Another Sharebuilder question

**sweeps** · 10-15-2006, 04:43 AM

Re: Another Sharebuilder question

Yes, you can either put in a buy whenever you want, or you can set it up to buy stocks/ETFs at regular intervals. If you're not going to buy very often, go for the basic subscription ($4 each). Otherwise, there are other plans which allow you to spend a certain amount a month and you get so many free stock buys.

One gotcha is selling a stock or ETF costs $16. If you plan on being a total buy-and-hold person, then this shouldn't be a problem. But if you plan on doing more than just the occasional sell, you'll probably want to look at other options (Scottrade, TradeKing, etc.).

An ETF is a "basket" of stocks. It trades just like a stock, but when you own it, you actually own a piece of a lot of different stocks (similar to a mutual fund). Buying a diversified ETF (such as "SPY") from Sharebuilder is a good way to get diversification without incurring a lot of trades.

Yes, you can buy some stocks to start with, and just let them sit in your account. If you bought 4 stocks, that would cost you $16 commission (under the basic plan). But again, selling those stocks will cost you $64 when the time comes, so make sure you really want to keep them for a while.

**LuxLiving** · 10-15-2006, 06:22 AM

Re: Another Sharebuilder question

Read about Exchange Traded Funds here:

http://finance.yahoo.com/etf/education

**Mathew Green** · 10-15-2006, 10:24 AM

Re: Another Sharebuilder question

Originally posted by Sweepsplayer

An ETF is a "basket" of stocks. It trades just like a stock, but when you own it, you actually own a piece of a lot of different stocks (similar to a mutual fund). Buying a diversified ETF (such as "SPY") from Sharebuilder is a good way to get diversification without incurring a lot of trades.

Article about the many Exchange Traded Funds available through any broker: http://www.fool.com/etf/etf.htm

Also, it's easy for beginners to get confused by the similarity of ETF and EFT. EFT means Electronic Fund Transfer (aka ACH) and the context should make it clear that the subject is transfering money rather than buying stock, but if both terms are unfamiliar to you it may take a while to remember which is which.

The real fun begins when people start talking about buying "spiders and snakes" (meaning SPDRs and VIPERs) or saying they're evenly split between SPYs and Cubes (SPY=S&P500, Cube=QQQQ=Nasdaq)

And that's only the beginning of the jargon! But eventually you'll learn the terms that are important to you and develop a handy crib sheet for the less-familiar ones.

Originally posted by Sweepsplayer

One gotcha is selling a stock or ETF costs $16. If you plan on being a total buy-and-hold person, then this shouldn't be a problem. But if you plan on doing more than just the occasional sell, you'll probably want to look at other [brokers].

In real life it works out like this:

Normal Broker Commissions:
Buy 10 Shares of XYZ Stock $9.99 commision,
Buy 10 Shares of XYZ Stock $9.99 commision,
Buy 10 Shares of XYZ Stock $9.99 commision,
Buy 10 Shares of XYZ Stock $9.99 commision,
Buy 10 Shares of XYZ Stock $9.99 commision,
Sell those 50 Shares of XYZ Stock $9.99 commision,
Total Commisions: $59.94

Same Trades If You Pay $4/buy $16/sell:
Buy 10 Shares of XYZ Stock $4 commision,
Buy 10 Shares of XYZ Stock $4 commision,
Buy 10 Shares of XYZ Stock $4 commision,
Buy 10 Shares of XYZ Stock $4 commision,
Buy 10 Shares of XYZ Stock $4 commision,
Sell those 50 Shares of XYZ Stock $16 commision,
Total Commisions: $36.00

As long as you're going to buy more often than you sell, the $4-buy/$16-sell works out to your advantage vs a flat $9.99 commision. The catch is some brokers charge you a monthly fee or other charges if you don't trade enough, whereas others don't, so you always have to evaluate the whole package -- not just the stated commisions.

Another catch is that some brokers who entice you with a low commision and encourage you to set up an automatic investment plan, don't actually buy the stock when you tell them to. Instead, they make all stock purchases "at the closing price on the following Wednesday" or at some other arbitrary time. If you're a mindless dollar-cost-averager, that doesn't matter. But if you want to buy stock on days when the price looks good to you, instead of hoping the price will be ok at some arbitrary future time, then using that type of 'arbitrary future date' investment plan would be intolerable. (And IMHO mindless dollar-cost-averaging is a HUGE mistake, so I would never consider using such a plan.)

The point is, there's a lot of mumbo jumbo in the fine print at some of these places and you need to be certain what you're agreeing to. If you can't find it spelled out in plain English somewhere on the website, ask them directly about total account and transaction costs, how/when orders are executed, and to explain anything else you don't fully understand.

**sweeps** · 10-15-2006, 12:18 PM

Re: Another Sharebuilder question

If you choose a broker like TradeKing, it's $4.95 per trade. So in Mathew's example, it would be $30 vs. $36. Also in my experience many people start a Sharebuilder account thinking they're buy-and-hold investors, but end up selling a lot more than they thought they would. Also if you buy a stock or ETF and decide you don't like it, it costs $20 to exchange it for another one (sell @ $16, buy @ $4).

Good point about Sharebuilder only buying on Tuesdays. So if a stock or ETF you've been watching takes a nice drop on Wednesday and you want to buy on the dip -- sorry, you have to wait until Tuesday.

**tinapbeana** · 10-15-2006, 05:06 PM

Re: Another Sharebuilder question

i set-up w/ sharebuilder before i found tradeking, & much prefer the offering and interface tradeking offers.

**LuckyRobin** · 10-18-2006, 04:57 PM

Re: Another Sharebuilder question

Thanks for the information. It helps a good bit.

**LuxLiving** · 10-22-2006, 06:02 PM

Re: Another Sharebuilder question

interesting ETF reading:

http://online.wsj.com/ad/focusonetfs/

Another Sharebuilder question