Want To Build Your Own Mutual Fund?
Recently a number of consumers have
asked me how they can create their own mutual stock fund because
they no longer trust companies that are alleged to have engaged
in after-hours trading.
It’s hard to determine which
mutual funds will not come under federal and state scrutiny. However,
we all know stocks can be very risky, and I recommend against
building your own mutual fund unless you have a trusted financial
advisor or a relatively sophisticated knowledge of the stock market.
But if you believe you have the necessary research and information
tools, then there is a way you can create your own mutual fund
portfolio and pay relatively low commissions.
Millions of Americans have a traditional
brokerage account into which they deposit money that their broker
uses to buy whole shares of stock. Fees are paid based on the
number of shares bought and sold and on the price of those shares.
However, many consumers do not have
the ability to fund a stockbroker’s account in advance.
Rather, they can afford to invest maybe $100 a week or $250 per
month into stocks through payroll deduction or automatic checking-account
transfer. They also may not be able to afford whole shares of
a wide variety of stock but can afford partial shares. Consumers
in this group may want to use a dollar-based online-broker site
that invests the entire amount you are able to invest.
The largest online-broker site is
www.sharebuilder.com, which allows you to determine how much you
want to invest and at what frequency. You decide what stocks to
purchase with the money you have and the company will lump together
all of the orders it has and purchase the stock during specified
trading times. You can pay for the stocks through checking account
or payroll deductions. Fees are based on the type of plan you
chose, from $4 per investment to $20 per month if you plan to
buy a number of different stocks. The company’s website
explains how this is done and outlines the different types of
plans available to you.
Three other online brokerages operate
relatively easy-to-use sites, including www.mystockfund.com, www.buyandhold.com,
and www.foliofn.com. Some of the online brokers only offer a limited
number of stocks in their portfolios, so I recommend you analyze
each site carefully before investing. Good luck in putting together
your mutual fund portfolio!