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Portfolio Strategy

ShareOwner lets small investor build wealth, piece by piece Add to ...

There’s an online brokerage where you can buy just a slice of an Apple share, or a mere sip of Tim Hortons.

The broker is called ShareOwner and it brings the convenience of mutual fund investing to stocks. “Most of our customers have a portfolio they’re building with 10, 15 or 20 stocks,” said Bruce Seago, a veteran online brokerage executive who recently bought and began running ShareOwner. “You can say to us, take $300 and put $15 into each of these 20 stocks. It makes it easier to manage the portfolio because most investors think in terms of dollars, not necessarily in terms of shares.”

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ShareOwner allows clients to do more than just buy fractional amounts of stock. There’s also a dividend reinvestment plan (DRIP) that will scoop up however much cash you receive in dividends from a stock and put it toward more shares. A ShareOwner demonstration portfolio shows a holding of 0.8242 of an Apple share that earlier this year paid a pro-rated $2.16 in dividends. That money was used to buy an additional 0.0042 of an Apple share.

The company behind ShareOwner was founded in 1987 by John Bart, a onetime finance professor who became a Canadian pioneer in educating the public on investing in stocks. Mr. Seago bought the firm from Mr. Bart and plans to build its brand as a home for investors who are interested in using stocks and exchange-traded funds to build their portfolios.

“We’re geared toward a buy and hold investor,” he said. “Most of our research and our education is oriented around a Buffett-like approach to investing – buy high quality companies at attractive prices and hold for the long term.”

In keeping with Mr. Bart’s efforts to help people become successful investors, the stocks available through ShareOwner tend to be those of large Canadian and U.S. companies and popular ETFs. The firm recently doubled its menu of available securities to more than 450.

Mutual funds aren’t available at ShareOwner, and neither are bonds or GICs. The website is fairly basic, although Mr. Seago plans to introduce new tools to help investors manage their portfolios. ShareOwner is just like other online brokers in that it’s a member of both the Canadian Investor Protection Fund, which protects portfolios for up to $1-million in case of broker insolvency, and the Investment Industry Regulatory Organization of Canada.

ShareOwner’s commission structure isn’t a great bargain at a time when investors can trade for as little as $1 to $5 per online to buy or sell, but it makes up for that with considerable flexibility. With the firm’s pooled trading service, you pay a $40 commission per buy trade and you can have your money spread among any number of stocks. Alternatively, you can pay $9.95 per stock for regularly scheduled buys. Want to buy or sell right away? The cost is $19.95, a price that applies to everyone. There are no discounts for large accounts or for active trading.

Like most online brokers, ShareOwner’s DRIP is available at no cost. Unlike the competition, ShareOwner allows clients to buy fractional shares with their dividends. DRIPs that allow fractional purchases are available directly through many publicly traded companies, but they can be a hassle to set up and manage.

All types of accounts are available from ShareOwner, but mind the annual administration fees. Registered retirement savings plan accounts cost $80 per year, registered retirement income fund accounts cost $105 and tax-free savings accounts cost $50 (HST included). “These fees are one of the things we’ve been hearing we should probably get rid of,” Mr. Seago said. “We are looking at it.” On the plus side, ShareOwner has no minimum requirements for opening an account, and there are no inactivity fees.

ShareOwner has a few clients with portfolios worth $1-million plus, but the average account size is about $30,000. “A good chunk of our clients have less than $5,000 with us,” Mr. Seago said. “You might have a one-time investment and you’re just going to buy and hold it. You take advantage of dividend reinvestment and over time your portfolio grows.”

While ShareOwner offers about 50 ETFs for trading, it’s not an ideal platform for investing in these index funds that trade like a stock. Most of the ETFs are U.S.-listed, and the menu for the TSX is limited mainly to iShares and Horizons products. You could certainly include a couple of ETFs in a broader portfolio of individual stocks at ShareOwner, but an ETF-only portfolio would be better housed at a firm where ETFs can be traded with all or some commission fees waived. Brokers in this group are Questrade, Qtrade Investor, Scotia iTrade and Virtual Brokers.

Setting up a regularly scheduled stock purchase plan is easy to do on the ShareOwner website. Browse the selection of stocks in each sector, do your research and then go to an online order page that lets you select your stocks and choose how often you want to invest in them – one time, monthly or every two, three or four months. Select your stocks, the dollar amount for each and indicate whether you will pay for the transaction from your ShareOwner account or a linked bank account.

U.S. stocks far outnumber Canadian stocks in the ShareOwner inventory, but you’ll still find domestic blue chips like all the big banks, Canadian Pacific Railway and Canadian National Railway, BCE, Telus, TransCanada, Rogers, Enbridge and Imperial Oil. In the tech sector, you’ll find not only Apple, but Research In Motion and CGI Group among others.

At $40 per bulk buy trade, the economics of investing through ShareOwner work best for larger purchases. Figure on investing $2,000 or more at a time so your commission costs are no more than 2 per cent of the amount you’re investing.

If you’re looking for investing ideas that will mesh well with an account at this firm, consider ShareOwner’s own research products. Annual costs start in the $130 range – ask for a free sample before you buy.

Read more from Portfolio Strategy.

For more personal finance coverage, follow Rob Carrick on Twitter (@rcarrick) and Facebook (robcarrickfinance).

 

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