Q: My grandson is interested in buying shares of stock in companies. I recall reading something about special plans that allow youngsters to buy a small number of shares in companies such as McDonald's. Could you give me any information on this?
A: There are several inexpensive ways your grandson, or anyone for that matter, can ease into stock investing.
One way is to buy shares directly from a company, thereby avoiding brokerage fees.
Currently, about 200 U.S. companies sell their shares directly to investors. The typical minimum investment is about $250. However, a few companies, including Bob Evans Farms Inc. and Johnson Controls, have minimum stock purchases as low as $50.
When considering buying stock directly from a company, be sure to inquire about fees. Many companies, including McDonalds' McDirect Shares program, charge a one-time enrollment fee, plus annual fees. If you still want to take a bite of the McDirect Shares, the toll-free number is (800) 621-7825.
Free lists of all the companies that offer direct share purchase programs are available. The DRIP Investor will send you a complimentary copy of its monthly newsletter and a list of companies that offer direct share programs. The address is 7412 Calumet Ave., Hammond, IN 46324. The phone number is (219) 931-6480.
More detailed directories of companies that offer direct share purchases and dividend reinvestment plans (DRIPs) are available. The Drip Investor sells a directory for $15.95. Evergreen Enterprises sells its directory for $32, which includes postage and handling. The address is P.O. Box 763, Laurel, MD 20725. The phone number is (301) 549-3939.
Investing among youngsters is gaining in popularity and the investment community is taking notice.
Chicago-based mutual fund manager Stein Roe has a fund geared for children and teens.
The Stein Roe Young Investor fund invests in companies known to most kids. They include: Coca-Cola, Nike, Disney and McDonald's. The fund also provides various learning materials, including a quarterly newsletter that profiles a different company each issue.
Since its inception in April 1994 through July 31, 1997, the fund's return was 31.38 percent, an impressive performance even in a strong market.
The minimum investment for a minor account is $1,000. You can begin with $100 and put in $50 a month until you reach $1,000. The annual management fee is 1.5 percent of the invested amount. Stein Roe's toll-free number is (800) 338-2550.
Meanwhile, the National Association of Investors Corp., the nationwide organization that helps individuals form investment clubs, recently came out with a stock study course designed specifically for teens.
The Investing for Life guide teaches youngsters how to select stocks and mutual funds. The cost is $27 for NAIC members; $40 for nonmembers. Annual membership costs $39.
To order a copy or get more information about NAIC, call (810) 583-6242 or write to P.O. Box 220, Royal Oak, MI 48068.
John Finotti is a business writer for The Florida Times-Union in Jacksonville. Send questions about money matters to him in care of Business News, The Augusta Chronicle, P.O. Box 1928, Augusta, GA 30903. He can be reached on the Internet at firstname.lastname@example.org.