People are still asking me for Scottrade referrals, but I’m not allowed to give them out anymore. Instead, I’m going to start a list of My Money Blog readers who already have accounts that are willing to give out referrals. If you are interested, please contact me and I’ll put you on the list.
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As a counterpoint to outrageously expensive meals, how about some stupid, unethical, and somewhat scary stories about how I ate on the cheap while in school? Note that I don’t do any of these anymore. (Unless left alone for more than a month, then I regress…)
1. Bringing Ziploc Bags the Dorm Dining Hall. You know you’re not supposed to, but when you’ve just spent all your money on a fancy date, you bend the rules. Our dining hall was pretty much a buffet and I would make entire sandwiches and put them in ziploc bags for later. Cost of lunch: 6 cents for the bag.
2. Crash Random Student Association Meetings. “Why yes, I would like to join the Society of Hypercompetitive Brainwashed Kids (Pre-Med Society)! I too studied for 54 hours straight for that O-Chem midterm. Ummm… the flyer mentioned free pizza?”
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Maybe new broker Zecco (my review) was right and stock trades really are a commodity now. Today, Bank of America announced that they will be offering 30 free online trades a month for customers with at least $25,000 in combined deposits. Not surprisingly, shares of discount brokerages like E-Trade (ET) and Ameritrade (AMTD) are not doing so hot, both down ~10% today.
It’s only available in the Northeast at first, nationwide later. Thanks to Corey and everyone else for the tip.
Pop Quiz: How much money did you spend on food last month?
I’ve been blogging about money now for almost two years, and I’ve been wanting to put together a kind of distillation of all the things that I’ve learned. All these posts are the equivalent of rough drafts, so comments are welcome.
Taking a step back and thinking of what is the first step to setting yourself up for financial security, the first thing I thought of was to make a budget and make sure you spend less than you earn. But then I thought, before even doing that, I think you need to first sit back and observe your current habits. What are you spending now?
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Zecco.com has revealed more details about its promise of free stock trades, and is causing a lot of talk for us investors looking for cheap trades.
Details
» Stock Trades - Yes, it’s free and yes, it’s limited. You get up to 10 free market or limit online orders per day, up to 40 per month. After that, they cost $3.50 per trade.
» Mutual Fund Trades - $10 per online trade, no-load only.
» Options - $3.50 plus $.60 per online contract with no minimums
» No minimum to open! (was $2,500)
» No inactivity fees.
» Accounts are SIPC-insured, like most brokerages.
» ACAT fee is $50, not sure whether this means in, out, or both
» IRA accounts available. $30 IRA annual fee and no closing fee.
» Free trading applies only to one account type per person/company. For example, if you open one account for yourself, an IRA, and also a joint account, you can only get free trades one the first of the three accounts opened.
As for how they make money, here is an excerpt I found:
We make our money the old-fashioned way. We earn interest off your money. Hopefully we provide enough value to you as a investor that it’s worth your placing your account with us. This business model has worked for fianncial institutions for about 400 years, it will work for us. It works for most other onine brokerages, too. If you take a spin through Etrade latest 10-K filing, you’ll notice that they make 49% of their revenues from interest. We absorb the minimal clearing fees on a trade as the cost of doing business with you. We also make money on higher margin services like options trades and from advertising on the portal. When we don’t spend $5 of every trade on advertising to get the trade in the first place, we can offer this service at a much more attractive price: FREE. - Sabin Zecco.
Accounts and transactions are done through Penson, one of the largest clearing firms in the country.
By interest they are probably talking mainly about margin interest (which is currently at 10.5%), but I haven’t found any details on interest rates on cash. According to the forums you have the default cash option but can also sign up for a money market sweep account. Another concern that some people have is getting ‘bad fills’, basically not getting the best order routing and therefor the best share price, but it’s hard to find any place that objectively measures this.
As for advertising, they sure are going to get a lot of buzz for this! Only time will tell if it’s enough. My only question now is if they do a hard credit pull when applying. If not, I’m signing up!
Added: I signed up, and there was no hard credit pull for opening an account at Zecco.
Even though any individual can apply for business credit cards, I’ve been looking for one for my actual active business, as I have some upcoming big purchases to make. I don’t buy gas or groceries for my business, mostly software, online services, and computer equipment. Most biz cards only get 1% back on those things, so applied for the AmEx Business Gold Rewards Card which I wrote about previously, mainly for the $100 and 5,000 miles upfront bonus. I doubt I can get to the 90,000 bonus point level, but I’m going to try to reach the 10,000 point bonus.
This should give me a nice bonus and greater than 1% overall back since I’ll also get 1 Membership Rewads point per dollar spent. I also get 5% off FedEx too. I saw “for now” because the annual fee is only waived for the first year, but sometimes they waive it for the 2nd year too.
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Here is another snapshot of my retirement portfolio as of market close 10/7. As indicated in my previous snapshot, I simultaneously sold ~$10,000 of iShares S&P 500 Index ETF (IVV) and contributed $10,000 to my Solo 401k, which I used to buy Fidelity Total Stock Market Index Fund (FSTMX).
I don’t know how long this has been out, but I just noticed in my Scottrade brokerage account that there is a new service called Money Direct that allows you to electronically deposit money from a bank account. Note that I said deposit only, because you can’t use the service to withdraw. What’s up with that? How disappointing.
The service appears to use Yodlee Funds Transfer as the back end, which is similar to the CashEdge service banks like HSBC and Bank of America use. You can basically link any savings or checkings account as long as you have a routing number and account number. Verification is either via website login information or trial deposits.
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As I’ve mentioned previously, I have been enjoying a free trial courtesy of George of Fat Pitch Financials Contributor’s Corner and here is my review.
Basics
The main premise behind Contributor’s Corner is to provide “arbitrage and special situation opportunities in the stock market for small time investors.” One of the more common examples of this is a company trying to “go private” by buying back all the existing publicly traded shares.
For example, let’s say BigBob Enterprises (BOB) has 100,000 shares currently trading at $9.00 each. If it wants to go private, it has to buy back all the shares at a price that the current shareholders as a whole would approve. So maybe it files with the SEC that it would like to buy back at $10.00 a share, giving the potential for profit.
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While in Paris, my friends and I decided to have a “nice French meal”. While you don’t have to necessarily spend big bucks to have such a meal, we were not French, not locals, and therefore we simply dressed up and stumbled into a nearby restaurant recommended by our concierge… and proceeded to have one of the most expensive meals I’ve ever had.
My previous record was at a restaurant in the San Francisco Bay Area called Chez Panisse. It’s won countless awards as one of the top restaurants in the country and is famous for its fresh and inventive California/French cuisine. While I’ve since dined at both the restaurant downstairs and the cafe upstairs, the prix fixe restaurant was my first and pricier experience.
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Whenever there is a discussion about a big bank like Bank of America, Washington Mutual, or Citibank, there is always someone with “XXX Bank is evil, they did [something bad] to me, stay away from them!!!” But let’s face it, with thousands of branches it is very hard to get uniform service everywhere. An awful branch in Detoit might be counteracted by a great branch in Atlanta. It’s like getting bad service at a TGIF restaurant.
I have gotten both crappy and great service from banks, but only good service from my local branches of Washington Mutual and Bank of America. This has included the waiving of NSF fees, the manual crediting of missing bank bonuses, and an override of their usual funds availability policy. Two things that I think helped a lot:
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I recently opened a savings account at E-LOAN to try out the new 5.50% APY that a few people kindly pointed out to me while I was gone. Here’s a brief review of the opening process and my initial thoughts.
Basics
This is a new FDIC-insured online savings account, similar to Emigrant Direct, ING Direct, and others. You need $5,000 to open the account, but after that there are no monthly fees. Per their rates page, they are currently paying 5.50% on all balances, so one won’t need to keep $5,000 there forever. But you may need to keep at least $500 in there (see below).
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Just as surely as there will be an article entitled “Lose 10 lbs On 10 Minutes A Day” or “Easy Abs For You” on the cover of Men’s Health magazine this month, there will also be an in big letters “Six Stocks To Own Right Now” or “5 Mutual Funds To Protect Your Money” on the cover of one of the personal finance magazines this month. I guarantee it!
Why? Because “Low Cost Index Funds A Good Idea… Again” every month would get very stale and would stink at selling magazines! In addition, even the construction of the articles themselves is very predictable. It’s almost like they use a Mad Libs form (remember those?):
1. Give me the name of a recently successful mutual fund manager.
2. Give me the name of a formidable-sounding management company.
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JLP of AllFinancialMatters has started his Bogleheads’ October Project, in which every day in October a different person will review a chapter from the book The Bogleheads? Guide to Investing. Hey, if someone reviews every single chapter well enough, maybe you won’t even have to read the actual book! Too bad I already bought a copy (hardcover even!) months ago. 
I’m doing Chapter 19: Tune Out the ?Noise?, which is funny, as I’m just now writing something about doing just that.
