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Intel

For years DRIPs and DSPs have been just the ticket for investors looking to invest small amounts in a given company's stock. Like a mutual fund, DRIPs and DSPs let you own partial shares something that a broker would never allow. And since you are purchasing the stock directly from the company, you also avoid hefty brokerage fees.

Until recently, however, the lack of companies offering these plans, combined with the sheer tediousness of tracking the required paperwork (especially if you invested in more than one company), made DRIP and DSP investing a drag.

But now that's changed, thanks to a small group of quasi DRIP and DSP brokers who have gone online. For a small premium ($5 a trade at the most), you can now manage your DRIP and DSP accounts through one Web site. That makes checking your balance, placing buy and sell orders and keeping track of the extensive paperwork much easier. Of course, even with the low fees, these aggregators will cost you more than investing directly in a traditional DRIP or DSP plan. But the convenience can be worth the extra expense.

DRIP Basics
First, a short primer on DRIPs and DSPs. DRIPs are currently offered by over 1,300 corporations, including IBM, Coca-Cola and Xerox. The plans allow shareholders to reinvest their dividends to purchase more shares. Traditionally, to start a DRIP, you must already own at least one share of the stock, which can be purchased through a broker or given to you by a friend or relative. A DSP, on the other hand, allows you to make all stock purchases, including the initial share, directly from the company. Often there is a minimum initial purchase requirement as well as a small start-up fee.

Both DRIPs and DSPs allow for small investments (sometimes as low as $10), making them a good bet for people who can't meet the minimum initial balance requirements of most brokers and mutual funds. And since you get to buy an actual stock rather a mutual fund, DRIPs and DSPs are also often marketed as a great way for kids to get involved with investing. (Picture you and your child fighting over The Wall Street Journal to check the closing price of Nike.) Whether this is enough to turn your child into a pint-sized Warren Buffett is, of course, debatable.

If you do decide to use an online aggregator like Sharebuilder.com or Buyandhold.com (detailed below), keep in mind that the fees you'll pay for the convenience while small can add up quickly (kind of like a sushi menu). They also can eat up a significant amount of your investment. (After all, if you're only investing $20 a week, a $2 fee is 10%.)

Here's the lowdown on your online options:

DRIP Brokers
Sharebuilder.com
Sharebuilder.com is an outgrowth of DRIP aggregator Net Stock Direct. It boasts the largest selection of stocks (currently 2,000) and 46 index funds. There's a $5 flat fee for one-time investments, and $2 for recurring ones ($1 in custodial accounts). You can arrange to pay weekly or monthly, via check or automatic withdrawals. You can also elect to have your dividends automatically reinvested, as well as transfer over existing DRIP or DSP accounts. There are no minimum investments or start-up fees.

Now, if you're thinking that $2 trades are your ticket to day-trading stardom, forget about it. The company executes trades just once a week, so it's impossible to know the exact price of the shares of the companies you are buying. And Sharebuilder.com tags on a relatively large fee for selling $19.95. Real-time trades are available, but you'll have to pay $19.95 per trade for the service. (All selling is done in real-time.)

Buyandhold.com
Buyandhold.com, which launched in November 1999, has a similar philosophy and target audience. "We refer to our customers as the 'minivan clan,' says CEO Peter Breen. "They're people who realize the power of the market but don't have the money or the time to outthink it."

The site offers 1,400 stocks (that's significantly less than Sharebuilder.com) and no index funds. To buy or sell a stock costs $2.99, with no start-up or annual fees. Compared with Sharebuilder.com, Buyandhold.com leans further into the discount-brokerage area, executing trades twice a day.