Costco Connection - December 2008

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Smart, scheduled
and long-term

COMSTOCK/RF

Investing the
ShareBuilder
way

THE INVESTING philosophy behind the Costco ShareBuilder program is dollar-cost averaging. With this strategy, you invest the same amount on a regular basis, regardless of whether the shares you are purchasing are going up or down in price. That way, you purchase more shares when the price declines and fewer shares when the price increases. Over time, you may achieve a lower average cost per share compared to a lump-sum investment, especially in volatile markets.

While dollar-cost averaging won’t guarantee a profit or protect against loss in declining markets, it provides a sensible and affordable way to invest, and can reduce the effects of market volatility. Investors should consider their financial ability to continue investing in periods of declining markets.

Automatic cost-averaged
stock buys help weather
the stormy economy

By David Wight

PERSPECTIVE MAKES a big difference. Many investorswhoareheavilycommittedtostockshave exhibited panic during the recent roller-coaster performance of the world financial markets. But for others, the economic chaos presents an opportunity to find real stock bargains at lower prices than in recent history—a strong investment position as the market recovers.

Record numbers of investors are opening new accounts with ShareBuilder, one of the first online brokers to focus on small investors, and a company that has provided a co-branded service to Costco members since 2002.

“While the market remains volatile, our customer base continues to follow a long-term approach to savings and investing, seeing this time as a significant buying opportunity,” says Kathy Schanno, spokesperson for ShareBuilder. “The number of new accounts from July through October 2008 has more than tripled, and we find existing customers are investing even more.”

One new account holder since late September 2008 is Satyajit Nath, a Microsoft program manager in Redmond, Washington, who has followed the growth of ShareBuilder over several years, thinking their scheduled, cost-averaged approach to investing is a good idea (see sidebar). “When I noticed Costco promoting ShareBuilder, I felt my original good impression was correct,” he says.

Nath, who has a son in college, admits to being very conservative with his savings following the dot-com bust 10 years ago. He kept his bank money market account for ^$337,371savings and the 401(k) plan provided by his employer. His understanding of stock market investing was limited, and he How $100 works for you blames himself for not learning enough _Here’s _what _investingabout stocks. ^$144,028$100 per month into a “But I recently listened to an audio- ShareBuilder account book, Learn to Earn by Peter Lynch [and ^might ^be ^worth ^if ^it $56,923 John Rothchild, Simon & Schuster, 2006], ^earned ^8%.$17,680 which broke investing down into fundamentals that I really understood,” he says, 10 years ₂₀ _years“such as how to value a company, under- ³⁰ ^years40 years

standing what is a bargain stock and what is an overpriced stock based on earnings, and not paying undue attention to share prices dropping. It opened my eyes and

madetotalsense—youvalueacompanyforits actualworthasopposedtooverreactingtospuri-ous data such as falling stock prices.”

The real impetus for Nath to start investing now was to get serious about his retirement savings. He has specific goals set for what kind of growth his investments need to achieve to keep him on track.

“I needed to figure out what stocks were bargain valued with long-term growth potential, then do long-term investing in those stocks and follow those companies closely,” he says. “ShareBuilder is the way I could do that with routine, planned monthly investments that I’ll review each month, leaving plenty of time to understand changes in a business as opposed to reacting to rising or falling stock prices.”

Nath also factored some of his other interests into choosing the stocks for his initial portfolio.

“I picked one stock because of my interest in movies ... an emerging company there, in fact now a studio,” he says. “Another pick is a company that produces technology for the audio industry and has huge growth potential.”

He’s very enthusiastic about the benefits, savings and ease of investing with ShareBuilder.

“There’s the incentive of the automatic trades costing less than real-time trades that encourages disciplined investing,” he says. “And another cool feature is being able to fund the automatic transactions electronically from my savings account, seamlessly.” C

Connecting Costco members are eligible for special benefits from ShareBuilder. For a limited time, Executive Members get a $90 account bonus and a 25 percent rebate on qualifying transactions. Business and Gold Star members get a $70 account bonus and a 10 percent rebate on qualifying transactions. Offer ends December 31, 2008. For more information, including terms and conditions of this offer, go to costco.com and type “invest offer” in the search box.

This is a hypothetical example based on a fixed 8% rate of return and is not a guarantee of future performance. Actual investment returns will vary with stock selection and changing market conditions. Calculations do not include tax or inflation considerations.

While this story is a true experience of an actual investor, ShareBuilder does not represent that everyone will have a similar experience. This story should not be considered investment advice, or a guarantee of future performance. References to stocks are for illustrative purposes only. ShareBuilder is a registered broker/dealer, member FINRA/ SIPC, and is not affiliated with Costco. ShareBuilder is a subsidiary of ING Bank, fsb. Securities products are not FDIC insured, not bank guaranteed and may lose value. Costco is not a broker/dealer and does not provide any investment, administrative or fiduciary service.