TradeKing Review and Promotion Codes: A Discount Broker with Loads of Features

I have wanted to write a review of TradeKing for very long, but kept postponing it. One of the reasons is that I don’t use TradeKing as often as I do with Scottrade or Zecco.

I opened a TradeKing account last December after comparing between Firstrade and TradeKing and decided to go with the latter in order to save on commission. Since then, I have made a few trades with the broker and set up automatic dividend reinvestment for my account. From my limited experience, what impressed me the most is that, TradeKing has a user-friendly website with a lot of features that make trading and researching much easier for its customers. Comparing to other brokers I am using,

• TradeKing offers free dividend reinvestment that Scottrade doesn’t have;
• Though Zecco has lower commissions as well as free dividend reinvestment, its website is much worse than TradeKing’s;
• Firstrade also has a nice, easy-to-use website and allows customers to reinvest dividends for free, but its commission ($6.95) is higher than TradeKing’s ($4.95).

Commissions and Fees

TradeKing charges a flat $4.95 commission for stock trades, regardless the order (market or limit) or the size of the order. For option trades, the commission is $4.95 plus $0.65 per contract. Comparing to other discount brokers, though TradeKing’s commission isn’t the lowest (as of I know, two are lower: Zecco charges $0 commission for up to 10 trades per month and SogoTrade has a $3 per trade standard plan), it doesn’t require a minimum for opening an account (Zecco requires $2,500 minimum), which is a plus for investors with small money.

In addition to stocks, TradeKing also offers mutual funds from about 235 fund families, including well-known names such as Dodge & Cox, Fidelity, T. R. Price, and Vanguard, etc. However, since buying and selling mutual funds with brokers involve additional cost, I usually recommend go directly with the fund company, as I discussed in my IRA guide post. At TradeKing, the cost for each mutual transaction is $14.95.

Trading Interface

What I like about the trading interface (click picture below to enlarge) is that it show it shows the quote immediately after the stock symbol is typed in, making trading in TradeKing a lot easier. In Scottrade or Zecco, the quote and the order form are not on the same page, a little bit inconvenience.

For all the discount brokers I am using, I feel that orders are always executed immediately and that’s true for TradeKing as well. In fact, from what I can see, there isn’t noticeable difference in the way orders are executed at different brokers, not that it really matters if the order is delayed a few seconds.

Research Tools

To make trading and researching on stocks/mutual funds/ETfs easier, TradeKing provides its customers a range of research tools. For stock research, TradeKing uses a tool provided by MarketGrader.com to generate detailed research reports for individual stocks (a sample of the research report is here for RIMM). The best part of this report is that it gives the fundamentals of the stock, such as Growth, Value, Profitability, and Cash Flow,  in an easy-to-understand grade format.

In addition to stock research, TradeKing’s research tools also include a mutual fund center and an ETF center, allowing investors to screen mutual funds and ETFs. For mutual funds, there are four screeners powered by Thomson Financial: High Net Assets - Equity Funds, High Net Assets - Fixed Income Funds, Foreign Equity Performers, and Low Turnover Top Performing Equity Funds. The ETF Center also features four screeners: Income Producing ETFs, Top Performing International ETFs, YTD Top Performing ETFs, and High Yielding Bond ETFs. For investors who are new to exchange-traded funds, TradeKing also has an ETF Education section providing basic knowledge.

TradeKing Community

Nowadays, the word “social” is very popular, even stock brokers like TradeKing and Zecco are no exception. Both have them own community (other websites have also built similar communities that are not limited to a certain broker) to let their customers share their trading ideas and portfolios and be interactive with their fellow investors.

Though I haven’t participated in any such community (I have a Zecco Share account, but never used it), the idea of seeing what other average Joe and Jane are doing, as opposed to recommendations from experts, is quite interesting. I wish I have time to dig it a little deeper and actually participate. Maybe I can pick up some ideas to make a few more bucks

Conclusions

Overall, I feel that TradeKing is truely a discount broker that doesn’t sacrifice its service for being “cheap.” In a recent SmartMoney broker survey, TradeKing received the highest mark in customer service. I only contacted TradeKing a couple of times via their Live Chat (a very nice tool, BTW) and my issues, including setting up dividend reinvestment, were resolved quickly. Though I didn’t use TradeKing a lot, my experience so far has been positive.

If you are interested in opening a brokerage account with TradeKing, use any of theTradeKing promotion codes below to open an account and start trading.

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Suspending the Zecco Referral Bonus Sharing Program

I started my own Zecco referral bonus sharing program back in December 2007 when Zecco relaunched its Zecco Friend program. At the beginning, it was actually pretty good. I sent new customers to Zecco and got a $50 bonus for each new customer shortly after they opened and funded a new account. I then shared part of the bonus with those I referred every month.

However, the last time I got a referral bonus was in early March. Since then, I haven’t received a penny from Zecco. Though I have answered some 20 requests in the past two months, none of them signed up for a new account. I don’t know whether it’s the problem of Zecco or people just changed their minds after receiving the link (I do have a couple of people telling me that they did open and fund their accounts as required, but that wasn’t reflected in my Zecco account) , the result is that the program hasn’t be very effective lately.

In February, I contacted Zecco when a reader questioned the referral link I sent to him. After providing detailed information Zecco asked for investigation, I never heard back from them again. And I don’t want to spend any more time dealing with them with the issue. So to avoid making promise (to split the $50 bonus) that I can’t deliver, I decided to suspend the bonus sharing program unless I know exactly what has been going on.

I have updated the Referral page to reflect this. But there are other referral programs that are still available. Take a look if you need any thing.

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• Make Hundreds of Dollars by Referring People
• Alive Again: OptionsXpress $100 Bonus Offer

Zecco: Go Paperless or Pay for Your Paper Statement

Since I began to actively use my Zecco account to trade stocks in March, I got myself a task that I don’t want: find a place to store the mail Zecco sent me every time I made a trade. It’s not really a piece of junk mail that I can just throw away, but close to that status because I really don’t need it. It’s the trade confirmation. When I did only one trade every few months, getting a piece of mail isn’t a problem. However, when I traded seven times a month, all the unnecessary statements become a problem.

Because of the large number of accounts we are using, I have tried to minimize paper statements I receive from banks, credit cards, and brokers. Since most transactions are already conducted online, I am more comfortable to go to their websites to find information I need than looking for a statement from a pile of paper. For Zecco, I have long wanted to opt-out paper statement and receive email confirmation instead. Eventually, I called them about two weeks ago after I failed to make the selection myself. The problem was when I clicked the Account Record, there was also a link to Account Statement in the window on the right in addition to the one in the pull-down menu. But when I clicked the link on the right, nothing happened (another evidence of their lousy website). After I called, I was told that I had to use the link in the pull-down menu

Anyway, I am glad that Zecco decided to force its customers to switch to electronic statement and if you don’t, it’s going to cost you for every paper statement you receive:

If you don’t sign up on or before May 30, 2008, you’ll continue receiving paper documents by mail, and you’ll be charged $1.50 per paper trade confirmation starting June 1, 2008 and $2.00 per paper statement starting June 30, 2008.

You pay $0 commission for a trade, why pay $2.00 to receive a paper statement? Actually, I hope all the banks, credit card companies, and brokerages eventually offer only electronic statements. Yes, they will probably lose some marketing opportunities (all those extra stuff that come along with your statement), but they can also save a lot of money from paper and postage.

BTW, I hope that when everybody switches to electronic statement, Zecco can increase their monthly commission free trades from 10 to, say, 15 as the operating cost is reduced further

Featured Information: Zecco Promotion Code

Ready to buy stocks for zero commission? Open a Zecco free trading account and get 10 commission free trades every month:

And be sure to check out my review of the broker and my first trading experience before opening your account.

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Scottrade’s Customer Service

Last week, I wrote about my experience with Scottrade when I was trying to place an order of Visa (V) when the markets opened. The day after that post was published, I got an email from Chris, Chief Marketing Officer of Scottrade, who expressed concern why I had to wait so long before being connected to a customer service representative:

I saw on your website that you tried to call us this week to buy Visa and were on hold for 20 minutes at the branch before being transferred. I am sorry for the delay on hold. Can you let me know the location of your branch? We are very focused on excellent customer service and I want to look into this long hold time.

Honestly, I didn’t expect anybody from Scottrade to contact me for that minor issue. In my reply to Chris, I told him that my statement (”had to wait nearly 20 minutes before my called was transferred to Scottrade’s national service center instead being answered by brokers at my local office”) wasn’t very accurate. I wasn’t really put on hold for the entire 20 minutes. Here’s what happened on March 19. I called my local Scottrade office a little after 9:30 am. However, the phone rang much longer than usual and nobody picked it up and I didn’t get a voice message either. So I hang up and dialed again. Still the same. I hang up and waited a few minutes before trying again and still nobody answered the phone. I called my local office quite often in the past and even when everybody was busy, I always got the voice message very quickly so I knew I needed to wait, but not on March 19th. Eventually I waited until I was told that my call will be transferred to Scottrade’s national service center during peak hours or in the weekend. After a few more minutes, I spoke to a broker and that was about 10:00 am.

I know March 19 was a busy day because of Visa’s IPO, but somehow the voice message I usually get didn’t work and that caused the confusion as I wasn’t sure what happened. If I had waited a little longer instead of dialing and waiting many times, I could have reached a CSR earlier.

Anyway, today I got a response from Kelly from Scottrade:

I manage public relations for Scottrade and I wanted to follow up with you on your correspondence with Chris and make sure you were satisfied. When you call your branch, the phone rings about five times and then rolls over to our Service Center here in St. Louis if no one is able to answer the call - either because they are assisting customers in the branch or are on the phone. Typically, however, they are able to answer within two to three rings. We’re not sure what happened in your particular the branch the day you called. We do know it was an unusually busy day due to the Visa IPO, but the calls still should have rolled over promptly. We appreciate being alerted to a potential issue and are glad that we had a chance to investigate it.

I have been a Scottrade customer for more than five year, having our brokerage account and IRA accounts with the firm since 2002. Though I have opened several brokerage accounts with other firms in the past couple of years, Scottrade remains our primary broker for reasons I have explained before. I am quite happy with Scottrade, though its commission wasn’t the cheapest.

On the other hand, I also have an account with Zecco, which offers $0 commission for stock trading that nobody can beat, but its customer service is just terrible. I have complained at here several times in the past about my experience with them, but nobody ever contacted me for the issues I, as well as other customers, encountered when dealing with Zecco.

I guess that’s the reason why I won’t jump from Scottrade to Zecco.

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Zecco Dividend Reinvestment: More of a Hassle than Convenience

I knew Zecco offers free dividend reinvestment, the only problem is I don’t know how to set it up.

When I logged into my account yesterday, I noticed that there’s a $20 dividend from my investment in Blackstone Group (BX) (not that I appreciate the money given how much the stock has dropped since it’s IPO). Since I don’t need to take any cash distribution now, I’d love to see all the dividends, as well as capital gains from mutual funds, reinvested. After clicked all the menu items in my account, I didn’t find anything tell me how to set up dividend reinvestment. That’s kind of weird because as a service, I imagine it should be easily accessible.

So I decided to give Zecco a call and was told that there’s no way I can set up dividend reinvestment myself. To use the service, I have to send them a signed little with instruction on which security, or the whole account, I want to set up the dividend reinvestment. When I asked if they have a form I can fill out, they said no, there’s no such a form and I just have to write a letter myself and either mail or fax it to them.

Later, I found there’s a discussion in Zecco forum on what are needed, including one item I wasn’t told over the phone: a copy of a government issued ID. What do they need that for? They didn’t ask that when I opened the account, but require it to set up a dividend reinvestment plan? And the discrepancy between information given by Zecco sure will mean some back-and-forth before the job is done. Why can’t they provide a template to make everybody’s life a little easier?

BTW, I was told yesterday that only whole shares can be purchased with dividends.

Sorry, no fractional shares for you! And you probably can forget about the whole dividend reinvestment thing if the distribution is too small to even buy a single share.

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Random News: First Set of Zecco Referral Bonuses Distributed, $100 OptionsXpress Bonus Received, and Account Transfer to TradeKing Completed

After learning that Zecco relaunched its referral program last December, I set up a referral program of my own shortly after. With my program, I promised to share $20 of the $50 bonus Zecco rewards me for each new account I refer to them. In the first 2 weeks after I put up my program, three people opened and funded their account through my referral. According to Zecco, the cash rewards will be handed out in the first week of the following calendar month and indeed, when I logged into my account today, I noticed that Zecco has already credited me $150, $50 for each new customer. And as I promised, three $20 Amazon.com gift cards were emailed the three people I referred as a little “Thanks For Using My Referral” gift.

If you like the idea of trading stocks without commission and could you a $20 gift card, send me an email to request a referral link. And before you do, be sure to check out details of Zecco’s referral program and my own referral bonus sharing program for other brokerages and banks as well.

On a related note, the $100 bonus from OptionsXpress also arrived early this week. I opened the account before the new year and funded my account on December 31st. So it only took about two weeks to receive the bonus, faster than I expected. The promotion is still alive if you want to take advantage of the offer and get $100 free money.

Finally, the account transfer from Firstrade to TradeKing is completed. I initiated the transfer on December 18th and on the same day, TradeKing informed me that I should provided a copy of Firstrade statement for verification purpose. After that, no more contact from either Firstrade or TradeKing and the account was transferred on December 28th. Very smooth. One more thing that I had to do before it’s all done was email TradeKing to request a reimbursement of the $50 account transfer fee charged by Firstrade. The fee was reimbursed shortly after I submitted the latest statement showing the cost of the switch.

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Random News: OptionsXpress Account, Citi Driver’s Edge Card, and the Surging China Sunergy

I took advantage of the $100 bonus offer from OptionsXpress last week and opened an account for myself. The process is quite simple, taking only several minutes to complete. What appeared to be a little bit concern was that when I set up the ACH transfer, it asked me the method to verify my identity, either online or by mail and the online verification probably pulled my credit history because it asked questions about my previous address. Anyway, I have funded my account with $500 and now am just waiting for the $100 free money Actually, in addition to the $100 bonus, OptionsXpress also offers a free investment book for new customers. Sweet!

Plus, OptionsXpress will give $100 or 10 free trades for each referral. If you want to have an account and need a referral, please use the contact form to send me an email. Once you open an account that meets the requirements, I will split the rewards with you by giving you a $40 Amazon.com gift card. Check out my Referrals page for details.

It didn’t take me too much longer to consider whether we should pay off our car loan. In fact, I almost immediately applied for a Citi Driver’s Edge credit card which I planed to use to pay off the loan. My application was approved and the new card arrived yesterday, but not without a little setback. I was approved for only $2,500 credit line It’s not even enough to make a down payment if I would buy a new car, let alone the $17,000 loan. Of course I am not very happy with the low limit and called Citi last night demanding an explanation why I could get only $2,500 after being a loyal customer for nearly 10 years. While they didn’t exactly give me the reason, a manager did mention that for each customer, there’s a limit on the combined credit lines. Since I already have two cards with a combined line of more than $30,000, I may be near that limit so they can only give me $2,500 this time. Well, I have to do some credit line reallocation before I can use the 12-month 0% APR balance transfer from the new card.

Finally, a bright spot in this terrible market recently is the surging China Sunergy (CSUN) shares. I bought the stock on October 10th at $13.70 apiece and saw the price plummeted to below $7.00 at the end of November. When I almost feel regret about the purchase, the stock surged more than 62% in the past two trading days as China unveiled plan to rely more clean, renewable energy including solar power.

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Scottrade Launched Improved Mutual Fund Center

I have been a loyal customer for Scottrade for more than 5 years. Though I have opened a number of brokerage accounts during that time period, Scottrade remains my primary broker holding most of our investable assets. There are reasons for me to stick with Scottrade.

Last week, Scottrade informed me that they are launching a new Mutual Fund Center, with new features including:

• An easy-to-use mutual funds screener that can search funds by availability and other criteria.
• Detailed Lipper Leader ratings for all mutual funds.
• Detailed expense and performance information.
• Real-time customizable charts.
• A new comparison tool that compares up to five mutual funds at a time.

Though I no longer use Scottrade for mutual fund investment after they started to charge fees, I am still curious what changes have been made and whether the new features can make mutual fund research easier. After logging into my account last night and playing around with the new site, I feel that it’s quite impressive, though I also discovered some errors.

The new mutual fund center consists of four parts: Fund Screener, Comparison Tool, Commentary, and Top Performing Funds. The first screen at the mutual fund center shows 5 funds that generated top returns in the past one-year period. Somehow, I feel this part of the information isn’t that helpful because not many people will make their investment decision based on 1 year performance. Interestingly, right now all the top 5 performing funds are related to China. Though 5-year and 10-year performance are provided, such information is not available for the top 5 funds as they are all very new, with a little more than one year of history. Unless such longer term performance data is also showing, I won’t pay much attention to the top 1-year top performers.

Comparison tool

The next part I looked at is the fund comparison tool. According to Scottrade, up to 5 funds can be compared side by side. To get a feeling how the tool works, I compared two top international funds, DODFX and OAKIX, and found it’s quite good. The tool compares the fund’s performance (from 1 month to 10 years and since inception), portfolio (holdings and sector breakdown), expenses (expense ratio, load, fees, initial investment), and Lipper rankings (total return, consistent return, preservation, tax efficiency, and expense). The comparison summary page shows 1 year performance of the funds being compared (below, click to enlarge) with a graphic display of the funds’ returns in the past year.

It also gives Lipper rankings on all the five categories as well as the fund’s performance since inception. I particularly like the performance chart of the fund since its inception since it gives me an idea of whether a fund has been consistent comparing against others. As for DODFX and OAKIX, it’s quite clear that DODFX has been delivering very consistent performance (below, click to enlarge) in the past five years or so, while OAKIX didn’t take off until about three years ago.

The performance comparison page shows each fund’s returns from 1 month to 10 years as well as the performance since the fund’s inception.

Mutual fund screener

I have used a few fund screeners before and the one provided by Scottrade is quite different from others. Following is a screenshot of Scottrade’s mutual funds screener (click to enlarge). In stead of listing all the criteria in a big table, Scottrade breaks up the criteria into four groups and only show some very basic ones at the beginning. Users then have the option to add when they are interested in when screening funds.

The four groups of criteria are:

Mutual Fund Basics

• For Sale at Scottrade
• Load Type
• Transaction Fees
• New Investors
• Asset Type
• Fund Minimum Investment
• Classification
• Fund Family

Total Return Performance

• 1 Month
• YTD
• 1 Year
• 3 Year
• 5 Year
• 10 Year

Fundamentals

• P/E Ratio
• P/B Ratio
• Dividend Yield
• Expense Ratio
• Beta
• Sharpe Ratio
• R-Squared
• Standard Deviation

Lipper Leaders

• Lipper Leaders

Note that the Transaction fee in the Mutual Fund Basics group refers to whether a transaction fee will charged if the fund is purchased at Scottrade, not the fund’s expense ratio (ER) which can be found in the Fundamentals group.

At each step when additional criteria are added and selections are made, Scottrade shows the number of funds from their pool of mutual funds meet the requirements. As the process goes on, the selection is narrowed and the number gets smaller. To test the screener, I set the following criteria:

• No load fund
• Open to new investors
• Equity fund
• Minimum investment <$5,000
• YTD return 5-10%
• 3-year return 10-15%
• 5-year return 10-15%
• 10-year return 10-15%

I didn’t set limit on ER as well as transaction fees as I didn’t want see zero fund meet my conditions. There search returned five funds listed below, none of them I am familier with.

• Gabelli Equity Income AAA (GABEX)
• Madison Mosaic Mid-Cap (GTSGX)
• Janus Fundamental Equity (JAEIX)
• Dreyfus MidCap Index (PESPX)
• California Investment S&P MidCap Index (SPMIX)

While using the screener gave me a different experience, the resulted funds didn’t make me a lot of excitment. The reason is partly because the tool is provided by Scottrade, a broker, therefore it can only search those funds that investors can buy from Scottrade, limiting the search range. In addition, the screener doesn’t include such measurements as benchmark indices, fund assets, manager tenure, etc., making it less than the similar tool at Morningstar.com, which is one of my favorites.

Conclusions

In general, I feel the new mutual fund center at Scottrade is a big improvement over its previous version, with more information and a user friendly interface. I especially like their graphic presentations of performances and allocations. And the comparison tool is much useful than the fund screener, which can still use some enhancements.

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Random News: ShareBuilder Lowers Real-Time Trading Commission and Firstrade Account Transfer

Good changes are coming to ShareBuilder after ING Direct bought the online discount brokerage firm a month ago.

An email from ShareBuilder over the weekend infomred me that starting December 17th, the cost of trading securities at real time at ShareBuilder will be at a flat fee of $9.95 for both market and limit orders. ShareBuilder used charge some $15.95 for each real-time trade. ShareBuilder started with the idea of letting investors make regular investment at a lower price ($4 with basic service). However, for a small amount of monthly investment such as $100, the commission represents more than 4% of cost, not a cost effective choice for small investors. Now with other discount brokers such as Zecco which doesn’t charge commission at all, or TradeKing which charges a slightly higher commission ($4.95 per trade) but much more flexible than ShareBuilder, I don’t know how ShareBuilder can be competitive even with the now lowered real-time trading fee, unless you are willing to pay a monthly subscription fee of at least $12. BTW, as expected, ING’s banking products are now available at ShareBuilder which has also adopted ING’s orange scheme.

Speaking of TradeKing, I faxed my account transfer form to them today to start the transfer process after getting an account a couple of weeks ago. The form is actually quite simple with less information required than the Zecco account transfer form. TradeKing says the process could take two weeks to complete, which isn’t that bad considering the time it took me to transfer from Scottrade to Vanguard and from ShareBuilder to Zecco. If everything goes well, I could have my stocks available at TradeKing before the new year

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Zecco Trading Promotion: A FREE Book Plus $20 Bonus

I received an email from Zecco yesterday, announcing the re-launch of their Zecco Friend Program. The program is actually a referral program which allows existing Zecco customers to earn cash rewards for recommending the service to friends. Here’s how it works:

As the holiday season approaches, we’re sure you’d appreciate more cash to buy gifts for your loved ones. All you have to do is act now to tell your friends about Zecco. Whenever a friend you referred opens and funds a Zecco Trading account, you’ll get a $50 cash reward. The more friends you tell about Zecco, the more you’ll earn. What’s more, your friends will get a FREE book because of your referral.

If you are a Zecco Trading account holder, the $50 cash reward will be credited to your trading account in the first week of the next calendar month after your friend opens and funds a Zecco Trading account. (This offer is not applicable to IRA accounts.) If you are not a Zecco Trading account holder, a $50 Amazon gift certificate will be sent to you in 2-4 weeks instead.

So basically, you don’t have to have a trading account to earn rewards. In stead, you can simply get a myZecco account to start to use the Zecco Friend Program.

Interested?

Here’s what I plan to do to make this promotion even sweeter with an extra $20 bonus.

1. If you are interested in getting a Zecco Trading account, use the Contact button in the navigation bar above to send me an email with your valid email address so I can send your the invitation.

2. Once you open and fund the account ($2500 minimum is required), send me another email and provide me the email address you use to open your account and the time the account is opened and funded.

3. If everything goes well, Zecco will send you a free book, Small Giants by Bo Burlingham, a value of $16.47 at Amazon.com.

4. Upon receiving the $50 cash reward from Zecco which could take up to a month according to Zecco’s promotion plan and verifying your information, I will split the reward and send you a $20 Amazon gift certificate.

Before opening an account, be sure to check out my Zecco Review and my trading experience to see if you want an account. In summary, the free trading is good, but customer service and website can use a lot of improvements.

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• ZECCO PROMOTION CODES

E-Trade Customer Appreciation Day and ……

So now E-Trade Financial seems out of the immediate danger of going out of business, they want to show their appreciation to those customers who chose to stay with them after the firm revealed big losses from subprime mortgage loans and saw their stock sink more than 50% in one day. An email from E-Trade this evening says next Wednesday, December 19th will be a commission-free customer appreciation day, when customers can trade unlimited stocks, options, futures, even global stocks for free (use the above links for details of the offer).

Well, I think I use some appreciation. Though I don’t use E-Trade for US stocks, I do have an account with them for global trading and I still want to buy that Alibaba stock. I guess I can use that HK$300 saved on commission for something else

Then immediately after receiving that email from E-Trade, an message from Zecco arrived with the subject read E*trade Unclear on the Concept of “Customer Appreciation”:

Check it out: E*trade is offering customers free trades for one day only next Wednesday as part of a “Customer Appreciation Day”. Details here. At Zecco, everyday is “Customer Appreciation Day”. Zecco has always offered free trades every day of the year. I encourage you to share this news with your readers, while letting them know that Zecco really does appreciate our customers, and we put our money where our mouth is every single day.

That’s probably true for Zecco in terms commissions and I love to see the competition, but unfortunately, I don’t anything I want to buy with Zecco at this moment.

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• Reassurance from E-Trade
• Free Dividend Reinvestment at Zecco Confirmed

Switching from Firstrade to Tradeking

As 2007 comes to an conclusion, I make another change of my investment accounts over the weekend when I opened a TradeKing account, which will replace Firstrade as my main stock broker for stocks that pay dividend.

I got the Firstrade account in early 2006, mainly for its free dividend reinvestment feature, one that my primary broker Scottrade doesn’t have. At that time, Firstrade still had free mutual fund trading. Though I have never used Firstrade to buy mutual funds because I wasn’t so sure how long it could last, it was nice to have it as an option. In fact, that was one of the reasons that I eventually chose Firstrade over TradeKing back then. That policy, however, was abandoned last February when Firstrade adopted a similar fee structure as other brokers for mutual fund investment: charging a $9.95 commission for each trading no-load mutual funds.

When comparing Firstrade and TradeKing, other than the free dividend reinvestment service offered by both brokers, my main focus is on the commission: Firstrade’s $6.95 vs TradeKing’s $4.95. Percentage wise, the difference between the commissions charged by the two brokers is quite large, but that isn’t a big deal to me given how little I trade in a year. Plus, if I indeed switch, the $50 account transfer-out fee charged by Firstrade could potentially take me years to make up from money saved on commissions. In the end, what promoted me to make the change is the news that TradeKing will reimburse account transfer fees charged by other brokers before the end of the year. That basically solved my problem and, no matter how less, I still want to reduce the trading cost.

Of course, all of these are not necessary with a broker that charges zero commission, such as Zecco. However, I am not confident that the company can maintain their free-trading service after seeing it flip-flopped several times in a short period of time. Free-trading is nice, but I don’t want to end up having another commission based account with no other appealing features should Zecco decide to reverse course later. For that, I only keep a small account with Zecco right now.

After the latest change, my active brokers for both taxable and retirement accounts are:

• Scottrade: Primary stock broker, $7 per trade;
• Zecco Trading: Speculative money, $0 commission;
• TradeKing: Main broker for dividend paying stocks, $4.95 per trade;
• E-Trade Global: For stocks listed in Hong Kong only, about $40 per trade;
• QQQDirect: For QQQQ only;
• ComputerShare: For DRIP stocks only;
• Fidelity: 401(k) accounts;
• Vanguard: Roth IRA accounts;

Still a large number, but each has it own unique use. So I will keep all of them for now.

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• Random News: ShareBuilder Lowers Real-Time Trading Commission and Firstrade Account Transfer
• Random News: First Set of Zecco Referral Bonuses Distributed, $100 OptionsXpress Bonus Received, and Account Transfer to TradeKing Completed
• Poll: Who’s Your Favorite Broker?
• TradeKing Review and Promotion Codes: A Discount Broker with Loads of Features
• TRADEKING PROMOTION CODES

ShareBuilder Acquired by ING Direct

An email from ShareBuilder reached my mailbox tonight with some “exciting” announcement: ShareBuilder has been acquired by ING Direct on November 15, 2007. Along with the announcemen, ShareBuilder also told its customers what change they can expect after the transaction: none.

Rest assured there have been no changes made to your ShareBuilder account. All of the easy account maintenance, trading tools and customer service functions you are accustomed to will remain the same. The only change you will find is an eventual logo and color change as ShareBuilder begins to adopt ING DIRECT’s signature Orange color. You can also continue to use the same account number, login and password, and can access your account anytime through the co-branded ShareBuilder website.

While the message says currently there’s no change on ShareBuilde’s services, it won’t surprise me that one day ING will start to offer its savings products on ShareBuilder website and eventually integrate saving and investing together. Something like what E-Trade is doing (E-Trade has its own high yield savings products), so its customers can meet both the short term (savings) and the long term (investing) goals with one broker.

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• Random News: ShareBuilder Lowers Real-Time Trading Commission and Firstrade Account Transfer
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• ShareBuilder Starts to Offer ING Funds
• Some Bonus Money
• Another $50 ShareBuilder Promotion Code

Reassurance from E-Trade

As E-Trade’s stock bounced back to $5+ level, it seems the bankruptcy rumor has calmed down a little bit. Actually, instead of going out of business, E-Trade may become a take-over target (that speculation played a big role in driving up the stock price).

Anyway, today I received an email from E-Trade regarding my account with the broker and the safety of my money:

Because the sweep option for your brokerage account is the E*TRADE FINANCIAL Extended Insurance Sweep Deposit Account, you have one of the highest levels of asset protection in the industry—including 5X the FDIC coverage for our standard sweep accounts:

• FDIC insures all E*TRADE Bank accounts to at least $100,000 and Extended Insurance Sweep Deposit Accounts to $500,000.
• SIPC protects E*TRADE Securities customers up to $500,000 (including $100,000 for claims for cash).
• Additional E*TRADE Securities protection of up to $150 million per brokerage account is underwritten by London insurers (aggregate $600 million).

E*TRADE is well capitalized by regulatory standards. In addition, our core business is thriving. Today, over 3.5 million customers worldwide rely on us for their trading, investing, and banking needs.

It’s good that E-Trade decided to address my concerns directly, they could have done it earlier to ease account holders’ nerve when the news first broke out.

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• BoA Offers $0 Trade for Combined Asset of $25K or more
• Trading Global Stocks Becomes Easy with E-Trade Global Trading
• E*Trade Raise Rates on Complete Savings Account: Interest Rates Bottomed?

Is My Money Safe if E-Trade Fails?

Another big story yesterday (the other one I thought was the 170+ points reversal of the Dow, extending the index’s losing streak to 4 and closing below 13,000 the first time since late August) was the nearly 60% drop of E-Trade Financial shares. Following a Citigroup analyst downgrade of the stock to Sell over the weekend and the suggesting that the company may seek bankruptcy protection, questions arise on whether investors accounts with E-Trade are safe if the brokerage indeed fails.

I have a small account with E-Trade ($1,100 Global Trading Account and $7,000 cash in Complete Savings Account yet to be transferred to the Global Trading Account to invest in Alibaba.com). Though it’s not a lot of money, the news that E-Trade may bankrupt still concerns me about the safety of my money and investment in the trading account. After reading a MarketWatch.com news, my nerve eased a little bit, knowing my money is basically safe.

The company’s website states that both “E-Trade Securities LLC and E-Trade Clearing LLC are members of SIPC, which protects securities customers of its members up to $500,000 (including $100,000 for claims for cash).”

This is the first time that I actually tried to get to know a little bit more about SIPC, the Securities Investor Protection Corporation, though I am no stranger to the name. According to SIPC website, in the event that a brokerage firm fails, SIPC will protect investors from losing their investments:

When a brokerage firm is closed due to bankruptcy or other financial difficulties and customer assets are missing, SIPC steps in as quickly as possible and, within certain limits, works to return customers’ cash, stock and other securities. Without SIPC, investors at financially troubled brokerage firms might lose their securities or money forever or wait for years while their assets are tied up in court.

That sounds like the protection savers will receive when the bank holding their deposits go out of business. However, the protection from the SIPC is different from that of the FIDC, as explained in a SIPC brochure (PDF):

SIPC is not the FDIC. The Securities Investor Protection Corporation does not offer to investors the same blanket protection that the Federal Deposit Insurance Corporation provides to bank depositors.

How are SIPC and the FDIC different? When a member bank fails, the FDIC insures all depositors at that institution against loss up to a certain dollar limit. The FDIC’s no-questions-asked approach makes sense because the banking world is “risk averse.” Most savers put their money in FDIC-insured bank accounts because they can’t afford to lose their money. That is precisely the opposite of how investors behave in the stock market, in which rewards are only possible with risk.

Most market losses are a normal part of the ups and downs of the risk-oriented world of investing. That is why SIPC does not bail out investors when the value of their stocks, bonds and other investments falls for any reason. Instead, SIPC replaces missing stocks and other securities where it is possible to do so…even when investments have increased in value. SIPC does not cover individuals who are sold worthless stocks and other securities. SIPC helps individuals whose money, stocks and other securities are stolen by a broker or put at risk when a brokerage fails for other reasons.

Well, it won’t be a desirable situation for anybody who has a relationship with the brokerage, whether it’s investing or banking. But, as long as my money and investment won’t disappear just because E-Trade may file for Chapter 11 protection, I think I will leave them with the company for now.

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• Reassurance from E-Trade
• BoA Expanding Its Free Trade Program
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• Teach Your Kids to Save Money with an Electronic Money Jar

Is Kiplinger’s Choice of Best Online Fund Broker Any Good?

Last week, when I went through Kiplinger’s 2007 Best List, one of the surprises to me was their choice of the best online broker for fund investors, which went to Muriel Siebert, a broker that I have never heard of until I read the magazine. Kiplinger gave a brief explanation why this particular broker won the horner:

Sibert carriers a selection of nearly 3,000 no-load funds, and more than 1,800 of them are available without a transaction fee. The brokers’ easy-to-navigate web site offers countless ways of comparing funds. The firm also wins points for automatically sweeping customers’ cash into a money-market fund and keeping nuisance fees at bay.

In the past, I have used the so-called mutual fund supermarket such as Scottrade to invest in mutual funds so I didn’t have to deal with each fund company individually. It also saved me considerable amount of time in managing the funds as well. However, that activity was abandoned in 2003 when Scottrade started to charge fees to invest in a lot of no-load funds. When I saw Muriel Siebert in Kiplinger, I decided to take a look to see if there’s anything special of this firm.

To me, one of the biggest concerns of using a broker instead of the fund company is fees they charge to buy and sell no-transaction fee and no-load funds. And here’s what I found on Muriel Siebert’s web site:

In addition to no-load funds with no transaction fees, FundExchange offers many more of the no-load funds you want at a flat rate of $35 per transaction, regardless of how much you buy or sell.

That $35 transaction fee alone is enough to keep away from this firm.  Just to have an idea of how bad it is, Scottrade charges $17 flat fee for transaction fee, no-load funds, and Firstrade’s fee is even less, at $9.95/transaction. Who’s going to pay $35 to buy mutual funds when you can purchase the same fund at $9.95?

Then their fund selection of no-transaction fee and no-load funds. Muriel Siebert claims they have over 1,800 fund in this category. While the overall number seems to be quite large (Scottrade has more than 1,100 funds), the selection of funds doesn’t appear to be better. For example, I checked several funds from several popular fund families, such as Vanguard, T. R. Price, Dodge & Cox, and Bridgeway, and they all belong to transaction fee, no-load funds.

While using a broker can make investing in mutual funds a little easier (one account with the broker as oppose to multiple accounts when dealing with the fund companies directly), it doesn’t make any sense to pay a hefty fee ($35 in this case) to buy the fund through a broker when it can be purchased through the fund company without any extra fees.

Any I really don’t see why this broker is recommended by Kiplinger.

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Get Up to $100 When Switching to Scottrade

I am currently using several brokerage accounts and each of them has its own *unique* features. For example, I use Firstrade for stocks that pays dividend (such as MO), but it charges $6.95 per trade, E-Trade for stocks listed in Hong Kong, and QQQDirect to buy QQQQ without commission (find out more in my brokerage firm review). Though essentially I can get all I want from Zecco which offers both commission free trading and free dividend reinvestment, the back-and-forth changes of their services doesn’t make me feel comfortable of having a large account with them. Plus, it is uncertain whether they can keep offering free trading.

Then I still have Scottrade as my primary stock broker, though it charges the highest commission ($7 per trade) among brokerages I am using and doesn’t even have dividend reinvestment plan for stocks and ETFs. I have been using Scottrade for nearly 6 years and only saw it changed its service twice: one in 2004 when it started to charge fees for a lot of non-fee mutual funds forcing me to cancel all my mutual fund purchases with them, another one in the same year (or earlier) when it eliminated its eChecking service due to a security breach at a third party provider. In general, I am quite happy with them. They have a branch office not far away from where I live. If I have to send them a check, it’s almost certain that they will receive it the next day. When I have problems with my account, I can always speak to the same person who knows my problem. And their website is by far the best I have used and for active traders, they also have a stand alone trading platform.

If you are using other brokerages, but not happy with them, Scottrade could be an option. And if you switch before December 31, 2007, you can get up to $100 (for account value $25,000 or more) back, enough to cover the account transfer out fees your brokerage firm charges you.

For more details about this offer, check out their website.

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Zecco Scales Back Free Trading Offer

It seems to me that Zecco doesn’t have a clear plan on how to run their business.

First, they asked a ton of paperwork to open an account, then ran a promotion with a lowered minimum requirement that didn’t want anybody to know, shortly after the secret promotion, they decided to get rid of all the paperwork for good and went even further to eliminate the minimum. It finally became a true free trading broker in June. At one time when I called them with questions about my account, I was told they were flooded by new applications.

I guess they must be either exhausted by the processing or overwhelmed by customer calls complaining their trading system that they don’t want it any more because, less then three months after the elimination of the minimum, they reversed course and reinstall the $2,500 account minimum and scaled back monthly free trading offers from 40 per to 10 (details can be found on their website).

Beginning next year, each qualified Zecco Trading account will get 10 free stock trades per month. Additional trades cost only $4.50, a deal we think is hard to beat. If you have more than one account of the same type (individual, joint, Rollover IRA, Traditional IRA, and Roth IRA), you’ll get free trades in the first account of that type.

For your accounts applied for or opened before 12:01AM PST, October 1, 2007 you’ll continue to get 40 free trades a month, 10 free trades a day and pay $3.50 each additional trade until December 31, 2007. For options trades, you’ll pay $3.50 per trade plus 60 cents per contract till then. The new commissions kick in January 1, 2008. If you apply for or open a new account on/after 12:01AM PST, October 1, 2007, your new account gets the new deal from the start.

The change won’t affect me too much before so far I only made three trades (two buys and one sell) and going from 40 free trades to 10 probably won’t change the way most Zecco customers trade as they claim that 98% of their customers made far less trades than offered. However, the back and forth does show how unpredictable Zecco is.

I wonder what’s next. Maybe start to charge fees for trading? After seeing what they have done in the past six months, I can’t totally rule that out.

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Opened E-Trade Global Trading Account

I have been considering an E-Trade Global Trading account for quite some time. I thought it’s a good idea to invest directly into foreign markets, in addition to buying ADRs that are listed on US markets. What held me back is the high cost of trading foreign stocks.

However, I still want to try that program to buy Chinese stocks listed on Hong Kong Stock Exchange. Not many (I can’t afford to buy many anyway), just one at the beginning to see how it goes. So I went ahead and opened an account late last month and funded the account with $1,000 (it did take me five business days to complete the ACH fund transfer). The following is screenshot of the Global Trading platform.

The stock that I am interested in is Industrial and Commercial Bank of China (ICBC), world’s largest bank. Before making any trade, the US dollars in my account had to be converted to HK dollars first. It cost me about $11 to convert my $1,000 into HK$7,717. So even before buying any stock, I already lost $11. After th conversion, I used their real-time quote system to get the price of HK.1398. What I have noticed was that there’s no Market order and only Limit order can be placed.

For stocks listed on HKSE, they have a limit on the increments of the shares one can purchase (called board lot size), anywhere from 50 shares to 10,000 shares. For the stock I wanted to buy, the lot size is 1,000, meaning I can only buy shares in the multiples of 1,000 shares. The money I transferred was more than enough for 1,000 shares, but short for 2,000. If I found out this information before the currency conversion, I probably would transfer a little more to buy 2,000 shares. However, since I already paid the conversion fee, I decided to buy only 1,000 shares.

Immediately after I submitted my order and limited buy price to HK$5, I received the following error message:

The market was closed when we received your order. It has been entered into our system and will be reviewed prior to market open on the next regular trading day. After market open, please check to make sure your order was accepted.

It’s kind of ridiculous that they use EST (10:00 pm) instead of local time (HK time) to determine the time the order is received. Are we trading US stocks or foreign stocks? Anyway, the next morning when I called them to ask why I got the error message, they told me the order has already been executed, but gave no reason about the error.

Right now, the stock I bought at HK$5.00 is traded at HK$5.12. To break even, the stock price has to go to nearly HK$5.40 to cover both the currency conversion fee and commissions, equivalent to a gain of 8.00%.

In addition to the above mentioned fees, E-Trade also charges the so called Account Service Fee (ASF) of $40 every quarter if the account balance is less than $10,000. Fortunately, that fee is exempted for accounts opened less than 12 months. Therefore, I will give myself a trail period of 12 months to see how the stock performs. If the growth meets my speculative expectation, I will consider using other ways (such as getting a money market account from them as well) to avoid the ASF; otherwise, just get my money back and forget about it.

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