There is an easy way for the small investor to play this investing system. The easy way is with the Merrill Lynch Blueprint Program. The Blueprint Program, formerly called the Sharebuilder Program, is ideally suited for us, the small investor. Briefly the Blueprint Program allows the investor to buy stocks, mutual funds, and precious metals at reduced commissions through a branch of Merrill Lynch, their "discount broker."
Merrill Lynch has over 1,000,000 Blueprint customers. The great advantage of Blueprint is that it allows you to buy and sell as little as $100 worth of stock as my system recommends, at very low commissions.
Here's how Merrill Lynch describes Blueprint: It's a convenient and inexpensive way to build your investment portfolio of stocks, mutual funds, and precious metals. More than a million people are building shares in their future and preserving the purchasing power of their dollars by participating in the Blueprint Program. Besides helping increase assets, Blueprint offers these benefits:
Small incremental investments in the securities you select allow you to build your portfolio over time as you invest in stocks, mutual funds, and precious metals. You have an opportunity to buy full and fractional shares because you invest by the dollar, not the share amount. The Blueprint Program will buy you shares out to FOUR decimal places. For example your account could show 78.9856 shares. This is a tremendous benefit to the small investor. Investment alternatives allow you to diversify your portfolio among thousands of stocks and closed-end mutual funds listed on the New York, American and Over the Counter Markets.
Reduced brokerage fees on securities provide substantial savings off the regular Merrill Lynch commission charges for stocks. When you purchase stocks through the Blueprint Program, you can take advantage of transaction fees up to 55% less than regular Merrill Lynch rates. Below are the Blueprint rates as of April 1988:
| TRANACTION AMOUNT | BLUEPRINT COMMISSION |
|---|---|
| $ 0 TO $ 125 | $12.50 |
| $ 125.01 TO $ 200 | 10% |
| $ 200.01 TO $ 500 | 5% + $10 |
| $500.01 TO $ 1000 | 1.5% + $27.50 |
| $ 1000.01 TO $ 5000 | 1.2% + $30.50 |
| $ 5000.01 TO $ 7500 | 1.15% + $39.50 |
| $ 7500.01 AND UP | REGULAR RATES |
Blueprint also charges $3.85 as a transaction fee for all trades and now charges $30.00 a year for account maintenance. There are no charges for Ready Asset, (money market), transactions.
The basic reason that Blueprint is better for us small investors is that all brokers including discount brokers, have a minimum commission. The regular Merrill Lynch minimum commission (not Blueprint) in August 1984 when I bought 100 shares of a $4.50 stock was $40. A comparison of several discount brokers from 1984 showed that the minimum commission ranged from $30 to $39. Also some discount brokers only dealt in round lots (100 shares).
For us small investors, Blueprint is perfect. If you look at the various charts throughout this book, you'll see that our buys and sells are small most of the time. Blueprint is an easy and inexpensive way to make them.
You always have immediate access to your investments under Blueprint. You may change from one investment to another any time. If you wish to buy or sell, Blueprint is only a toll-free (sorry only in the U.S.) And Blueprint has another advantage . . .
Merrill Lynch Ready Assets Trust
After an initial investment of $500, you can open a Ready
Assets Account (Money Market Account). With your
authorization Merrill Lynch will automatically invest cash
proceeds of $50 or more resulting from the sale of assets.
Blueprint puts proceeds in the Trust the next business day.
The money can then sit in the Trust earning higher money
market interest (usually higher than a bank savings account).
The money will already be at Merrill Lynch when it's time to
make another purchase. You can reinvest quickly by using the
U.S. toll-free number (800) 637-3766. Blueprint lists all
your investments including the Trust on quarterly statements.
These quarterly statements will give you an easy summary of
transactions in your account and show you how far you've come
on the road to financial freedom. You will also receive a
statement after each transaction. You should save these in a
notebook by date.
Tell Blueprint when you open your account that you want all dividends reinvested into the Ready Assets Trust instead of Blueprint automatically reinvesting them into additional shares. This will greatly simplify your income tax calculations at the end of the year.
The toll-free number (such a great benefit that it deserves repeating) is exclusively for Blueprint clients. Unfortunately it's not free for us overseas. Call (800) 637-3766 to speak with a Blueprint representative who can answer questions regarding your account. He can assist you in any type of transaction; make additional purchases and make any sales the system requires.
Blueprint offers insurance and safeguarding of securities free of charge. Your securities are protected up to a total of $2,500,000 (you'll get there) - $500,000 including $100,000 for cash through the Securities Investor Protection Corp., (SIPC). An additional $2,000,000 comes through the Aetna Casualty and Surety Company. Precious metals if you own them are stored in major London and Delaware bank depositories and insured by a London based insurer against most risks other than market loss.
Once you join Blueprint, they will send you a regular newsletter and keep you informed of all the latest developments. I have dealt with Blueprint from Seoul, Korea; Maffle, Belgium; and now Weilerbach, Germany. Blueprint impressed me with the high level of service and low commissions. This is your way to begin investing with very small sums at the lowest price with quality service. Take advantage of this excellent opportunity! To join Blueprint and receive all necessary information, write to:
Merrill Lynch, Pierce, Fenner & Smith
The Blueprint Program
P.O. Box 30439
New Brunswick, N.J. 08989-0439
If you are eager to start after reading this book and you should be, you can open your account by writing them. Open your account initially be putting all your money into Ready Assets. Later when you have selected what stocks you want, call Blueprint and have them sell Ready Asset shares and purchase your stock. It takes a couple of weeks to open your account. By putting your money into Ready Assets, you can check the paper and find out if the price of the stock you wanted is still at or near its low price before you buy it. The price may have changed enough that now you don't want to buy it. Under my system, you will need about $1,550 per stock. So for example if you sent Blueprint $5,000 to Ready Assets, you could buy three stocks later.
Based on commissions I recommend you invest $1,500 per stock -$1,000 worth of stock and $500 Ready Assets + $50 to cover the commission. If you decide you'd like a risky stock (more on these later), then I recommend you go $500 in stock, $250 in cash. I recommend this because otherwise you won't get many buys and sells and your profits will be less.
OTHER DISCOUNT BROKERS
Blueprint is a fine and inexpensive way to play the system but it's not the only game in town. There are other discount brokers out there. For investors who start with larger sums (for example $10,000 per stock) the savings can be substantial. I'd like to give credit to Steve Donahue for creating the graph in this chapter. The graph shows you a comparison of commissions between one discount broker (Pacific Brokerage Services) and Blueprint. Even if you start small, someday you will be big and you should shop around for the cheapest commissions.
The graph on the next page shows a comparison for Adobe, our example stock. A review of transactions for Adobe (you started with $10,000) will show you that you paid a total of $255 in commissions with Pacific vs. $690 with Blueprint. You would have saved $435 or 73%. Savings should even get larger as your transactions get larger.
After the graph I've included the names and addresses and some commission information on discount brokers. Write or if you can call toll-free, phone them for information.
All the charts in this book use Blueprint commissions; if we had paid less in commissions by using another discount broker, our commissions would have been less and our profits more.
| DATE | TRANS AMOUNT | # OF SHARES | BLUEPRINT COMM | PACIFIC COMM |
|---|---|---|---|---|
| 11/85 | $6,666 | 599 | $233 | $37 |
| 04/86 | $819 | 92 | $44 | $27 |
| 05/86 | $615 | 72 | $41 | $27 |
| 07/86 | $556 | 70 | $40 | $27 |
| 08/86 | $2,170 | 362 | $60 | $29 |
| 11/86 | $1,522 | 277 | $53 | $27 |
| 02/87 | $1,583 | 189 | $53 | $27 |
| 03/87 | $303 | 36 | $29 | $27 |
| 04/87 | $2,272 | 216 | $62 | $27 |
| 08/87 | $927 | 82 | $45 | $27 |
| SUBTOTAL | $660 | $255 | ||
| ANNUAL FEE | $30 | |||
| TOTAL | $690 | $255 |
DISCOUNT BROKER INFORMATION
DISCOUNT BROKER ------------------------------------ MINIMUM COMMISSION
Bidwell & Company
209 S.W. Oak St.
Portland, OR 97204 ------------------------------------------------- $ 20.00
(800) - 547-6337
Burke, Christenson & Lewis Securities Inc.
303 West Madison St.
Chicago, Ill 60606 -----------------------------------------------------$ 30.00
(800) 621- 0392
Fidelity Brokerage Services, Inc.
161 Devonshire St.
Boston, Ma 02110------------------------------------------------------$ 36.00
First National Brokerage Services
1822 Douglas St.
Omaha, NE 68102 -----------------------------------------------------$ 31.00
Norstar Securities
2 North Riverside Plaza
Suite 1717
Chicago, IL 60606------------------------------------------------------ $ 34.00
Pacific Brokerage Services
5757 Wilshire Blvd., Suite 3
Los Angeles, CA 90036----------------------------------------------$ 27.00
(800) 421-8395
DISCOUNT BROKER ------------------------------------------ MINIMUM COMMISSION
Quick & Reilly, Inc.
120 Wall St.
New York, NY 10005-------------------------------------------------- $ 37.50
(800) 221-5220
Charles Schwarb & Co., Inc.
101 Montgomery St.
San Francisco, CA 94104-------------------------------------------- $ 39.00
(800) 648- 5300
Muriel Siebert & Co., Inc.
444 Madison Ave.
New York, NY 10022---------------------------------------------------$ 34.00
(800) 872-0711
Waterhouse Securities, Inc
100 Wall St.
New York, NY 1005-3701---------------------------------------------$ 35.00
(800) 934-1773
K.Aufhauser & Company, Inc.
112 West 56th St.
New York, NY 10102-0836------------------------------------------- $ 24.99
(800) 368-3668
National Discount Brokers
(800) 4-1- PRICE----------------------------------------------------------$ 25.00
Brokers on the Web
The Computer Age comes to investing. Now you can do your buying and selling by computer over the Internet. Many brokers and subsidiaries of major brokers offer trading via computer. Most brokers on on the Web which means everybody can access them. Some are on a on-line service (AOL, Prodigy, etc) which means you'd have to be a member on that service to use them.
BARRON'S rated these brokers very recently. See my listing on the Mining Co for these ratings. There are several investing Usernet groups on investing (misc.invest & misc.invest.stocks where people offer opinions). You should remember we are looking for low-cost brokers. So if you see a low-priced broker, you can bet they probably don't offer a lot of services that a full-service broker offers. You don't need those services because you have the system to tell you what to do and my monthly newsletter and other sources to help you pick the best stocks for the system in the book.
Below are all the brokers I found out in cyberspace. I'll give the essential information you need to find them. Check out their web pages and you'll probably find additional information and if you want, you can probably sign up. Remember to look for services you'll need - does the broker offer stop/loss?, confirm trades?, offer money market fund you can buy and sell from?, let you reinvest dividends into your money market rather than buy more shares.
Below are online brokers you can check out. I tried to put the necessary info you'd need to contact them.
$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$
ONLINE BROKER-------------------------------------------- MINIMUM COMMISSION
Ceres Securities------------------------------------------------- $18.00, no minimum account
(800) 669-3900------------------------------------------------------balance ($20 set-up fee if
Web access: -------------------------------------------------------account under $1,000)
Ceres Securities
eBroker --------------------------------------------------------------$12.00, no minimum account
(800) 553-9513------------------------------------------------------balance ($20 set-up fee if
Web access: -------------------------------------------------------account under $1,000)
eBroker
E* TRADE-----------------------------------------------------------$14.95 for listed stock,
(800) 786-2575------------------------------------------------------$1,000 minimum account
Web access: -------------------------------------------------------balance
E*TRADE
Compuserve: GO ETRADE
Fidelity Investments----------------------------------------------$48.50 for 100sh @$50,
(800) 544- 0246-----------------------------------------------------$5000 minimum account
Web access: -------------------------------------------------------balance
Fidelity (info only)
Via Fidelity Online Xpress (FOX) Software
Lombard Institutional Brokerage-----------------------------$34.00, $500 minimum
(800) 688-6896-------------------------------------------------------account balance
Web access: -
Lombard
National Discount Brokers--------------------------------------$20.00 for OTC stocks; $28
(800) 888-3999-------------------------------------------------------- for other stocks
Web access: -
National Discount Brokers
ONLINE BROKER --------------------------------------------------MINIMUM COMMISSION
Net Investor-------------------------------------------------------------$29.00, $5000 minimum
(800) NET-4250--------------------------------------------------------account balance
Web access: -
Net Investor
Pacific Brokerage Svcs--------------------------------------------$15.00 for market orders
(800) 342-8497----------------------------------------------------------$25 for all others
Web access: -
Pacific Brokerage Svcs
PCFN----------------------------------------------------------------------$40.00, no minimum
(800) TALK-PCF------------------------------------------------------- balance
AOL: Keyword PCFN
Prodigy: JUMP PCFN
Quick & Reilly-----------------------------------------------------------$44.00 for 100 shares @$50
(800) 837-7220----------------------------------------------------------no minimum balance
Web access: -
Quick & Reilly
Compuserve: GO QWKI
e. Schwab-----------------------------------------------------------------$49.50 for 100 shares @$50
(800) 540-0667-----------------------------------------------------------no minimum
Web access: -
e. Schwab
Street Smart (Schwab)------------------------------------------------$39.00, $1000 minimum
(800) 540-0667------------------------------------------------------------account balance
Via Street Smart software
WealthWEB---------------------------------------------------------------$34.00, no minimum
(800) 368-3668-------------------------------------------------------------account balance ($20
Web access: -------------------------------------------------------------- set-up for account
WealthWeb----- less than $1,000)