started without spending a lot of money on fees and commissions?
Nowadays one of the cheapest and speediest ways to trade small lots of stock is online. Unfortunately, many online brokers require a minimum of $1,000 or more to set up an account. But a few brokers let you open custodial accounts with as little money as you want.
If you don't like the impersonal nature of trading by computer terminal and would prefer the security of hearing a human voice over the phone, discount brokerage.
If you already have a working relationship with a full-service broker, you may be able to cut a deal involving a custodial account for your child to pay less than the standard commission.
More than 500 companies will let you make initial stock purchases directly without going through a broker, after which you can enroll in the company's dividend-reinvestment plan (DRIP) and buy additional shares.
But be warned. Too many of the companies that let you make initial purchases directly have taken to raising existing fees and dreaming up a lot of new ones.
For a detailed list of companies that let you make initial purchases directly, visit Netstock Direct.
Sometimes you can circumvent dollar minimums for initial purchases in company-direct plans by buying a single share through another source. And hundreds of companies with single-share DRIPs don't let you buy that first share directly. In those cases, you'll have to go through a broker or use one of the broker-free services that specialize in making initial investments at low cost:
The Low-Cost Investment Plan of the National Association of Investors Corp. (248-583-6242). For $20 a year you can also buy an NAIC youth membership, which includes a year's subscription (five issues) to Young Money Matters, a newsletter, and (12 issues) Better Investing.
Temper Enrollment Service (800-388-9993), formerly available only to subscribers to The Moneypaper and Direct Investing newsletters, but now open to anyone for $20.
First Share (800-683-0743), a co-op in which you buy shares from other members.
(888-777-6919), which specializes in selling a single share of stock in certificate form that can be framed. You can also purchase shares of companies that are hard to come by through sources other than a broker, such as Apple Computer, the Boston Celtics limited partnership, the Cleveland Indians, Microsoft, Pixar, Tootsie Roll, Topps and Yahoo.
For a modest fee, these services specialize in getting a single share of stock into your portfolio or that of your child. But with many online brokers willing to execute almost any trade for $15, $10 and even $5 -- and because your child can participate in the trade at the keyboard -- this may be the least onerous and most direct way to buy a stock share, especially if you don't have to come up with a minimum initial investment.
You and your children should first decide which companies you want to invest in and then compare share-purchase options based on convenience and cost-effectiveness.
GETTING STARTED
