I have my trading accounts with Scottrade. I started out with a regular taxable trading account in 2009. Since then I have opened an IRA account for myself and my wife. So currently all stocks in my portfolio are spread across these three accounts.
I am really satisfied with Scottrade with respect to their fees. But I am always on the lookout for better options. In particular I am looking at options for lower fees when investing smaller amounts (around $500). With Scottrade’s $7.00 flat commission, investing around $500 means I am paying 1.4% in commissions which I feel is not worth it. That is one of the reasons I almost end up investing at least $1,500 in each transaction thereby lowering my commission to 0.5% or less. But it is not always possible to invest $1,500 in single transaction (either due to lack of capital or just want to invest in small chunks to average) and hence my desire to look at other brokerages.
Here are some of the options I am looking at:
Sharebuilder has been out there for a while now and needs no introduction. I already have my online savings account at Capitalone360 (formerly INGDirect) and Sharebuilder also is part of Capitalone. They have couple of fees structure:
- $6.95 per transaction for normal trades
- $3.95 per transaction for automatic trades – This is what I am interested in. $3.95 for about $500 per transaction works out to about 0.8% which is digestible.
I learnt about Loyal3 just a few months back from one of the dividend blogs that I follow. Loyal3 does not charge any fees and allows investments as low as $10. It also allows transactions using credit cards. But they have very selective list of stocks to invest from (about 50+). But their collection includes quite a bit of blue chips that I would invest in anyway. Ability to invest without any fees coupled with the ability to invest using credit card (free rewards 🙂 ) makes this quite an attraction. The only caveat is the sustainability of the brokerage itself. I am not sure how long they have been around and how long they can sustain and I am worried about them going under.
Motif Investing is another brokerage I learnt about from one of the dividend blogs. Motif Investing allows you to buy a basket of stocks/ETFs (up to 30) in a single transaction for a flat fees of $9.95. You can create your own motif or choose from one already configured. You can even adjust the weight of each stock in the motif before buying it. Sounds really wonderful especially if this allows me to buy multiple stocks in a single transaction for a flat rate. But again, my only concern is the sustainability of the brokerage itself and I am worried about them going under.
What about you folks? Do you use any of the brokerages (Loyal3 or Motif)? Are there any other brokerages that I am missing?
What happens if a brokerage goes under? I read somewhere that the brokerages need to be insured through SIPC similar to FDIC for banks and that the limit is 500K for the insurance. Is it per brokerage for the individual or per account for the individual? For example, since I have 2 accounts in Scottrade (Regular and IRA), am I covered for 500K in each account or just 500K overall? And is recouping the investments a simple process?
Is it even worth the time and risks to maintain multiple brokerage accounts for the sake of these advantages and flexible options?