Without repeating several insightful comments already made, it would be inappropriate for most investors to hold issues of a single company. Some investors should not buy idividual issues simply because they do not have enough knowledge.

Anyone who has to ask how to buy a stock probably also has no idea on how to sell a stock. There is no money to be made in BUYING stock. Money is made when you SELL a stock for more than you paid for it.

By default, if you have to ask this question then the only way for you to properly buy stock is with professional assistance.

The key to using DRIPS is to pick several sound companies(in several different industries for balance) and dollar cost average into them, just as you do with a workplace 401K for instance and consider them long term investments. This both spreads your risk of timing and stock picking.

Its not gambling, its speculation. Gambling is betting on chance events, speculation is betting on chaotic, but researchable events, especially on the price moving.

One nice thing about individual stocks is that there are a lot of secondary strategies around reducing the risk of the stock via option buying. For instance, if you bought Apple, and you were afraid that it go down this quarter, perhaps a lot , you can buy what’s called a “Put” to allow you to sell your stock at a certain floor (Which is actually something mutual funds do all the time to hedge their stock purchases). You can do these strategies with index funds as well, but stocks are not inherently “super risky” as the top poster makes them sound.

Mutual funds also have the issue they have to liquidate a stock carefully when they sell it or they’ll cause a stock price move that will hurt them as they sell, and they also have all those fees to pay the salaries of the people who run them. Those together sap your returns somewhat.

Historically, the market makes ~13%, Mutual funds 9% and individual investors ~7%, so be careful though going out on your own. You need to research research research. Also remember: Diversification is the only free lunch. Buy some things of various risk amounts in totally different sectors, and you’ll do better.

–Michael

*Heard on Talk of the Nation

http://www.sharebuilder.com

You can do an automatic investment plan in many things, including individual stocks (but also in ETF’s). This costs $4 per item if you let it occur on a periodic Tuesday. As fees and costs are one of the most determining factors of profits…we’ll that nice low fee to buy securities is great news

–Michael

Part of frugality and debt reduction is planning for what you will do with your money that can be spent on assets (constructive things) instead of liabilities (things that don’t add much to your life and suck money away from you). Investing is part of that.

If you don’t have the time or inclination to educate yourself properly about individual stock investing, it’s better to buy an index fund or mutual fund. No shame in that. Both of which you have researched to compare performances, managment, fees, etc.

Also I would guess that if someone wants to buy shares in an individual company but has not done enough homework (info easily available on the Net) to know how to do that, they don’t know enough to be putting there money into an individual stock. This scenario is indeed gambling and riskhy.

http://en.wikipedia.org/wiki/Modern_portfolio_theory

Sure there’s IPOs like Google, Red Hat, or VA Linux that do amazing things, but those are few and far between. For long term growth, only go with mutual funds as the amount of risk is far less than any investment with a rate of return that beats inflation.

Sun at The Suns Financial Diary blog does both DRIP and brokerage accounts and has nice write-ups on both.

If you want to invest in individual stocks, study for years, then invest. If you aren’t willing to put in a year or two of studying first, stick to index funds!