Weekly Purchases… Are they worth it?

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?

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6 thoughts on “Weekly Purchases… Are they worth it?

  1. The obvious trade off is that you can invest more regualry at smaller amounts instead of having to hold onto cash. In addition, you can hopefully cash on more dips in prices by going weekly; hwoever, you also run the risk by buying at highs as well.

  2. Hi DGJ,

    I’m also planning to continue my Sharebuilder purchases with $300 a week this year. I prefer the ability to buy a wider range of stocks than I would be able to buy using a $7 fee per trade. Although I do plan on stopping weekly purchases once my dividend increases, but I think there’s little difference for a couple of years.

    I suppose another benefit is the partial shares since you may purchase a lower number of whole shares than with the automatic investment.

    But I think the stocks you buy are the real determining factor since the costs are fairly similar. Let’s say you went the cheaper route and ended investing up the $12 x 3 = $36 this year. With an 8% theoretical gain, that’d work out to be $362 in 30 years’ time. As a percentage of your total portfolio’s value in 30 year’s time I expect that amount is just noise. Although if you continued investing the $36 each year over that 30 year period then the total increase would be $4,400 which is more significant….assuming of course that the narrower range of stocks you invested in actually gained 8% a year.

    Best wishes,
    -DL

    • DL,
      That’s a great thought. $36/per for 30 years definitely adds up. And maybe like you mentioned, it might be worthwhile to take a look at this after a few years when the dividends are reasonably substantial.

      Thanks for stopping by and sharing your thoughts.

  3. Why not use Robinhood or Loyal3 (as long as they offer companies you are looking to invest in)? No fees and purchase price doesn’t matter as much since you are dollar cost averaging.

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