Last week, I wrote about drawing up a wish list of stocks and funds to buy during the market carnage. That prompted an email from

Ray Macchiarola

suggesting that perhaps "the market hasn't worked out all its problems yet," and asking if it was really wise for me to continue with my bullish attitude in a bear market.

Ray makes an excellent point -- the same one

Jim Jubak

suggested in his

column last week. The thought of a bear market fills me with dread and uncertainty. If this is a big bear, we should run for cover. If it's a little bear, we should bide our time, ready to jump in.

But I don't know which it is. And I don't like to spend my day watching the numbers on my online portfolio at

MSN MoneyCentral

flick from red to black or black to red, and trying to guess whether I should buy or sell.

Need a Plan? Here's One

I'm a person who needs a plan. And

Paula Clodfelder

is a person who has one. Her plan is to gradually funnel money into the stock market through thick and thin. Paula is one of the 50,000 investors who've set up accounts with

ShareBuilder.com to make regular investments into the market. Making regular investments is what we should all be doing.

"People who dollar-cost average into the market are in it for the long term," Paula says. "A day like Friday

April 14, when the

Nasdaq Composite

index plummeted 355 points is exhilarating. But you don't pay it that much mind."

Dollar-cost averaging is a fancy term, but all it really means is setting up a plan to invest a consistent sum of money in the market once a month or once a quarter.

Dollar-cost averaging works for two reasons. First, it removes the emotion from investing -- and, if my house is any example, there's been lots of emotion over the past couple of weeks. Second, putting money in regularly without thinking about it allows you to buy more shares of a stock or mutual fund when the market is down, less when it's up.

There are a number of ways to do this.

One is to set up a mutual fund portfolio and have the money deducted each month from your paycheck or bank account. But many investors choose to buy individual stocks instead of mutual funds.

Building Your Shares

For those stock investors, ShareBuilder, an online service that got underway in January, is a ready-made answer. With ShareBuilder, investors can buy stocks and exchange-traded funds like the

Nasdaq 100

tracking stock

(QQQ) - Get Report

, with no minimum investment and at a cost of just $2 per investment ($1 for custodial accounts).

We've had lots of questions about ShareBuilder in the Start Investing community. I've been promising an update, and what better time than in the midst of the volatility we've seen in the markets in recent weeks?

Before she opened the ShareBuilder accounts for herself and her children, Paula Clodfelder used dividend reinvestment plans, or DRIPs, which allowed her to buy fractional shares of stock directly from companies like

Wal-Mart

(WMT) - Get Report

and

Home Depot

(HD) - Get Report

. Most DRIP plans are free or quite inexpensive, sometimes following an initial enrollment fee. The problem with these plans is that many of the most popular tech companies do not offer them. They can also be a record-keeping nightmare, as you must keep track of all the fractional shares yourself.

What ShareBuilder Offers You

ShareBuilder offers the 2,000 largest stocks on the

New York Stock Exchange

and the Nasdaq, as well as 34 exchange-traded funds, such as the QQQ or

Standard & Poor's Depositary Receipts

(SPY) - Get Report

, the securities known as "spiders," which represent a portfolio of common stocks meant to track performance of the

S&P 500

index. The number of investing options will soon be increased to 3,000, according to Brian Ratzliff, ShareBuilder's vice president of marketing.

ShareBuilder consolidates all your purchases on one statement and keeps track of your cost basis, which is necessary for tax reporting purposes. Everything is done online.

Ratzliff has collected data on the investors who used ShareBuilder in its first three months of operation, and the way they used it.

Ratzliff says half of ShareBuilder's customers are 19 to 39 years of age, and most of them also have online brokerage accounts. The typical investor puts $300 a month into three different investments, he says. And 35% are female, which is higher than most brokerage firms.

Most Popular Investments

Not surprisingly, the 20 most popular ShareBuilder investments are mostly technology stocks:

Cisco Systems

(CSCO) - Get Report

,

Microsoft

(MSFT) - Get Report

,

America Online

(AOL)

, Nasdaq 100 tracking stock,

Oracle

(ORCL) - Get Report

,

Intel

(INTC) - Get Report

,

Lucent Technologies

(LU)

,

Qualcomm

(QCOM) - Get Report

, Home Depot,

JDS Uniphase

(JDSU)

, Wal-Mart,

Dell Computer

(DELL) - Get Report

,

Walt Disney

(DIS) - Get Report

,

General Electric

(GE) - Get Report

,

Yahoo!

(YHOO)

,

Sun Microsystems

(SUNW) - Get Report

,

MCI WorldCom

(WCOM)

,

Pfizer

(PFE) - Get Report

,

Amgen

(AMGN) - Get Report

and

CMGI

(CMGI)

.

Paula Clodfelder, for example, puts money into QQQ every month for each of her three children, the youngest of whom is eight months old. It costs her just $1 a month per child, since these are custodial accounts. A $49 monthly investment ($50 less the $1 fee) bought 0.50 shares of QQQ on February 22, 0.41 shares on March 28, and 0.54 shares on April 18.

The dollar-cost-averaging approach that Clodfelder and other ShareBuilder fans are using is pretty much the opposite of trying to "time" the market. ShareBuilder doesn't try to time its transactions, either: The company executes them just once a week, on Tuesday afternoons.

I think this is the perfect way to skin a bear market. As Jim Jubak points out, we don't have any idea what will happen next. The market might go up. It might plunge. Or it might drift down for a long time.

Good Time to Buy For Long Term

If this is a bear market, it's the perfect time for long-term investors to buy. When you're accumulating stock, you should be pleased when the market goes down because you'll be able to buy more shares. And what better strategy than to set up an automatic plan so that you don't have to think too much about it?

What stocks to buy? I'm a big fan of the QQQ, which invests in the 100 largest non-financial stocks on the Nasdaq. That includes the big ones like Microsoft, Intel, Sun and Cisco, but also some fast-growing retailers like

Staples

(SPLS)

,

Starbucks

(SBUX) - Get Report

and

Bed, Bath & Beyond

(BBBY) - Get Report

. I already own QQQ in another account, and I think it's a perfect investment to add to the college accounts for my kids. And $1 per trade through ShareBuilder seems to me a really fair price, enabling me to put a small amount every month -- or perhaps every quarter, to cut the fees even further -- into QQQ for my two kids.

For investors who already have a core portfolio and want to add individual stocks, I wrote a column on March 15 ("5 Market Sectors With Sizzle") detailing the five sectors I like this year, along with some stocks in each of them. They are energy, technology, wireless, fiber optics and health care. I'll still hold with that, despite all the turmoil in the market.

There's been some concern in our Start Investing community about the reliability of ShareBuilder. After all, it's a new service. It's online. We can't really see the people who operate it.

Investors who feel concerned should be reassured by several new partnership arrangements between ShareBuilder and such firms as

Wells Fargo

(WFC) - Get Report

,

Safeco

(SAFC)

,

Boeing

(BA) - Get Report

,

Costco

(COST) - Get Report

and others.

These banks, credit unions and employers will offer stock to their customers and employees through ShareBuilder, according to Cathia Geller, a spokesman at ShareBuilder. For instance, Costco doesn't want to offer a direct-stock purchase plan. But the company will make its stock available through ShareBuilder.

I think we can assume that these companies did their due diligence before signing on and that the service is a sound one. So what am I waiting for?

Follow Mary's Start Investing Portfolio at MoneyCentral

.

Mary Rowland is the Start Investing columnist for MSN MoneyCentral. At time of publication, she was long Nasdaq 100 Trust, Intel, Cisco, Lucent, Qualcomm, JDS Uniphase and Pfizer, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. She welcomes your feedback at

mctsc@microsoft.com.

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