Personal Finance Q & A

Buying stock without paying a big fee Q. I am a longtime purchaser of mutual funds. Most of them are no-load funds. Now, my son suggests that I buy no-load stocks to supplement my holdings. What are they, and where can I buy them? C.D., New York

A. No-load stocks are companies that allow you to join their dividend reinvestment plans (DRIPs) without first owning a share of stock in the company, says Chuck Carlson, editor of the DRIP Investor newsletter.

Typically, to buy into a DRIP, you must own at least one share of stock in the firm.

You could, for example, buy a single share from a broker, but commission costs will be expensive. But many companies now allow you to enter their direct purchase plans without owning that first share. These are the no-load stocks. (Mr. Carlson says he first used the term "no-load stock" in a book he published in 1995.)

No-load stocks, in other words, are like no-load mutual funds, says Carlson. You contact the company; they send you forms and a prospectus, and you sign up. It's that simple.

Companies offering DRIPs include McDonald's, Exxon, and IBM. Like no-load mutual funds, however, some companies charge fees. To learn more about no-load stocks, contact or on the Internet.

Q. I want to open IRAs for my two children in their names. I would provide the money. The eldest child, a college student, earned close to $10,000 in part-time jobs. The other child, in high school, earned about $1,000. Can they establish IRAs? G.M., Los Angeles

A. Yes, says Paula Hogan, a financial planner with Hogan Financial Group, in Milwaukee.

As long as each child has "real" earnings, they can invest up to $2,000 in an IRA. (Your younger child can only invest up to the amount he or she earned.)

Assuming they have reached the age of "maturity" in their state (usually 18), the IRAs can be held in their names. If below the age of maturity, the parent would have to set up a "custodial" account. If the children pay no taxes, then a traditional tax-deductible IRA may not make as much as sense as a Roth IRA, says Ms. Hogan.

Contributions to a Roth are not tax-deductible. On the other hand, interest earnings are tax free, provided the Roth is held for at least five years and certain other requirements are met.

Questions about finances? Write: Guy Halverson The Christian Science Monitor 500 Fifth Ave., Suite 1845 New York, NY 10110 E-mail:

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