Part 2: Dividends for My Daughter’s New Car

Last time, we talked about the Williams Plan. The Williams Plan uses income producing securities such as Utility Stocks. These stocks give high dividends. The idea is to use the dividends to purchase more high income stocks. This will give your account a compounding affect.

We talked about several online accounts before. However, for people investing from $59 to $25 per pay, I suggest using the “Share Builders” Account managed by ING Direct. This account allows you to purchase full and fractional shares for only $4.00 per transaction. I will provide you with the link to the Share Builders Account web page:
http://www.sharebuilder.com/sharebuilder/Default.aspx

You can schedule investments on a weekly, bi-weekly, or monthly bases. You can also invest when you want with no schedule. You can invest using any dollar amount since you can purchase fractions of shares. You can choose from over 7,000 investments and ETFs.

If a person can afford to invest $25 per pay and gets paid 26 times a year, that person will pay $104.00 in commissions and invest $546.00 per year. In this case, it might be better to place $25 per pay into the account and invest 4 times a year paying $16.00 a year in commissions. This will make available $634.00 per year to invest. In ten years, you will have $6,340 and in twenty years, $12,680 if no interest or dividends are given and the stocks refuse to appreciate.
On the other hand, if you see a total return (stock appreciation and dividends) for ten years at 10%, you will have $10,954 and in twenty years at 10%, you will have $40,365. This looks like money for some big ticket items like a car, down payment on a house, pay off a home, or payment toward trade school or college. Whatever you use it for, you will be further ahead than if you spend it on something else over the years.

You may also consider investing in DRIPs. Here is a link that is self explanatory.
http://www.directinvesting.com/drip_learning_center/what_are_drips.cfm

As you probably already guessed, success centers around the investment, type of account, the time when you need the money for purchases, and portfolio management. In our next part of this series, we are going to look at Portfolio Management of a Williams Plan Portfolio.