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How to Buy Sky-High Stocks

By U.S. News & World Report

It’s one thing to miss the boat on a great investment. Even Warren Buffett does that.

Yet it’s quite another to watch a luxury liner sail on by and feel powerless to climb aboard. In this case, you’re savvy enough to know where that ship’s going. Then you take a look at the ticket price, and suddenly a year’s worth of prudent saving to buy stock feels an awful lot like chump change.

Witness the recent run-ups of Amazon.com (ticker: AMZN) and Alphabet ( GOOG, GOOGL) as prima facie evidence. Amazon was trading Monday at $995, up 39 percent over the last 12 months. Alphabet? It’s Class A stock is an almost identical $976, and in the black an almost identical 38 percent. It even hit and stayed above the $1,000 mark for a brief spell in early June.

[See: 9 Investing Steps From Warren Buffett’s Playbook.]

Meanwhile, the cryptocurrency bitcoin continues to do a fine impersonation of a loose Las Vegas slot machine. Even the bad publicity generated by the WannaCry ransomware attacks (the bad guys asked for their payments in bitcoin) failed to derail its latest digital-age rally. As of Monday, one bitcoin was worth more than $2,559, close to five times what it fetched in 2016.

So let’s see: one share of Amazon, one share of Alphabet and one bitcoin. That’s not asking for much, is it? Just one. Of each. And as long as you’ve got $4,500 lying around, you’re golden, pal.

Or, you could just take one of those high-ticket investments and do what you never would with, say, an Armani suit: Cut it into little pieces and buy a few of those instead. This is where the fractional purchasing concept comes in, and some of the newest mobile- and web-centric platforms make it possible.

Chicago-based M1 Finance, launched in September, allows investors to buy partial shares of individual stocks and exchange-traded funds. M1 is the brainchild of CEO-founder Brian Barnes, a fresh-faced fellow at 27 who just earned his bachelor’s degree from Stanford in 2012.

Barnes explains this stuff as only a young investor not jaded by jargon can.

“With fractional shares, every penny can get put to use,” he says. “The purpose of investing is to move out of cash and into assets. Without fractional shares, you build up cash waiting to make a purchase. With fractional shares, you don’t have to wait.”

Barnes cites the other liberating aspects of buying chunks of high-priced shares. These range from better portfolio diversification to more regular investing of money, in the same sort of consistent streams utilized by automatic bill pay, for example.

All of this, Barnes says, “effectively turns individual investors into portfolio managers — where they can have as little as 1 percent of their portfolio in Apple ( AAPL) or Google, regardless of how large or small of an investment that is.”

And if you already own shares of a stock that has since priced you out of the market, there is good news in the same vein. “Fractional shares can be purchased through a DRIP or dividend reinvestment plan,” says Joseph Ventura, founder of Eden Financial in Albany, New York. “It’s done directly with the company and not via a brokerage account, so DRIP participants pay no commissions or sales charges.”

[See: U.S. News & World Report’s 10 Top-Ranked ETFs.]

In fact, the fractional concept even applies to bitcoin, to the point where newfangled ATMs — known as BTMs — allow you to deposit small sums of cash and get a receipt that indicates how much bitcoin you just bought. One such terminal even exists at Amsterdam Falafelshop (yes, a real-live falafel shop) on 14th Street NW in the District of Columbia. Save some of your cash, though: a quick call there indicates that they won’t take bitcoin for your lunch order.

Another way to nab stocks with a stratospheric share price is through forming or joining an investment club. Like a lottery pool or two couples sharing a multi-unit property, investment clubs allow people to combine financial resources, in this case funding a larger stock purchase or portfolio even as the members further their education and experience with the market. Such clubs have been around for decades, and typically proliferate in communities and regions far beyond the bustle of the trading pit.

Yet to expand on that lottery pool comparison, a loosely organized herd of amateurs can easily succumb to hit-the-Powerball-jackpot fever.

“Unless you’re looking for investment clubs from a social aspect, I am not a big fan,” says Bob Johnson, president and CEO of the American College of Financial Services in Bryn Mawr, Pennsylvania. “Investment clubs often suffer from groupthink.”

It’s one thing if club members come from diverse socioeconomic backgrounds and have unique market perspectives that make for healthy debating. “But too much homogeneity in terms of club composition can result in people looking at opportunities from the same or similar perspectives,” Johnson says.

When it comes to sky-high stocks, Johnson raises two salient points. First, there are many under-the-radar stocks that also cost a boatload to own: They just don’t grab the headlines as much as sexy high-tech affairs. He points to the homebuilder NVR ( NVR) and specialty insurance underwriter Markel Corp. ( MKL) as examples; their shares sell for $2,459 and $974 respectively.

Second, those who seek expensive stocks often confuse the quality of the product with that of the company as a whole. Consumers love Tesla’s ( TSLA) electric cars. But over the last 12 months, this stock that now trades at $370 (and is up 72 percent over the last year) has earnings in the same period of $4.77 — as in minus $4.77. Overvalued? You bet.

What’s more, many high-ticket stocks pale in comparison to the great investments found in bargain basement country. And should you ever get discouraged, remember: Some stocks are pretty much outside everyone’s price range.

If you had $150,000 to blow, you could land a median-priced home in Omaha, Nebraska, where Buffett lives. But forget buying a share of his beloved Berkshire Hathaway Class A stock ( BRK.A). Right now, that’s going for about $257,510.

[See: 10 Great Tech ETFs That Stay Under the Radar.]

Not even a second mortgage on your Omaha home is going to help much there — though that represents, almost to the dollar, the 2017 equivalent of what Buffett paid in 1958 for the house he still calls home today. And when your home is long paid for, who cares much about missing the boat?

More from U.S. News

The Fastest Ways to Lose All Your Money in the Stock Market

6 Things to Know About Mark Zuckerberg’s Manifesto

10 Important Investments Before Having a Baby

How to Buy Sky-High Stocks originally appeared on usnews.com

Don’t Settle for Student Loans to Pay for Online Education

By WTOP Staff
Online college programs are becoming a more popular choice for prospective students, with one study finding that more than 6 million students enrolled in at least one online course in fall 2015. The popularity of these courses can be attributed in part to their flexibility with working adults' schedules, students' ability to progress more quickly through online programs and, oftentimes, cheaper tuition. [See 10 low-cost online bachelor's programs for out-of-state students.]Online degrees can be beneficial to many college students, but some studies have shown online learners complete their programs at lower rates than students at traditional brick-and-mortar campuses. Individuals with student loans but no degree comprise two-thirds of defaulted borrowers. Though these numbers are not encouraging, just like for traditional programs, there are ways to reduce how much you'll need to borrow for an online program to ensure you won't become one of these statistics. Don't just settle on borrowing student loans to cover the whole cost of your program and living expenses. Instead, start thinking about how to cut costs and cover your balance in different ways, such as the following. -- Grants and scholarships: Even though you are taking an online course, you can still apply and receive grants and scholarships. But your first step should be to complete the Free Application for Federal Student Aid, commonly referred to as the FAFSA, which will allow you to receive a Pell Grant if your expected family contribution is low enough. The EFC criteria and award amounts are adjusted annually, but the 2017-2018 academic year awards range from $606 to $5,920, which could significantly lower the amount you borrow annually. Your next step is to apply for scholarships. You can start by checking online scholarship search engines, such as the Salt Scholarship Search, College Board's BigFuture and Peterson's. But don't forget to take advantage of local organizations and your school's financial aid office. Both may offer scholarships that you can't find with a national scholarship search. [Review these 10 sites to kick off your scholarship search.]For instance, organizations like the Elks Club, Knights of Columbus or the Rotary Club typically offer scholarships annually to local students. Just because you're going to school online doesn't mean you're ineligible. Visit your local library for scholarship listings, and ask around town. You might be surprised how many local organizations offer scholarships. While these scholarships typically aren't large, every little bit counts. Each dollar you receive in a scholarship is a dollar you don't have to borrow and pay interest on. -- Work-study: Another option for online students may be work-study awards. Not all students enrolled in online programs are eligible, but students at some schools -- including, for example, SUNY Empire State College and Liberty University -- are. Work-study awards are not given upfront like scholarships and grants. In most cases, they are an offer to earn up to the awarded amount if you secure an eligible work-study job. While there is a misconception that all work-study jobs must be on campus, students can work for off-campus, nonprofit or public employers as long as the work is in the public's interest. You may be able to work for a for-profit employer if the job is relevant to your course of study. No matter who the outside employer is, it will need to have an established agreement with your college for you to receive work-study funds. Remember, to be eligible for federal financial aid, you must be enrolled and pursuing a degree or certificate. If you're not working toward a credential, Pell Grants and work-study won't be option, but you may still be able to take advantage of private scholarships -- just be sure to read the eligibility criteria carefully. [Explore what to know about financial aid in online programs.]-- Pay as you go: One of the great benefits to enrolling online is the flexible schedule, which can allow you to complete your college coursework around your responsibilities. But prospective students often overlook using their part- or full-time job earnings as an option for paying for college. Almost 80 percent of college students in 2015 worked at least part time while attending classes, according to the National Center for Education Statistics. By budgeting and thinking strategically about your college costs, you can likely reduce your dependence on student loans by paying a portion out of pocket. Many -- but not all -- online programs are less expensive than traditional programs and often have shorter payment periods. Six, eight or 10 weeks are common course durations. Because of the frequency of payments in an online setting, you may be well-placed to pay as you go and possibly avoid borrowing altogether. Attending college online and avoiding student loans may be challenging, but if you are willing to put in the effort, you can limit the amount you need to borrow. More from U.S. News Q&A: Understanding Student Loan Discharge Eligibility Student Loan Refinancing Isn't Right for All Borrowers
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