As was foretold, we've added advertisements to the forums! If you have questions, or if you encounter any bugs, please visit this thread: https://forums.penny-arcade.com/discussion/240191/forum-advertisement-faq-and-reports-thread/
Options
On E-Trade
KrunkMcGrunk
Registered User regular
Registered User regular
I'm completely new to investing. A friend of mine works for Charles Schuab, and she directed me to some online tutorials on investing. Now, I'm getting ready to open up an account.
I'm looking at E-trade and I notice it says "$9.99 Stock & Options Trades" does that mean I'll be charged $9.99 every time I make a trade? If so, is that a decent rate? What would you guys recommend?
I'm looking at E-trade and I notice it says "$9.99 Stock & Options Trades" does that mean I'll be charged $9.99 every time I make a trade? If so, is that a decent rate? What would you guys recommend?
KrunkMcGrunk on
0
This discussion has been closed.
Posts
Here are their rates:
https://us.etrade.com/e/t/estation/commissions?id=1206010100
$9.99 is for 30+ trades per quarter, or value of more than $50,000
$19.99 for less than 30 trades per quarter and less than $50,000
So maybe qualify for the $9.99; maybe you don't. I don't, though I swear they only used to charge me $12.99 per. I might have set up a day-trading thing... I don't know. Hope that link helps.
Go with Fidelity for the 7.95 rate. But seriously, are you considering investing or day trading because day trading is risky. People confusing successful day trading with alpha all the time and that easily bit me in the ass in 2009.
Yes. You shouldn't be making trades all that frequently anyway.
Even supposing you do make a few trades a day: if $7-10 is a serious chunk out of your profit margin, you're likely going about things completely wrong.
At least there you don't have to pay to sit down at the blackjack table, and they come around with free drinks.
Put your money into a 401K if your work offers matching funds or otherwise makes it a good deal, or an IRA (index fund or managed for a specific retirement date) if it doesn't.
Yes, there's some other stuff out there, but if you're asking H&A for advice, you don't want to touch any of it.
Honestly, with just $1000 dollars, I'd look at just opening a Vanguard account and dropping it in there and adding more cash in when you get more.
With $1000 dollars, that's about 35 shares of Microsoft (based on the current closing price). And you'll be paying a quarterly maintenance fee on that account, which will eat away any profit you'd make.
Open a Roth IRA and put money in there for your retirement.
You cannot beat the market.
If you want to play at investing, there are simulators that track the market and you can mess around w/ investing.
Vanguard has a minimum starting balance of $3k for most investments, so that won't work well. (I think you can just drop money in a Vanguard account, and just not bother to put it in an fund, but that won't earn you any return.)
https://personal.vanguard.com/us/whatweoffer/mutualfundinvesting/accounts
The principle's sound, though. E-Trade is really a bad idea for you; look around for some fund with a lower buy-in, or just save up a couple more thousand and try again. Also check to see if you can get in on a 401K.
Jerichohill posts at civfanatics.com in addition to writing that blog.
I've got a 401k with employer matching. I could check into a Roth IRA, but I don't really need/want to invest for retirement with this money. It's purely disposable, and I'd like to learn some things about trading, then see where I can go with it.
I wouldnt go THAT far. Investing well doesn't really involve knowing micro econ principles.
The best course of action for the OP depends on how much time you're willing to commit to this (that is, to learning about investing), your risk tolerance, and your time horizon (i.e. when you will want to use the money). I'm going to assume you've got an emergency fund saved up and you've more-or-less exhausted the potential in "household investments". I'm making that term up because I don't know what the real one is--basically I mean things that require some small amount of capital but otherwise offer real, guaranteed savings. Stuff like home repair, more efficiently insulating windows, shoes that don't wear out in 3 months, a more reliable car, etc. You can get very large returns (percentage-wise) on stuff like that if you're careful--obviously this is not a real list and this stuff may all be useless to you personally. You'll have to figure out your own opportunities in this area. There's only so much advantage you can squeeze out of buying toilet paper in bulk instead of in the 4-roll packs, though--you'll never get rich this way.
Once that is taken care of, you have a choice. Generally speaking, if you need the money in the next five years it should be in something liquid--a money-market account, savings account, etc. If you don't need it in five years, put it in the stock market.
As far as "putting stuff in the stock market" goes, your best option at first will be to use one of the tax-advantaged retirement accounts (an IRA or employer-sponsored 401k or something like that). Put the money in with the rest of your savings and get a properly-diversified portfolio of low-expense-ratio mutual funds or index funds. If you're already maxing out your contribution for the year, get an account with a discount online broker and buy an index fund (probably the S&P 500). The transaction costs involved in splitting up 1k into a properly-diversified portfolio would eat up a huge fraction of your principle; unless you have other money to spend it's probably not worth attempting. Besides, you probably don't know what a "well-diversified portfolio" means at this point or why you would want one. That will take research; there's a book called "The Intelligent Asset Allocator" (or something very close to that) that explains this very well. If you're into reading you might also want to read "The Intelligent Investor" and some books on other investment paradigms (those two are on "asset allocation" and "value investing", respectively--but there are others, such as technical analysis and momentum investing).
What you shouldn't do is try picking stocks yourself (learned men are divided on whether this is ever worth trying, and everyone agrees it's a bad idea if you know nothing about investing) or trade frequently (same caveat as for stock-picking).
I'd recommend this only if you have a high risk tolerance and don't really need the $1000.
Other than that, I agree with Ranger 100%
See, this is exactly what I'm looking for. Thank you, CR. You rule.
I feel like, financially, I'm in a very good place to use $1000 to "learn the ropes". I'm a 26 year-old homeowner with good credit, a savings account, and an employer-matched 401k. I have no children, and no one whom really relies on me as their bread-winner. So, rather than blow the money on a really nice TV, I'd like to do something financially constructive.
I realize that I have a hell of a lot of learning to do before I'm even remotely comfortable making any sort of judgment on where I should invest my money.
Lets say you buy $1000 worth of one stock, then sell it a year later. You just gave up 4.5% ((9.99+9.99 + 25)/ 1000) on your money. The odds of you picking a stock that will outperform that in any significant way are extremely slim. Pretend you pick a stock that improved 10% over the course of a year. That is optomistic and still would only net you $45. Odds are much better that you lose money here.
If you decided to split that money into different stocks, the numbers would be atrocious.
If you REALLY want to try investing, Zecco.com has much better rates ($4.50 per action) and no account fees. You'd still be looking at a 2% loss on $1000 just for one hold & sell but that is way better than E-trade.
I'd recommend waiting until you have 5,000 - 10,000 that you can AFFORD TO LOSE before attempting any investing.
They are allowed to make changes to their rates/deals. I'd be very surprised if their rates were sneakily different from what they convey on their pricing page.
Did you drop below $25,000 even for one day during a month?
Sharebuilder's automatic investment plan is even worse than E-trade for a low-capital investor. I assume the OP won't be dropping $1000 a month into the account, maybe more like 200 a month. $4/200 a month is 2% off the top. $4/100 twice a month is 4% right off the top. Not only that, you won't learn anything about the market. You don't get to choose your own entry points. Maybe you don't want buy your shares of American Steel on the day the market is overly excited about recovery in Europe.
Sharebuilder's regular pricing is largely the same as E-trade but with no account fees for having a low balance. It is a better option than E-trade but still completely sub-optimal for someone trying to invest $1000.
What? Do you know anything about the history of Zecco?
They used to offer free trades if you kept a balance of $2,500 in a non-interest-bearing brokerage account. The requirement was even less when they started.
They then announced that they were changing it and trades would now be charged for unless you increased your balance to $25,000. The new rates took effect 30 days after they were announced. It completely killed the trading I was doing, and they make it a pain in the ass to remove money from their system.
So no, I don't trust them.
So it's worse, except it's not worse?
It's just another option to consider, one that's slightly better than E-trade.
Zecco has changed their requirements and pricing frequently, and when I used them their website was a disaster to navigate. Sharebuilder, on the other hand, has a user friendly website with various options for investing on the cheap. Granted, they are not ideal, but I'd expect an investor to read and understand what they're signing up for.
$1,000 is going to be eaten up by fees no matter where it's invested.
I can see how that could be a bad situation and could cause you to lose a few dollars (like 20??), unless you plan was to like buy like 1 share of 100 different stocks. Then it would REALLY suck.
Still, I don't think there is a better option that Zecco for an investor with $1k. $4.50 fees come out to less than a percent for a two-way transaction, though with 1k, I'd pick one stock, buy, and hold.
EDIT: And yes, Sharebuilder's automatic investment plan = worse than E-trade. Sharebuilder's regular investment account = better than E-trade. BTW, they also make it a bitch to get your money out.
I've had no problem getting my money out of my sharebuilder account. I just sign in, go to Transfer Money, and say to withdraw X dollars. A day or two later it was in my bank account.
I guess I just feel a lot more freedom trading with a margin account at zecco vs a regular account back at sharebuilder. The waiting period to re-use money from a sold security was a huge pain.