Sharebuilder Question

[camberiu]

Does anyone in here have any experience using Sharebuilder (sharebuilder.com) as an investment tool? If so, can you share your opinions about it?

 

[grumpy]

camberiu,

I haven't used sharebuilder but there is something similar at Buy & Hold Securities called EZvest. Here's the link:

https://www.buyandhold.com/

Check it out.

Grumpy

 

[Marshac]

Do they offer automatic dividend reinvestment, or would that eat up one of your two trades per month?

Answer- I googled for .5 seconds and found the answer- Yes.

http://www.buyandhold.com/bh/en/help/helpdesk/features.html

 

[LOL!]

And there is also www.mystockfund.com
This one allows you to buy QQQQ for no commission whatsoever.

IMHO, these outfits are somewhat of a scam because with limited amounts to invest, you should probably be investing in no-load, low expense ratio, index mutual funds where the transactions cost are zero as well.

With sharebuilter et al, you pay a significant front-end load even at $4 a buy on amounts of $100 or less.

For low amounts to invest, I suggest you use a monthly automatic investment program at a major mutual fund company.

 

[camberiu]

With sharebuilter et al, you pay a significant front-end load even at $4 a buy on amounts of $100 or less.

Makes sense. I should have mentioned that I will be investing between $1000 to $2000 a month (long term buys). Any other reservation towards Sharebuilder (or similars) that I should be aware of?

 

[cute fuzzy bunny]

IMHO, these outfits are somewhat of a scam because with limited amounts to invest, you should probably be investing in no-load, low expense ratio, index mutual funds where the transactions cost are zero as well.

DING DING DING!

These are good for people with no money, that want to invest, that cant meet the minimums for mutual funds.

The investing equivalent of the check cashing services...

 

[camberiu]

DING DING DING!

These are good for people with no money, that want to invest, that cant meet the minimums for mutual funds.

The investing equivalent of the check cashing services...

Could you elaborate on that? Being able to buy$1000+ worth of an ETF for $4 (to hold for a while) does not seem like it is to much. What am I missing here?

 

[LOL!]

Makes sense. I should have mentioned that I will be investing between $1000 to $2000 a month (long term buys). Any other reservation towards Sharebuilder (or similars) that I should be aware of?

sharebuilder only does buys once a week.  If you are going to invest $1K to $2K a month, then why bother with a rinky-dink outfit like sharebuilder?  Why not use a real brokerage firm with real-time trades, research, etc?    Why not use a Vanguard index mutual fund because in 2 months you will  have the minimum for many of their funds? In a few years, you will have substantial sum and sharebuilder ain't gonna cut if for you.

CFB: the minimum for an automatic investment program at many mutual fund companies is $50 a month.  I think if you can't invest more than $50 a month, then you shouldn't be investing anyways.

 

[cute fuzzy bunny]

Its been a while since I looked at basement investing...

Without looking, dont most mutual funds (for non-IRA use) require an initial minimum investment of $1000-3000?

As far as the $4 trade on an etf to hold for a while...I was under the impression that these services only allowed trading like that on certain days, or required a higher rate, or required a regular committed periodic investment of funds that were subjected to a fixed fee charge?

(A short look at the site shows that the $4, no monthly fee trades can only be made on tuesdays)

I'd also like to see the bid/ask spread on their buys vs other brokerages, and the execution speed. This might be a case of paying a very small visible fee on the front end and getting completely hosed on the trade, to the benefit of the execution trader. Its been a while since i looked at these, but this is how I think this works...someone with more current knowledge please hack me to bits if I use the wrong punctuation.

By concentrating the transactions on a single day, the company can take trade orders, figure out the volumes of each stock issue/etc/whatever they need to buy. When the bid/ask spread is favorable, they buy the lots they need. Then they 'sell' them to you at the highest transaction point of that trading day.

I believe this used to be called "scalping".

There is no free lunch.

 

[yakers]

There are still a number of no fee or low fee DRIP stocks that could perform the function you are looking for. You could select 10 diversified stocks and invest $100 a month in each. There is some paperwork involved but the lowest fee approach I know of. I have had DRIP stocks for 5 years and am pleased with the results although I expect to close out the DRIP process in the next couple years when I retire and just start spending the dividends.

 

[grumpy]

Buy & Hold Securities charges $7 per month. That covers 2 trades. Trades are made at three fixed times each day. Trades after the two free ones are $2.99. Or for $15 per month you can trade as many times as you like. Minimum trade is $50. Dividends are reinvested for free. This is especially cost effective if you want to diversify by investing a small amount into many stocks each month. The posts above that think this type of brokerage is a scam don't know what they are talking about. I have used Buy & Hold for more than 5 years and have built a portfolio of 20 high dividend stocks worth over $200K.

Grumpy

 

[cute fuzzy bunny]

Well grumpy, if you've investigated your execution price and the spreads that were available that day and found that you received a favorable price, then i'm all wet.

When I used ameritrade, who is a little more expensive and does 'immediate trades' ...they used to give me crappy execute prices vs the spread. Seems they were selling me stock they held internally that they picked up at a good rate and selling it to me at a lousy one.

I guess you have to ask...how do these companies make money selling $1, $2 and $4, $10 trades...?

I'm not saying you cant invest and make money this way. What I'm saying is that somewhere the money has to come out for the trader to make a living. Scalping and using internal float are a couple of ways to do that. You just pay a little more for the shares...or I guess you could look at it as the company is paying a little less and you're getting worst case 'fair' value.

Maybe these guys just like the job and dont mind making a few cents a transaction...

 

[grumpy]

CFB,

For a buy and hold investor investing small dollar amounts (and therefore, buying only a few shares at a time) the difference in execution price is more than offset by the low transaction costs at a brokerage like Buy & Hold. I can see that if you are making large dollar purchases and expect to trade frequently on small price moves, then execution price might be a more important consideration.

Grumpy

 

[cute fuzzy bunny]

I'm not disagreeing with you at all.

You might only end up paying an extra $5, $10 or $20 buying that $1000 worth of ETF's, plus your $4 transaction fee.

I'm just explaining why your up front costs might be a little higher than the four bucks, and you called bullshit.

On the flip side, when I bought individual stocks I could put in a buy limit order after looking at the spreads and pick up at least a few cents a share...maybe even a buck...over the worst market order pricing of the day. Over 10 shares...no big deal. Over a hundred thousand shares...really big deal.

 

[grumpy]

I'm just explaining why your up front costs might be a little higher than the four bucks, and you called bull****.

Say what?!!

Grumpy

 

[cute fuzzy bunny]

The posts above that think this type of brokerage is a scam don't know what they are talking about.

I assumed you meant what I said...since we appear to be in agreement, perhaps not?

 

[LOL!]

The posts above that think this type of brokerage is a scam don't know what they are talking about. ....

   Grumpy

I said "somewhat of a scam".   I read of small investors buying $50 worth of stock with a $4 commission all the time.   That's quite a front-end load.  This is especially a problem, when they can buy $50 worth of a mutual fund every month with an automatic investment program (AIP) and pay no commissions and be much more diversified.

Its been a while since I looked at basement investing...

Without looking, dont most mutual funds (for non-IRA use) require an initial minimum investment of $1000-3000?

AIPs start with a minimum $50 investment.

The posts above that think this type of brokerage is a scam don't know what they are talking about. I have used Buy & Hold for more than 5 years and have built a portfolio of 20 high dividend stocks worth over $200K.

Grumpy

That's very nice.  With over $200K of dividend stocks, you would be better off in WellsTrade.  Over $100K, the first 50 trades a year are $2.95 and you get lots of other free financial services.  Once you are over $250K, the first 50 trades a year are free.

As for DRIPs.  IMHO they are an anachronism that were good 30 years ago when Grumpy was starting out, when commissions were high, online discount brokerages didn't exist, and Viagra didn't exist to help make up for aging testosterone levels.  Nowadays with free commissions on stock trades, no-load mutual funds, AIPs, etc they don't make much sense.   I would guess that 30 years of bookkeeping alone would make you cringe.  But I understand that you are not going ever sell your DRIPs and that your heirs will get a stepped up basis on your demise alleviating them of all the bookkeeping woes.

 

[maddythebeagle]

The arguments aside Sharebuilder was offering some sign-on bonus a few months back (50 bucks). Check out fat wallet for details. They also have a few threads on them. Seems like a good option if you want to buy smaller amounts of individual stocks.

 

[frujinator]

I was with Sharebuilder before getting the excellent advice to switch to Vanguard.

I lost money with Sharebuilder, mainly on their fee's and $14.95 per trade for ETF's.

1. ETF's I don't like
2. Sharebuilder website sucks
3. Sharebuilder fee's are awful

Go to Vanguard. The best!

 

[NinjaPigeon]

I signed up, but only for the free $50 bonus. Even if I lose almost $20 in fees ($4 buy, $15 sell), I'm still up $30.

But I agree that this is not a great choice for DCA. I'm just gonna keep my $100 opening deposit with them and see where it goes

 

[frujinator]

It will be a good experiment!

I had about $5600 in my IRA. I sort of realized that ETF's had low returns, and I was losing more in fee's than gains.

 

[NinjaPigeon]

I had about $5600 in my IRA. I sort of realized that ETF's had low returns, and I was losing more in fee's than gains.

Your comment intrigues me. Why do you think ETFs have low returns? The fees can certainly be on the high side, but there are ways of mitigating that from what little I've read.

 

[frujinator]

Well I a had a few ETF's that were recommended by experts, and I would get like $4 gains/dividends a month and pay a $12 fee.

I think Mutual Funds are so much better and offer much more diversification than ETF's.

Just my opinion and experience.

Also sharebuilders website sucks. No analysis kind of tools or anything. Uncomparable to Vanguard.

 

[NinjaPigeon]

It's all in what you pick. There are mutual funds with 5% front loads that track the same stocks as a no-load, .2% ER index fund. First thing I learned about finance is that many of the "professionals" are just salesman. They aren't trying to make you rich; rather, they are trying to make themselves rich.

Mutual funds and ETFs are very similar beasts, but the whens and whys of them depend a lot on your investing strategy.