Saturday, July 29, 2000
Answering some basic questions
Funny thing about investing and personal finance: You can never learn enough, and nothing is ever too basic. So in that spirit, here are some more not-so-stupid questions that readers have asked — or have even been afraid to.
How do you buy stock?
In order to write checks, you have to have a checking account. And in order to buy stock, you have to have a brokerage account. Often, the minimum investment is a few thousand dollars — even less at online brokerages.
You can get a brokerage account in a number of ways. The simplest might be to walk into your bank and ask. Most banks offer these services.
More traditional brokerage companies (such as Merrill Lynch and Prudential), discount brokerages (such as Charles Schwab and Fidelity) and financial advisers (such as American Express) also have bricks-and-mortar offices you can walk into. Ask some friends, grab the phone book or check out some ads. Treat picking a broker as you would a dentist.
For the more tech-savvy, almost all financial companies (including banks and insurance companies offering investment services) have Web sites. Many allow you to open an account online.
But my friend says she buys stock through her company.
Many companies do offer direct purchase or employee stock ownership plans. Often, this is done through a 401(k) or company-sponsored retirement plan.
Go see your personnel department about your options. Not all companies will offer this — especially if they are not publicly traded. But if you don't know the difference, go ask.
I know I have some stock my grandfather gave me. How do I find out how much it's worth?
The easiest way is to look at the stock charts in the newspaper. First, find the stock you own on the listing. They are arranged alphabetically according to which exchange they are traded on.
Say you own AT&T (more people own this than any other). AT&T is listed among the As on the New York Stock Exchange (NYSE) list.
Then look at the numbers in the row. The number under the column “Close” is the one you want. This is what each share was worth at 4 p.m. the previous day. (You might see a different number somewhere else if a trade was made after 4 p.m.)
Multiply the per share price by your number of shares, and you have what your stake is worth.
Remember: That's not the same as having that much in a savings account. You can't go out and spend that money. That only means that's how much someone else is willing pay you for your stock, and that always changes.
Is that what it means if someone says his wealth is on paper?
Exactly. You can also talk about paper gains or losses. That means a price might have gone up or down, but without actually selling that stock, it's an “unrealized” gain or loss.
Nothing is really gained or lost until you sell. And especially if you gain, the IRS may want to talk to you — but that's a topic for another time.
Amy Higgins writes about personal finance for the Enquirer. You can reach her at 768-8373; ahiggins@enquirer.com; or Your Money, The Cincinnati Enquirer, 312 Elm St., Cincinnati 45202.
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