Archives for August 2005

I’m not the type of person to obsessively check stock quotes throughout the day, but I think I’d like to start documenting my stock performance periodically. I last did this two months ago for my MyMoneyBlog Play Money portfolio (tracked at OpenPortfolios), in my post MMBPM beats the S&P 500! (*by pure luck). Since then, I haven’t made any trades, although I have been doing more and more reading into ETFs. I’m really considering selling all my stocks and rebuilding my portfolio with ETFs instead, but I don’t think I’m ready yet. Anyways, here’s my current snapshot:
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Don’t worry, I haven’t turned into some financial “advisor”. I was researching ETFs for my 401k roll-over, and came across this article from RadicalGuides: Turning Taxes to Your Advantage. As you know, I’m a index fund (or ETF I guess) guy. I think it is really hard for an mutual fund with active management to beat the market indices over time, and is really hard to pick ahead of time which ones will do so. So is the writer of this article, but he/she points out a possible new way of using ETFs to make tax-loss selling legal and profitable. Sound confusing? It did to me too, I ended up making up a simple example to wrap my head around it. I’m not 100% sure it is right, please let me know if I am wrong!
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I’m really not the hugest fan of ShareBuilder, but it seems to be pretty successful. Right now, in partnership with Costco, they are offering a $50 bonus and 10% rebate on transaction fees to Gold/Business Members, and a $75 bonus and 25% fee rebate to Executive Members that open up a new account and make one transaction (trade). Make sure you use the promo code ‘COSTCOEP50’ or ‘COSTCOEP75’ to get this promotion.

I’m going to open up an account, but not as my main brokerage account. Since this is free money, I’m going to put it in something fun and risky! Here’s my plan:

1. Go to the ShareBuilder website and apply. Be sure to enter the correct promotional code in the blank.
2. Deposit $50 of my own money (to make the 1st trade).
3. Pick the Basic Plan with no monthly maintance fees and $4 trade.
4. Buy $46 of any stock or ETF. $4 will go towards the trade.
5. Wait the 4-6 weeks for my $50 bonus.
6. Withdraw my $50 bonus. Net cost to me: nothing!
7. Don’t touch the account or make any more trades for 20-30 years. Hopefully they last that long.

Why? This is free money, they don’t even run a credit check when you open the account. If you want to sell a stock, they charge $15.95. That cuts into the bonus so much it’s not worth the effort just to get some bonus money. On the other hand, why not invest in something with a high potential return and take advantage of their lack of maintenance fees?

Emerging Markets are an asset class that invests in the performance of the world’s major emerging markets, including South Korea, South Africa, China, Taiwan, India, Russia, Brazil, and over 200 others. It is characterized as being risky, but with a high overall average annual return over time of about 17%! Of course, it is very volatile in the meantime. You should not put a lot of your portfolio in this stuff.

But with free money, why not? $46, invested at an 17% average rate, over 20 years, is $1062! Over 30 years, it’s $5109! Yes, inflation will devalue the final amount, and you’ll pay capital gains when you finally sell, but it’s not bad for 10 minutes and loaning out $50 for a month. I think Sharebuilder automatically reinvests dividends, but not sure, I’ll have to check again.

Now you could to this ‘plan’ with any volatile stock, but I like the index since it’s very very very unlikely to go completely belly-up, unlike some random pharmaceutical company. Thoughts welcome! I haven’t made the trade yet, I’ve opened the account and am waiting for it to fund.

Every morning I check my e-mail, I get more and more spam related to hot stock picks and get-rich investment ideas. I get very few ads for Viagra, other male enhancement products, or even pirated Microsoft softare. Is anyone else getting this? My e-mail address is public, so I guess it could be harvested by a robot, but it just feels so targeted. And what is it with spammers and poor spelling and grammar skills? Like I’m going to buy a stock with “promsing asdn specualtive future”…