Back in September when I opened a new trading account at Sharebuilder, I had mentioned about signing up for the advantage plan that gives 12 automatic investment credits for $10/month. I had planned to invest around $1,000/month using these automatic investment credits. The discussion at that time was whether the $10/month fees is worth the low investment amount?
To answer that, I looked at the numbers since I opened the account and started weekly purchases. Since September, I have invested $300/week for a total of $5,100 in 4 months (Sep – Dec). This is little more than $1,000 I had initially planned. That’s $5,100 invested over several weeks without too much hassle. I have spent $40 in total fees for this. This works out to a commission of 0.78%.
The alternative would have been to invest this $5,100 in my Scottrade account. Based on my average trade size of about $1,200 – $,1500, I probably would have made 4 trades for this $5,100 thus incurring $28.00 in commission. This would have worked out to 0.55%. When making trades in Scottrade, I typically try for 0.5% in commission. So this is pretty close to that.
So the net difference between the weekly purchase and regular purchase is 0.23% ($12.00) during this 4 month period. But as part of the weekly purchases, I have built reasonable positions in 8 stocks with a projected annual dividend of about $145.00. With bulk purchases, I would have had position in only 4 stocks.
So I feel that even though I have paid a bit more in the 4 months, I feel that it is a small price to pay for the ability to dollar cost average as well as build positions in multiple stocks. I might also try to see if I can increase the amount from the current $300/week to little bit more. So this will definitely help to reduce the discrepancy. Does that mean that it is not worth to invest ~$1,500 in a single transaction? Nope. In fact, I myself have made multiple purchases in Scottrade around ~1,300 rage and will continue to do so for opportunities that need that. But I will also be continuing my weekly purchases in 2015 to build the existing positions and to initiate new ones.
What do you all think?