Back in July, I had posted about my thoughts on opening another trading account in addition to the ones I currently hold at Scottrade. My aim was to open a new account specifically to lower the fees for smaller investments (less than $500). I looked at various options include Sharebuilder, Loyal3 and Motif Investing.
After much thought and scouring for deals, I decided to open a taxable trading account at Sharebuilder. Sharebuilder is a popular trading site especially among the regular readers of this blog. I was specially interested in their Advantage plan which offers a specific number of automatic trades for a fixed dollar amount per month. In fact, I got an even better pricing plan since Sharebuilder offers special pricing for Costco members. I got the following pricing option:
- Regular trades are $5.95 instead of $6.95
- Automatic trades are $2/trade instead of $3.95/trade
- Advantage plan – 12 automatic trades for $10/month and extra automatic trades are $1 each – This is the key feature that made me decide on Sharebuilder.
Loyal3 was another brokerage that I looked at very closely, but with the Costco pricing plan I decided Sharebuilder was a better option since I am not restricted with Loyal3’s stock selection.
Now that the new account is set up, this is what I am planning.
- I plan to invest with smaller amounts more frequently – preferably weekly. This will also enable me to dollar cost average depending on the market movements.
- Also, at least to start with, I am planning to invest in stocks that I don’t already own. These are stocks that I have been planning to initiate positions in, but haven’t done since I was waiting for better valuations and didn’t want to invest my usual ~$1,500 at high valuations. With smaller amounts (without added fees), I can initiate and build positions in such stocks over a period of time.
- I am planning to invest at least $1,000 each month through Sharebuilder at an average of 2-3 trades per week spread across few stocks.
In addition to this, I will also invest my usual ~$1,500 or so through Scottrade if some sudden opportunities come up.
Dividend Growth Journey 
Best of luck with your new brokerage! Being able to invest in smaller amounts is good when spacing out purchases and entering half positions. One concern is that $1,000 per month is essentially giving you a 1% trading fee, which is actually quite steep. Would you be better off making a larger amount of capital available to invest in this account monthly, like $1,500 or $2,000 to reduce the overall impact of commissions? Given my trading frequency and current capital available for my dividend growth portfolio, I utilize TradeKing and Loyal3.
Out of curiosity, how will you be building your trading costs into your cost basis given it can be diversified across 10+ trades per month? Is this something Sharebuilder will do for you?
W2R,
Thanks for stopping by. Really good information.
I know that investing $1000 results in a 1% fees which I also agree that it is too high. That is one of the reason I invest at least around $1400 in Scottrade that gives me 0.5% fees.
But with Sharebuilder, I am actually able to build positions in multiple stocks with the limited capital and that’s the flexibility that costs me the extra fees. Also, I am planning to increase my funds to at least $1500 once I get a feel for the platform.
Sharebuilder charges the $10 fees outside of the trading account – I change it to my credit card. So I think this amount doesn’t feed into the cost basis. if that is the case, I just have to eat this fees outside of my brokerage account and treat it as an account fees and not trading costs. Of course, this is just my assumption since I will have to wait and see how this is done.
DGJ
DGJ –
This is what I do. I’ve actually been meaning to write a quick update, since I recently made the switch to the Costco program (which saved me additional money). I liked exactly what you mentioned about Sharebuilder plan. I have a few positions that are only about $250, which is small for me. But it’s been nice to be able to build small incremental positions in companies I don’t have current stakes in, especially with the market at all-time highs. I don’t know if it’s necessarily been better than buying stocks in larger chunks, but it helps a little bit psychologically. And it’s allowed me to diversify a bit more.
Warrior
I love Sharebuilder. I have almost the identical plan except my monthly fee for 12 trades is $12, not $10. The DRIP program is great, easy to use, and best of all free. The only minor drawback is making your picks on Monday and then waiting to see what the prices are on Tuesday.
MDP
Thanks MDP. Like you mentioned, the only drawback is making the picks a day earlier, but I guess that’s how Loyal3 and Motif works too. So don’t have much options there.
Thanks for stopping by.
Great choice. I make weekly purchases through Sharebuilder already and love it. It’s a great way to dollar-cost-average on positions. I thought they were removing that Advantage Plan option for new accounts? I guess that changed. That’s an awesome deal. My wife is on her mom’s Costco account, I wonder if that counts. I should ask ShareBuilder to see. I look forward to seeing your purchases.
Thanks AAI. I believe the Advantage Plan is still not available…. at least I don’t see it on their website. But the plan is still available for Costco members.
With respect to your wife’s situation,I think it will count. Because when I signed up for the account, I had give the costco member number and the member information. So they might be restrict one sharebuilder account per costco member number.
Thanks for stopping by.
DGJ,
Seems like a very viable alternative.
I also use Scottrade, Although, investing $1,000-$1,500 a pop doesn’t really bother me. If I have the conviction to invest $100, then I should have the conviction to invest $1,500. But I can see how it’s nice to invest more frequently in smaller amounts.
I’m actually getting close to diversifying brokerages myself. Not sure who I’m going with yet. Might be Fidelity or something similar where I can access real, live human beings if I need to. Nothing would frighten me more than not having access to my account or having some kind of problem and just having a phone number to call or something.
Best of luck!
Cheers.
DM,
Investing $1000 – $1500 doesn’t bother me either. But lot of times, I don’t invest as often as I should since the valuations are not reasonable and therefore, I just hold off investing because I don’t want to invest 1000-1500 at high valuations. And often this results in not investing at all for a long period of time (like between 2011-2013). But I think I can invest small amounts even at slightly higher valuations taking solace on the fact that I will have the opportunity to average down if opportunities are available. And also I think having this plan will force me to invest weekly or bi-weekly to justify the $10 I am paying each month.
And like I mentioned in the post, I still have my Scottrade accounts (Taxable and IRA) and will make the bigger purchases when opportunities arise.
I will have to wait and do this for a while to see how this plays out. Hopefully it helps me to streamline the investing process a bit.
With respect to customer service, I have used the Sharebuilder online chat option a few times in the last week to clarify some questions related to opening the account. It was very good and had all my questions answered and there was hardly any wait time. For someone like me who spends most of the day in front of a computer, online chat is a better option than spending time on the phone. But I hope their customer service through phone is also on par.
Thanks for stopping by and sharing your comments. They are really thoughtful and helps a lot.
DGJ,
Welcome to the Sharebuilder club! I did the advantage plan on a free trial with my first few purchases ever and loved it. Unfortunately, I didn’t have the income to continue it and they don’t offer the plan to me any longer. Vets like MDP above are grandfathered in until they cancel the plan, which is pretty neat. Ultimately I’ve decided I can easily make up the commission cost by sort of ‘timing’ the market, which I know I can’t count on, but rather than commit to a company at an undermined price over the weekend that won’t go through until Tuesday, I have any day and any time to find a company on the watchlist at a nice value. To me, the best benefit of Sharebuilder is that it links to my Capitalone360 Savings account and I can instantly transfer money to Sharebuilder to make a purchase on the spot if I see something I like, rather than waiting for a deposit to clear into the brokerage account at places like TradeKing and ScottTrade. I’ve also found their customer service to be top notch.
Wishing you the best as you explore Sharebuilder!
~Ryan
Ryan,
That is correct. The advantage plan is not listed on the website now for regular customer. Not sure how long it will be available for Costco customers. And while it is true that we don’t control the trade price with automatic investments, they have to be set by 5PM the previous business day (Monday in most cases) and doesn’t have be done over the weekend.
And just FYI… Scottrade also offers instant money transfer. A transfer that has been initiated will show up as available funds within few mins and will be available to invest right away. The only limitation is that it cannot be used to purchase stocks priced less than $4.
Looking forward to explore the new plan and see how this works out.
Thanks for stopping by and sharing your thoughts.
Ryan –
I’ve spoken to Sharebuilder about this. I believe you can call and ask about the Advantage Plan. My understanding (although I could be wrong), is that they’re not advertising it anymore, but if you really want it I think you can ask for it and will get it.
Warior
are there any low or no fee options that let you specify exactly what price you want to buy a stock at (i.e. a limit order)? i’m hoping to lower my trade fees from fidelity’s 7.95 a trade.
Yes. Those are the regular trades and the fees for a regular Sharebuilder account is $6.95 or 5.95 for Costco members. So these are not very cheap compared to your fidelity.
My earlier post compared the prices for trades for other brokerages including Sharebuilder.
Thanks for detailing the shareholder fees and what is available to Costco members. I too was surprised that the Advantage Plan is still available to Costco members. One question, what is the major difference from the Advantage Plan and the automatic trades? Can you use the Advantage plan on days other than Tuesday?
Automatic trades are available only on Tuesdays. Each automatic trade needs to be placed by 5PM the previous business day and the order will get executed on Tuesday. Each automatic trade costs $2/trade with Costco plan instead of $3.95/trade for regular members.
Advantage plan is just a monthly subscription plan for automatic trades. It gives you fixed automatic investment credits each month for a fixed fee. For costco members, it is 12 automatic investment credits a month for $10/month. If you don’t use all 12, you lose it at the end of the calendar month and you get another 12 at the beginning of next month. So the advantage plan makes sense if you plan on doing at least 6 automatic trades per month under the costco plan. Also, the advantage plan can be canceled at anytime and is not a contract or something like that. You get 1 month free trial too.
DGJ