Dear Mr. Berko: The grandmothers and great-grandmothers at our bridge club were trying to select the most useful birthday gifts for our youngsters. We all agree that it's a waste of money to buy toys, which are mostly plastic, or clothing, which is soon outgrown and often not made in the U.S. We want to give a lasting gift that could grow in value. None of us has much money, but we're thinking about buying a few shares of a good stock and reinvesting the dividends, which we hope would enable us to buy a few more shares for other important events during the year. What stocks would you recommend, and how should we do this? -- EE, Syracuse, N.Y.
Dear EE: I earnestly applaud this wonderful idea. Frankly, I believe that our younger generation would be considerably better off if more folks would think like you gals. So many gifts are a stupid waste of time, money and intentions -- and are thoughtless, too. Common stocks are gifts that last a lifetime and also provide a wonderful learning opportunity for those youngsters who are lucky to have thoughtful, thinking grandfolks like you and your bridge club ladies.
Meanwhile, I've sent you a list of stocks that I think your kids might enjoy owning. Each pays a decent dividend, and each company is an American icon that the youngsters will readily recognize. Coca-Cola, General Electric, Pfizer, AT&T, McDonald's, Microsoft, Revlon, Mattel and Dow Chemical are a few classy issues that should continue to increase their revenues, earnings and dividends, and their well-known branded products are easily identifiable. These stocks, each of which trades on the New York Stock Exchange, will make great starter issues for your gossoons. They can easily follow the daily changes in stock prices and read about economic events in the news that affect their companies. Best of all, those striplings actually become owners of American industry. The dividends can be reinvested quarterly, and each quarter, these companies will send the younglings reports on how well they're doing. Once a year, the companies will send the grandkids colorful annual reports discussing their customers, their products and new products being developed while summarizing the important company events of the past year. The presidents of these companies will invite the juniors to their companies' annual meetings. It can be a fascinating experience to watch corporate autocracy at work. And many of those meetings are held in New York City, which is a five-hour drive from Syracuse.
Now, none of the large brokerage firms -- such as Merrill Lynch, UBS, Morgan Stanley and Prudential -- has the slightest interest in helping you establish a small account for grandkids. They will discourage this business and don't care to be bothered because this is an unprofitable transaction. Even if you do prevail at Merrill, UBS or any of the wire houses, they'll rip your heart out with huge annual account fees, between $50 and $100 a year, and the commission costs will exceed your share purchases. So I suggest that you ring Charlie Schwab or Fidelity or Vanguard and open an account for the lads and lasses under the Uniform Gift to Minors Act. You'll need their Social Security numbers, and you'll have to sign a boatload of papers (always paperwork), which may drive you bonkers. Then you're ready to purchase popular yet non-blue chip companies, such as Brinker International, Abercrombie & Fitch and Foot Locker. And if you enter the order personally on the brokerage's platform (without using a representative), the commission costs will be only about $9. If you're not computer-savvy, you can use the firm's help desk, which can give you clear instructions. Use the children's addresses so all the mail will come to them. Few companies still issue stock certificates, so the brokerage will mail quarterly statements to the kids, showing the current share position plus the new fractional share positions acquired by the quarterly dividend payments.
Malcolm Berko's column, "Taking Stock," can be found at creators.com.