Smart investments for young professionals: whether you have $500 or $5,000, here are great places to stash your cash

Black Enterprise, July, 1993 by Leslie N. Vreeland

If you feel truly daring, you might even consider a little stock picking yourself by participating in so-called dividend reinvestment plans, or DRIPS. About 900 companies, many of them blue-chips, waive brokerage firm commissions and even allow you to buy fractions of shares, when you invest directly with them. The catch is that you must plow all periodic income payments (dividends) back into your account

"With $5,000, you can start accumulating positions in about 10 good companies through DRIPS," points out Charles Carlson, the editor of Dow Theory Forecasts and author of Buying Stocks Without a Broker His suggestions: energy giant Exxon (recent price, $65), and health care manufacturer Abbott Labs (recent price, $28), which Carlson labels as "undervalued, with good growth prospects."

Gregory Weiss, associate editor of Investment Quality Trends, the La Jolla, Calif.-based stock newsletter, suggests that first-time stock pickers take a look at utility DRIPS. These stocks pay handsome dividends and, as Weiss points out, "it's so important to consider dividend yield when you're starting out because they provide a safety net should the stock price drop."

Specifically, Weiss recommends Texas Utilities (recently $44, yielding 6.7%), the largest utility in the Lone Star state, which has increased its dividends for 46 years running; and Allegheny Power, ($50, 6.2% yield), which has consistently boosted its dividends for 30 years.

Make no mistake: Since individual stocks are much more volatile than funds, DRIPs aren't for everybody. In fact, many investment advisers suggest sticking with mutual funds altogether unless you've got $20,000 or more to play with. On the other hand, "DRIPS can be a great way to get introduced to the stock market," says financial planner Lynn Ballou, who recalls her own first investment - public Service Co. of Colorado's DRIP. "Owning it taught me a lot," she says. Better still, "My husband and I just added on to our house with part of the earnings."

Talk about investing from the ground up.