How to buy partial shares of Berkshire Hathaway with ShareBuilder

As you may know, I’ve decided to invest roughly 50% of the earnings from The Dough Roller in B shares of Berkshire Hathaway. (The other half goes to charity.) I say roughly half goes to the B share because a small portion of the 50% I keep goes to loans on Prosper and Lending Club. As of the end of 2007, I had $910 to invest in the B share. The problem is that a single B share, even with the market decline, costs over $4,000. One option would be to save up enough for a share, and invest it using Zecco at no cost. I’ve decided to take a different approach, however, and use ShareBuilder.

ShareBuilder, as the name suggests, is a low cost way to make small monthly investments. One of the great features is that you can invest in partial shares. So I don’t have to save up $4,00o or more before buying a B share. Instead, I can make small monthly contributions in the B share at a cost of only $4 per purchase. Setting up the account was simple. It links to my checking account and I can transfer funds to and from the ShareBuilder account with a few clicks of the mouse. Also, while my money is sitting in ShareBuilder’s money market account waiting to be invested, I’m earning a descent interest rate (about 4% now). Note, ShareBuilder was recently bought by ING Direct, so the ShareBuilder website is now orange. As an ING Direct account holder, I like that the two companies have joined forces.

ShareBuilder’s Automatic investment plan

To put my investment’s on auto-pilot, I set up a ShareBuilder automatic investment plan. With this plan I choose my investments (for me just the B share), and how often I want to make a purchase. I choose a monthly plan that will invest $500 each month. I’ve started out at this level in part because half of my earnings go to charity. As the site grows and generates more income, however, I’ll increase this amount (or decrease it if revenues drop off). Once you set up the plan, you’re done.

Now it’s your turn

I’ve chosen to track my ShareBuilder, Prosper and Lending Club accounts on The Dough Roller in part to demonstrate how relatively small consistent investments can grow into substantial sums. I suspect that what has started out as just a few hundred dollars will grow into many thousands and tens of thousands (if not more) of dollars over the coming years. Whether you just watch, or whether you join along is up to you. But there are many, many options for investing small amounts of money each month. Here are a few:

ING Direct: If you want to save cash, perhaps to build an emergency fund, the ING Direct account is a great way to go. ING pays a competitive interest rate; opening an account is simple; and transferring funds to and from the account is a snap.

ShareBuilder: If you’re looking to make regular monthly investments in the stock market, ShareBuilder is a great low cost option as I’ve described above.

Lending Club: LC is a P2P lending and borrowing community. It was originally launched on the Facebook platform, but has sense become available elsewhere. I’ve begun investing in loans at LC, and will update you on my progress.

Tagged as: Berkshire Hathaway, ING Direct, Investing, Lending Club, Sharebuilder, Warren Buffett