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GOING TO MARKET; EXPERTS: TRICK TO INVESTING IS TO BECOME EDUCATED FIRST.

Byline: Chris Sieroty Staff Writer

You've watched the stock market roar through its best decade ever. Your co-workers brag about the 200 percent run-up of this dot com or that. And you've just sat on the sidelines, wondering how you could get in.

Well, here are a few tips on how to buy a stock using a full-service, discount or online brokerage service:

Full Service

As might be expected, full-service brokerages make it easy to buy a stock. Walk in one of their offices, fill out some forms, cut a check and pick a stock.

``If you want to open an account with Paine Webber there is no minimum. It's up to the broker and client,'' said Bambi Holzer, a senior vice president with Paine Webber. ``A potential client, for example, can open an account by purchasing a stock mutual fund, which will cost between $2,000 to $5,000 depending on the fund.''

After the client has chosen an investment, Holzer said, the client will complete a new account form, which is processed immediately. It is then followed by a three-day settlement period, in which the money owed comes due, she said.

Holzer, the author of several books, including ``Set for Life'' and ``Retire Rich,'' said there are several important things people need to learn before leaving the sidelines and entering the current bull market.

Define your goals. Are you investing for retirement, parent care, buying a home or estate planning?

``We are the sandwich generation,'' said Holzer. ``We (baby boomers) are taking care of our parents and children.''

Have realistic expectations. The stock market has traditionally returned 12 percent to 14 percent annually, not the 20-plus percent increases of the last decade. If you expect - and plan for - a 25 percent annual return, it will be that much harder to reach your goals.

Know the tax consequences. Many investors trade on a regular basis and can get into financial trouble from capital gains taxes.

Finally, Holzer said investors need to realize that there are differences among full-service, discount and online brokerages.

Why would you choose a full-service broker when discount and online brokerages typically charge smaller fees? Because full-service brokers offer a number of services, including tax advice and stock research, not offered by most discount and online firms.

Discounters

Not all discount stock brokerages are created equal. Most discounters require minimum amounts to open an account, usually $1,000, $5,000 or $10,000.

However, if you're just interested in purchasing 10 shares of IBM, one share of Amgen or 10 shares of Dell Computers, for example, without depositing large amounts of money, there are several discounters who have no minimum requirement.

Along with no minimum, DLJ Direct and Quick & Reilly Inc. offer their services at a cost of less than $20 per trade.

Jude Stewart, a spokeswoman with Quick & Reilly Inc., said requiring no minimum balance to open an account allows people to get comfortable with the idea of having an account before making an initial investment.

To open a standard account with Quick & Reilly, just fill out an application. Stewart said the application will ask what type of account the customer wants to open, along with some questions about the person's finances.

Once you've signed the application, return it to the broker and it will be processed.

Said Stewart, ``People need to get educated about investing before they make that initial investment. However, it's not too late to get started.''

Online

A number of online brokerage firms offer trades for prices from $7 to $14.95, but what does it take to open an online account and begin buying stock? Datek spokesman Michael Dunn says it takes a minimum of $2,000 to open an account with his online brokerage.

Those who apply online will need to wait, however; the application needs to get to the brokerage, the check needs to be cashed and the brokerage needs time to notify the customer that the account is active.

The most important rule to know before you begin to trade online, Dunn said, is to become an educated investor. ``Do your homework,'' he said. ``Know what a limit order is and know what a market order is. Know what you are buying.''

FOR YOUR INFORMATION

The Internet is filled with sites devoted to stocks. Below are a sampling of Web sites, including full service, discount and online brokerage firms:

Accutrade www.accutrade.com

Ameritrade www.ameritrade.com

Datek Online www.datek.com

ETrade www.etrade.com

Fidelity www.fidelity.com

Kennedy Cabot www.kennedycabot.com

Merrill Lynch www.ml.com

National Discount Brokers www.ndb.com

Paine Webber www.painewebber.com

Quick & Reilly www.quick-reilly.com

Scottsdale Brokers www.scottrade.com

Charles Schwab www.schwab.com

Waterhouse Securitieswww.waterhouse.com

DIVIDEND REINVESTMENT PLANS, OR DRIPs

What are DRIPs?

DRIPs are offered by companies as a way to buy stock directly from the company in various amounts on a monthly or quarterly basis.

The plans also reinvest all or partial dividends paid into more stock, thus the name ``Dividend Reinvestment Plan.``

To enroll in a DRIP, an investor has to buy at least one share through a regular broker. Then that investor can enroll in the plan by writing the company.

Advantages of DRIPs:

The accounts force investors to buy stock on a regular basis.

The structure of DRIPs encourages investors to buy and hold their shares.

Dividends are used to purchase more shares, rather than being spent or sitting in a money-market account.

The fees on some DRIP programs are smaller than some brokerage accounts.

Drawbacks of DRIPs:

Investors can't dictate buy or sell prices, since the companies that offer DRIPs typically wait until the end of the week, month or quarter to register transactions.

Since DRIPs are usually offered by the company through a broker, it's nearly impossible to get your stocks cashed quickly.

``Dividend reinvestment plans are a consistent, long-term way of saving to accumulate shares and wealth,'' said Vita Nelson, editor and publisher of The Money Paper. ``It's really saving, it's not speculating.''

The fees on some DRIP programs are larger than some brokerage accounts.

Investors must report any dividend income on their tax returns, unless the DRIP is part of a tax-deferred savings plan.

To find out if a company you want to invest in offers a DRIP program, contact its investor relations department or Nelson at The Money Paper: 1-800-388-9993.

- Chris Sieroty

CAPTION(S):

Photo, 2 boxes

Photo: no caption (Stock market tables)

Illustration by Lori Valesko/Daily News

Box: (1) FOR YOUR INFORMATION (See text)

(2) DIVIDEND REINVESTMENT PLANS, OR DRIPs (See text)
COPYRIGHT 1999 Daily News
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1999, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

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Title Annotation:Business
Publication:Daily News (Los Angeles, CA)
Date:Dec 28, 1999
Words:1102
Previous Article:IN BRIEF.
Next Article:MANN CHAIN AGREES TO SALE; BUYER IS AFFILIATED WITH TIME WARNER.


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