Stocks - Direct Investment

So, Muslims are against interest and this leaves a bank Savings Account out of the question as a vehicle for regularly saving a small monthly amount. This is also the "conventional" way to teach kids the basics of investment, and give them a motive to save rather than spend, and watch the money grow because of bank interest.On the other hand, not everyone can afford the 2,000$ required to start a brokerage account, and the 10-20$ a trade fee is too high if I only want to save 50-100$ per month? Is there a way?Yes there sure is a way! Direct investment plans allow you to buy on a regular basis company stocks, using a fixed dollar figure and a low transaction fee (5$ or less).The advantages of such plans are:

  • Low cost entry in to the stock market. The stock market is no longer the domain of the rich, anyone can participate.
  • Painless "small but regular" amounts approach.
  • Encourages the proven and tried method of "Buy and Hold".
  • Encourages discipline in investing (slow but sure)

Over time, you will accumulate a significant amount of stock, and hopefully its value has appreciated.To realize what potenital of such plans, consider someone who invests in three well known technology companies, IBM, Cisco and Microsoft for the last 5 years. He puts only 50$ each month, for a total of 150$ per month. This means that in 5 years he will have shelled out 9,000$. By now, these would have mushroomed to 47,670$, a net return of 429%! This is really beating the market! You can see a nice graph demonstrating this.These plans are also very good for investing for your kids future, as well as a way to teach them that saving (as opposed to spending) will make their moneygrow. If you save 50$ a month in such a plan, by the age your kids needs to go to college or get married, the money should be worth a lot more than what was invested.

  • NetStockDirect Offers direct investment for hundreds of companies. There are many plans to choose from, with a very nice and comprehensive tool to select plans based on several criteria, including whether the company is a US or International one, belongs to a specific industry sector, initial amount required for investment, whether the plan allows international investors, and much more.
  • ShareBuilder Is a service of NetStockDirect. Accounts cost 11.95$ per year, and 2$ per transaction ($1 for Custodial accounts). Custodial accounts are those in your child's name, and are a very good idea for teaching children and teens how to start saving in the form of stock investment, and to get hands-on experience on how the market works. It is also a good vehicle for future planning of things such as college education. CNNfn has an article covering Sharebuilder, and some of its pros and cons.
  • InvestPower Offers direct investment for several companies as well.