I have been using Quicken Home & Business for investment tracking for years. It is a powerful and convenient tool that does a lot of other things than tracking stocks and mutual funds. However, the convenience comes with a price tag of $100. It’s not cheap for sure. If you only want to have a tool to manage your investments, then you don’t need Quicken. In fact, there are plenty of tools to help you do what you want to do for free. One of them is Google Doc.

I recently created a Google Doc Stock Portfolio Tracking Tool based on a Google Doc Template. What makes it easier to create such a tool with Google Doc is that I can simply use GoogleFinance functions to retrieve values I need. You can do the job with an Excel Spreadsheet, but then you will need to figure out where to get the data and so on. With Google Doc, a function call to GoogleFinance() is enough. Here’s how my stock portfolio tracker looks like.

In addition to the columns in the original Google template, I added Purchase Date, Purchase Price, Position, Daily Change, Total Market Value, and P&L into the spreadsheet. At the end, I also have total daily change ($ and %), market value of the entire portfolio, and profit & loss ($ and %). I have published the spreadsheet, so if you want to use it, you can download the spreadsheet and save it as your own copy.

Right now, the spreadsheet only has a few stocks I own. To track the stocks you own,

1. Delete rows from the top and only leave the last row (row # 4 as in the screenshot below);
2. Highlight the last empty row by clicking the row number from the leftmost (# 8 in the picture below);
3. Click Insert from the menu bar on the top and select Row Above;
4. Copy the last row that’s left in the spreadsheet from Step 1 and paste the entire row to the new row just created

Now that you have the new row with identical information as the last row, all you need to do next is replace Ticker Symbol, Purchase Date, Purchase Price and Position with the new stock you want to add to the spreadsheet. The spreadsheet then will automatically calculate the rest for you.

Remember, when you add new investments to the spreadsheet, always leave a blank row above Total and always insert a new row above the blank row and copy and paste the entire row to the new empty row you just created. Each row is only for one transaction, even if it’s the same stock (as I have two rows of C above).

I am sure there are other functions, such as Year-to-date return, etc., that can be added to the spreadsheet to make it more useful, I just haven’t figured out how to do it yet. If you have ideas on what to add, please let me know.

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The IPO stock I bought today is Dollar General (DG), the discount retailer backed by Kohlberg Kravis & Roberts (KKR). With more than 8,700 chain stores mainly in the south and midwest,  DG is the largest retail store by the number of stores operated. Though items sold at DG are mainly priced around $1, the retailer is generating $10 billion in annual revenue with positive same-store growth for 20 straight years. Even in this tough economic environment, DG has increased its sales by 11% so far this year, according to IPOHome. Despite the growth potential, the stock, priced at $21 a share, is rather rich with its 26.9 price-to-earning ratio, higher than its competitors such as Family Dollar Stores and Dollar Tree. A Morningstar analyst said the stock is only worth $18 a share.

Anyway, I bought 83 shares of DG at $22.69 apiece at Scottrade.

Speaking of IPO stocks, my purchases so far are a mixed bag. On one hand, I got China Life (LFC) and Visa (V) on the day they were issued and they are doing very good. On the other hand, I also had Black Stone (BX) and Giant Interactive (GA) which are total disasters. Let’s see how DG will do.

Another stock I bought today is Boston Properties (BXP) through its direct stock purchase plan at ComputerShares. I have been looking at BXP for a long time, mainly for its dividend payout (currently at $2 a share), like other dividend-paying stocks I purchased through ComputerShares (except Bank of America which cut its dividend to 1 cent early this year after receiving massive bailout from the government). However, since BXP’s DSPP program requires $250 for each recurring purchase, I am not able to set up an automatic investing plan as I did with other stocks.

photo credit: Karen Apricot New Orleans

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I got the book for quite some time already, but didn’t get the chance to read it until recently. Actually, it isn’t really a book that you can buy from a book store, but more like notes with basics of options trading that are easy to understand. It starts with explanations of what an option and volatility is and some common terminologies used in trading options (such as Long, Short, Put, Call, and Strike Price, etc.).

After the basic concepts, there are a few pages in the book, called Rookie’s Corner, for beginners like me. This part of the book mainly covers two topics (or plays) for traders who just start to trade options and don’t want to get burned:

• Writing covered calls
• Buying LEAPS calls as a stock substitute

The discussions in Rookie’s Corner cover the definition of each of the techniques and scenarios when and how to use them.
What I like the most about the book is The Plays part that consists of a total of 30 plays. Each play tells investors the setup of the play, who should run it and when to run it, and the strategy for the play. In addition, each play also comes with a diagram that shows the market condition to use the play.

I am still reading and digesting the plays and have yet to use any technique to trade option, but so far I found that the book is quite helpful in understanding some commonly used strategies in options trading. And because of the concise, getting-right-to-the-point language used in describing each play, reading the playbook is much easier than reading a traditional book.

I got the playbook when I opened my TradeKing account a couple of years ago. Right now, the book may not be available in hardcopy. However, if you are interested in using the playbook as the starting point to learn to trade options, you can still read the book online after you open a TradeKing account (be sure to check out TradeKing review to learn more about the broker before opening an account). In addition, TradeKing also offer two free intelligence reports on options trading:

• Options Trading Basics
• Top Ten Mistakes in Options Trading

To receive these free reports, all you need to do is provide your email address and the reports will be sent right to your inbox. And besides the free reports, you will also get $50 bonus if you use the link in the email to open a TradeKing account with $2,500 or more and make a trade. Pretty sweet, right?

Given how volatile the stock market has been lately, maybe it is time to finally learn how to use options trading to profit

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Following is a short video from MarketWatch that shows a brief history of GM.

BTW, Dow Jones announced today that Travelers (TRV) and Cisco System (CSCO) will replace Citigroup (C) and GM, two private companies that have received the most bail out money from the government, in the Dow Jones Industrial Average Index respectively.

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Though no new stock was added to the portfolio, nor any was eliminated during the first quarter, Buffet did make a few adjustments, most notably the increased stakes in two railroad companies, Burlington Northern (BNI) and Union Pacific (UNP), because comparing to auto or air, railroad offers an attractive, and energy efficient, way to transport goods. In addition, Berkshire also increased positions in two of the nation’s largest banks, Wells Fargo and US Bancorp, as bank shares hit multi-year lows in the first quarter, as well as health-care and comsumer products company Johnson & Johnson, after selling stakes in the last quarter of 2008.

At the same time, Berkshire Hathaway has trimmed positions in Carmax (KMX), whose share price has jumped nearly 50% in the first quarter, and ConocoPhillips (COP), which used to be one of Berkshire’s largest holdings but suffered a lot last year as crude oil price dropped some 70% from its peak of $145 last summer, contributing to BRK’s worst quarterly loss in nearly two decades.

Actually, when you look at Berkshire Hathaway’s proforlio, you will notice that they don’t change much quarter over quarter, or even year over year. Buffet is an example of what the buy-and-hold investing strategy really means because some of the stocks have been in Berkshire porfolio for decades. However, there are arguments that the buy-and-hold method is dead as the stock market has experienced big ups and downs lately, giving stock pickers opportunity to profit from the buge swings. The stock market has essentially become a trader’s market.

Yes, the buy-and-hold may make my portfolio look bad in a down market, as the one we have seen since October 2007. But the stock market and economy work in cycles and they will eventually recover. When they do recover, my portfolio will benefit greatly from what I bought now. So I still buy and hold

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Netflix (NFLX), the DVD rental company which does its business exclusively online, has seen robust growth in its subscriber base. Late last month, the Los Gatos, California based company reported a record subscriber growth, surpassing the 10 million mark for the first time to reach 10.3 million at the end of the first quarter. Profit also skyrocketed nearly 70% from the same period a year ago. NFLX stock was traded at $23.10 on December 1, 2007, when the recession officially started. On April 30, NFLX share price reached $45.30, nearly doubled from its December 2007 price, though the stock gave up some of its gains this month.

So what has propelled Netflix’s gain in market share? According to CEO Reed Hastings, Netflix attracts a lot of new customers with its Unlimited DVD Rental Plans which allows a subscriber to pay only $8.99 a month to rent unlimited number of DVDs (but with 1 DVD out at-a-time) and exchange DVDs as often as you want. In addition, with the unlimited plan, subscribers can also watch movies on their computers instantly with no additional costs. Comparing to a movie ticket (the average ticket price in U.S. is $7.18 in 2008 according to National Association of Theater Owners), $8.99/month for unlimited movies is much affordable these days.

On the other hand, Netflix’s chief rival, Blockbuster, didn’t get too much love from investors. Currently traded at around $0.80 a share, the stock has lost nearly 80% of its value since December 1, 2007. Blockbuster also offers through its Total Access Plan unlimited DVD rentals in a month with 1 DVD out at-a-time, but the price is higher at $11.99 per month. The extra benefit of this plan is that subscribers can exchange movies at Blockbuster store for free. At the end of March, Blockbuster announced that it joined force with TiVo to deliver movies to subscribers via TiVo, allowing subscribers to view more recent hits as Netflix does. But can that reverse Blockbuster’s fortune, whose stock has been struggling for years?

And both are facing competition from Redbox, the movie kiosk operator. At just $1 per night with no late fee, Redbox offers an attractive alternative to enjoy latest releases at cheap (you can also find Redbox Codes to rent movies for free).

What’s your favorite place to rent DVD?

photo credit: Valerie Everett

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Then it took the benchmark 5 years to reach a new all-time high in October 2007.

Then there came the subprime mortgage crisis, the collapse of the housing market and the financial market, eventually, the recession. In about one and a half year, the index reached a fresh 12-year in March 2009, losing 56% from its peak in October 2007. The decline is more severe than when it happened last time.

Nobody knows exactly how the stock market will recover from here or how long it will take to reach another record.

But one thing for sure will happen is that the market will bounce back eventually, as long as we give it enough time.

In 2002, equity mutual funds as a whole saw its only negative annual inflow since 1990 as investors fled to safety amid tumbling stock market. But then in 2003, the S&P 500 returned 29%, followed by another 11% gain in 2004. The 38% loss of the S&P 500 in 2008 is terrible,  but it may have already set the stage for a rebound. Maybe 2009 is the year that when we look back from the future we can say the stock market bottomed in March 2009 in this round of recession. In the short-term, the stock market can be a scary place to be. But in the long run, it’s still the best place for investors. If you have time on your side, then now may be the time to get back to the stock market and invest again.

I am wondering how the big M formed between 1997 and 2009 in the above picture will look like when we actually reach 2023.

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Since late October, I have added $10,000 to my Scottrade account to buy hard-hit stocks. As I mentioned early, I have already sold some stocks purchased early to take profits, but I am still holding a large number of stocks that I have no plan to sell, at least not in the new future. Following is the complete list of stock trades I made since October 2008.

There are a few trades I didn’t do with the profits I wanted to have, or I could have waited a bit longer. Also, there were times I sold the stock just to have the money to buy others since I don’t usually have spare money in the account.  For example, I sold both Ctrip.com (CTRP) and WuXi Pharma (WX) with little profit on March 5 and used the proceeds to buy Citigroup (C), which didn’t turn out to be a bad move, even though CTRP has also moved up very nicely during the same period of time.

Right now the market value of those stocks I am still holding is nearly twice as much as my initial investments of $10,000. I will probably buy a little bit more latter, but given the run we have since March 9, stock prices probably won’t go up as fast as we have seen in the last month.

BTW, what you see here isn’t the whole picture. My entire stock holdings don’t look that rosy. Remember I have a play account at Zecco? At the peak of December 2007, the account had a market value at $6,560. Now it only has a little over $2,500. And my E*Trade Global Trading Account, in which I bought two Hong Kong listed stocks, Industrial & Commercial Bank of China and Alibaba.com. It had $8,100 at the peak of October 2007. Now, the account has only $3,100 Maybe I should buy a few more Hong Kong stocks as well

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What have been added to Prosper are new ways to invest with Prosper. In addition to direct P2P lending, which has been the cornerstone of Prosper’s operation, the new Prosper now offers an Open Market Listing that allows financial institutions to list loans, such as auto loans, small business loans, or social impact loans, and sell them to potential individual investors.

Open Market listings describe the existing Open Market loan, owned by the loan seller, which is offered for sale on the Prosper marketplace. Each listing displays information to assist the lender in making an informed bidding decision. Lenders can review the sale price for the Open Market loan, the yield percentage that corresponds to the sales price, the remaining principal balance of the loan and the interest rate the borrower is obligated to pay on the loan.

From the above description, the new Open Market is more like Lending Club’s Note Trading Platform, where investors, especially those who are unable to participate direct P2P lending, like myself, can buy and sell loans. In this case, the loans are from financial institutions instead of individual loan sellers. The benefit of having financial institutions join and participate in the Open Market is that potential investors will have a wider range of loans to choose from. Whether investors can get good returns from buying those loans, however, depends on how the loans are prices, not the types of loans, as noted in the Wall Street Journal article yesterday. From my experience with Lending Club, there are many lenders sell loans with big markups (some as high as 10%) and I always stay away from those high-price loans. I’d apply the same rule if I ever invest with Prosper. As we know, large companies usually have large overhead and that could be priced into the loans they sell to small investors. If that turns out to be the case, then I don’t think many investors will get excited about it.

In addition to the Open Market, Prosper is also preparing a secondary market, like exactly the one Lending Club has, where lenders can trade loans. I will definitely take a look at this when it becomes available.

BTW, if you are interested in investing through Lending Club, you can use this link to open an account and get $25 bonus.

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After a slow start in the first quarter, April is the first busy month in 2009 for the U.S. IPO market with three more offerings in the pipeline, two this week: Rosetta Stone (RST) and Bridgepoint Education (BPI).

Even if you are not familiar with Rosetta Stone the company itself, the chance that you have heard “the easiest way to learn a foreign language” commercial is still pretty high. Rosetta Stone’s self-study products have been used not only by college students and working professionals, but also by NASA, the U.S. Army and Peach Corps to learn foreign languages.

Founded in 1992, Rosetta Stone has seen rapid growth in sales since 2003 after spending aggressive in marketing and distribution. Information on IPOHome.com says that Rosetta Stone’s earnings have grown more than 50% in both 2007 and 2008 while increasing the operating margins from 6% to 14%. However, the firm, despite its strong growth perspective, has its vulnerability. As IPOHome.com indicates in its report,

Rosetta Stone is highly exposed to discretionary consumer spending, which makes up 80% of sales, and it may still be hit by the global recession, especially given the minimum $219 price point of its products.

That being said, Rosetta Stone could still benefit from a market that hasn’t seen many quality offerings lately. And it may even take a cue from two early 2009 IPO, both of which have gone up nicely since their respective debuts, MJN +10% and CYOU +75%

Rosetta Stone plans to offer 6.25 million shares, priced between $15 to $17. The stock will be traded on NYSE on April 16th under the symbol RST.

In addition to RST, another IPO on deck this week is Bridgepoint Education. Founded in 2004, the San Diego, CA based online higher education provider offers programs for BA, MA and PhD degrees in business, education, psychology, social sciences and health sciences. According to an article on The Wall Street Journal, Bridgepoint

generated more than twice the revenue and eight times the earnings in 2008 versus 2007, ending the year with $26.4 million in profits. It has more students, faster enrollment growth and a higher operating profit margin, at 15%, than the last online college that went public, Grand Canyon Education Inc.

Stocks of Grand Canyon Education (LOPE), which was the last IPO in 2008, have gained nearly 25% since going public on November 19.

BPI plans to offer 13.5 million shares in the IPO with price between $14 and $16 apiece. The stock will be traded under the symbol BPI on NYSE.

Update: RST priced at $18 a share on April 15, above the $15 – $17 range; BPI priced at $10.50 a share on April 14, 30% below the lower end of the price range.

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This week, INO released another educational video for its take on the recent gains of the S&P 500, which has surged more than 20% since reaching 12-year low on March 9th. Check it out to see whether this rally has legs, or not.

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1. Always Invest With a Margin of Safety

According to Investopedia, margin of safety is “a principle of investing in which an investor only purchases securities when the market price is significantly below its intrinsic value.” If the asset is worth $1, then Graham would buy the stock at $0.50. With the margin of safety in mind, investors buy stocks at discount to minimize downside risk.

This concept is very important for investors to note, as value investing can provide substantial profits once the market inevitably re-evaluates the stock and raises its price to fair value. It also provides protection on the downside if things don’t work out as planned and the business falters. The safety net of buying an underlying business for much less than it is worth was the central theme of Graham’s success. When stocks are chosen carefully, Graham found that a further decline in these undervalued equities occurred infrequently.

2. Expect Volatility and Profit From It

Measured by CBOE Volatility Index (VIX), the stock market is as volatile as it can be since last September. The investing strategies used by Graham to deal with market volatility, which are still valid today, are:

• Dollar-cost averaging: With DCA, you buy a fixed dollar amount regularly, taking advantage of dips of the market without having to worry about when to get in and out of the market. Though DCA has its limitation in an up market, it is proven to be the winning method in the long term.
• Invest in both stocks and bonds: Investing isn’t just about what assets to buy, but also how these assets are mixed in your portfolio based on a thorough evaluation of investing time horizon, risk tolerance, and expected returns, etc. Having the right asset allocation mitigates the risk.

3. Know What Kind of Investor You Are

Are you a passive investor (defensive investor) or active investor (enterprising investor)? Being an active investor requires a lot of hard work to achieve the kind of return that’s proportional to the effort. If you don’t have the time and energy to actively research on what to invest, then take the passive approach and accept market returns.

In modern terms, the defensive investor would be an investor in index funds of both stocks and bonds. In essence, they own the entire market, benefiting from the areas that perform the best without trying to predict those areas ahead of time. In doing so, an investor is virtually guaranteed the market’s return and avoids doing worse than average by just letting the stock market’s overall results dictate long-term returns.

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I heard that citi group is reverse splitting the shares. Is this good for the investors?

Before talking about what a reverse stock split is, here’s a story of one stock I used to own which did a reverse stock split in the past. The stock is Nortel Network (NT). After falling into the same category (price wise) where Citi stocks belong in today, NT did a 10:1 reverse stock split in December 2006, boosting the share price to some $20 a piece. On surface, $20 a share looks much better than $2/share, but that’s the only thing the reverse split did for the stock. Two years later, NT filed for bankruptcy protection.

OK, now what is reverse stock split? According to the SEC definition:

A reverse stock split reduces the number of shares and increases the share price proportionately. For example, if you own 10,000 shares of a company and it declares a one for ten reverse split, you will own a total of 1,000 shares after the split. A reverse stock split has no affect on the value of what shareholders own.

That’s enough to say what a reverse stock split is. Then why do companies reverse split their stocks? The SEC has a perfect reason for that as well:

Companies often split their stock when they believe the price of their stock is too low to attract investors to buy their stock.

As for Citi, a reverse stock split probably won’t do the stock any good, except making the price look nice. And as it happened to other stocks, reserve split signals trouble at the company (well, we don’t need any more signal to know Citi is in trouble), therefore, it’s time to get out.

That said, I am going to hold on my Citi shares

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But is this rally real? Or just a temporary bounce in a bear market that’s still search for the bottom?

In this INO educational video, Market Club analyst examined recent market actions from the technical point of view to see whether the rally is the beginning of a upside reversal, or not.

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In addition to Citi, I also snapped up 222 shares of Bank of America (BAC) last month when the stock was hammered by fears of nationalization. When Sirius XM Radio (SIRI) was rumored to seek bankruptcy protection in February, I bought 340 share with the $35 cash left in my Scottrade account. Other recent purchases are:

All these purchases were made with free trades I earned from Scottrade (I probably don’t need Zecco’s free trades any more). While it’s nice to trade without paying commission, Scottrade does have some restrictions that makes trading a little difficult. I usually don’t keep any cash in my account. When I saw something I want to buy, I deposit the money into my account in the early morning. The problem is, according to Scottrade’s rule, the money can’t be used to buy stocks under $4 right away and as we know, many decent stocks are traded below that level now. To buy stocks below $4/share, the fund, transferred via ACH, has to be cleared and that takes full three business days (no such restriction if the money is wired to the account though). Given how volatile the stock market has been lately, anything can happen in four days. I asked Scottrade for reason and one explanation I heard, but don’t think it makes any sense, is stocks below $4 are not considered as stable. And this isn’t the only restriction. Once I was trying to use unsettled fund to buy Kongzhong (KONG), but my order was rejected even though the stock was traded around $5.00. I called in and was told I can’t place internet trade order on some thinly traded stocks with unsettled fund. Those stocks can only be bought through the broker. Since there isn’t a list of stock with extreme low trading volumes, there’s no way to know in advance what order has be made through a broker.

All these policies are to protect the broker. While there’s nothing wrong with that, it does cause confusion and inconvenience.

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Though the analysis is done with INO Market Club chart, you can easily apply what is taught in this video to any stock chart you are using. The point is to discover the signal that the market is telling you underneath the chart. Click here to watch the video.

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I sold 360 shares of HTX that I bought on December 4 last year (made a little profit from the trade) and used (part of) the money to buy 600 shares of Citigroup (C) at $1.05 a piece. Did I just catch a falling knife with my bare hands?

Four months ago I was wondering whether the stock was buy back then. The difference between now and then, of course, can be seen clearly from the price of the stock: Then $9, now $1. Can it go even lower? That’s entirely possible, given how much C has come down this year already. But I still like to take my chance with this dead mouse. Let’s see how high it can bounce

*Chart from INO

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BTW, today Obama connected the daily fluctuation of the stock market to the political tracking poll.

Is there any similary between the two as Obama suggested? I didn’t see it. Did you?

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Check out the video and see if it can improve your trading, especially if you just began to trade

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Gurus like Jim Cramer and Suz Orman are often seen on TV offering their advices to audiences on where to invest their money or how to handle their personal finance, but often times what they offered are only proven to be wrong later. In the February 2009 issue of  Kiplinger’s Personal Finance magazine, there’s an article on what the gurus said then and what really happened later. The paragraph about Jim Cramer is like this:

HE SAID “The market will no revisit the panicked lows it hit on July 15 … Bye-bye, bear market. Say hello to the bull, and don’t let the door hit you on the way out.” - July 30, CNBC’s Mad Money

BUT THEN didn’t the Dow fall another 3,400 points from July 15 to its low on November 20?

Some times you just have to wonder whether the gurus really know what they are talking about. And many times, you may be better off following your own gut feeling and let the gurus, who make a living by telling people what to do, do the talking.

In early January Jim Cramer recommended five recession-proof stocks: Caterpillar (CAT), Home Depot (HD), Johnson & Johnson (JNJ ), Hewlett – Packard (HPQ), and Verizon Communications (VZ). These are solid companies with solid business, but what about the timing of the recommendation from a trader’s point of view?

By now we all know what happened to CAT when the company lowered 2009 earning forcast and announced another 20,000 job cuts. But if you followed Cramer’s advice and bought the stock when he recommended it, you are probably already in a hole. Check out this INO video, Fundamentals vs Technical, which examines Cramer’s picks. It’s just another example to show that we shouldn’t follow the advice blindly.

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Now we know Zecco will soon be Not ZEro Commission COst for many small investors after the broker introduced a new fee structure which requires at least $25,000 in market value to earn 10 free trades per month, it’s time to check out some alternatives to Zecco. Even though at $4.50 per trade (March 1, 2009), the commission is still quite low comparing to other discount online brokers, I can feel that there are a lot of unhappy investors ready to move on.

For me, I will keep using Scottrade and TradeKing as my primary brokers. I have earned some free trades at  Scottrade from their referral program, so I won’t have to pay commission ($7) if I trade modestly (Scottrade offers up to $100 account transfer fee reimbursement). At TradeKing, the commission ($4.95) is lightly higher than the commission at Zecco, but I like TradeKing interface much more despite the improvements at Zecco. Also TradeKing reimburses up to $150 account transfer fee charged by other brokers.

While I won’t be using my Zecco account as much as before because of the change, I will keep the account open for the time being. The reason for not closing it is that Zecco cited the current economic condition as one of the reasons to abandon the commission-free trade policy. If the economy improves (who knows when, but it will), maybe they will reverse their policy in the future? That’s not entirely impossible given how much the broker has changed its policies already.

But for now, what other cheap brokers can you use? Depending on the size of your portfolio, you have a few choices.

More than $25,000 in Assets

If you have more than $25,000, then there are a couple of other places where you can get commission free trades.

• Bank of America Investment Services: You can get 30 commission free trades from BofA Investment Services if you have more than $25,000 with the bank. The catch is assets in the brokerage account doesn’t count in the $25K assets. So you will have to have $25K in deposits accounts, checking, savings, or CD, to be eligible for the free trades.
• Wells Fargo WellTrade: Think the $25K in deposit accounts required by BofA is too much? Than check out WellTrade from Wells Fargo. With WellTrade, you can get 100 commission free trades each year as long as you maintain $25K in brokerage, loan balances or deposits with Wells Fargo. 100 free trades a year isn’t as good as 30 per month, but the requirement is lower.

Less than $25,000 in Assets

If you don’t have a high balance required by BofA or WellTrade for free trades, but still want to buy stocks with relative low costs, then there are several discounter brokers out there charge for less, in addition to Scottrade and TradeKing I just mentioned.

• Just2Trade: With Just2Trade, you pay $2.50 per trade, for stocks and mutual funds. I know many discount brokers charge a much high commission for buying/selling mutual funds, so $2.50 for no-load mutual fund order is a very good deal. And there’s no minimum to open an account.
• Options House: There’s no minimum requirement to open an account at Options House and you will pay $2.95 flat-rate commission for each trade. For stocks priced $2.00 or less, the commission is $2.95 per trade plus $0.01 per share.
• Sogo Trade (reviews): With a minimum of $500, you can open an account with SogoTrade and trade for stocks or ETFs at $3 per trade market or limit order. For trades above 5000 shares, the commission cost is the regular commission plus $0.004 for each share above 5000. For stocks priced less than $1, an additional fee of 1/2 of 1% of principal value applies. There’s no inactive fee or subscription fee.

Any other brokers out there beat Zecco’s $4.50 per trade commission?

BTW, if you want to transfer your brokerage account, take a look at my previous post on how much it costs to transfer a brokerage account. While in general you need to pay, usually $50 to move out, the good news is many brokerages offer reimbursement if you move your account to them.

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The day after he won the presidential election, November 5, 2008, the Dow Jones Industrial Average lost 486 points. Today, the day Obama was sworn in as the 44th President of the county, the Dow tumbled 332 points, the worst inauguration day drop, to close at the lowest level since November 20, 2008. The 486-point lose on November 5th was also the worst on the day after the election.

Today, financial shares again weighed on stocks as investors feared that banks, such as Bank of America (BAC), Wells Fargo (WFC) and Citigroup (C), will need to raise more capital to offset losses. According to Bloomberg, State Street Corp. (STT) plummeted 59% after the largest money manager for institutional investors said its unrealized bond losses almost doubled, while BAC tumbled 29% and WFC 24%. Steep losses of financial shares pushed the S&P 500 Financial Index down 17% for the day to the lowest level in nearly 14 years.

The country is facing what Warren Buffett described as  “an economic Pearl Harbor”.

Obama will lead the country out of the recession, but how soon?

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But it doesn’t look like that dividend income is going to last long.

Today, BofA, after losing $2.39 billion in the fourth quarter of 2008, announced that it will cut its quarterly dividend from 32 cents to a mere 1 cent. Of course, when the bank gets another $20 bailout money from the government, it can’t pay out a nice dividend as usual. The government will demand to get paid back first.

The new rescue fund is to help BofA to absorb Merrill Lynch, which it purchased last year when Lehman Brothers collapsed. However, the purchase, as long with BofA’s purchase of troubled mortgage lender Countrywide Financial early, didn’t make BofA stronger. On the contrary, Merrill just posted a massive $15.31 fourth quarter loss. Did Ken Lewis bite off more than he can chew with those purchases?

In total, Bank of America received $40 billion cash infusion from the government, the same amount as Citi got.

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I had a bitter history with NT, not with the company itself, but with its stocks. After graduation, I worked for NT’s main competitor, Lucent, briefly, and after seeing LU and NT dropped into the penny stock category in 2002, I started to buy those stocks. In fact NT was the very first stock I ever bought. In more than five years, I repeatedly bought and sold the stock and I did make a few bucks in the early days. Unfortunately, all the money I made early were lost later as I naively hoped the company could be turned around. I eventually gave up and unloaded all my NT shares last year, taking a deep loss.

Here’s my trading history of NT:

• 09/22/2002: Bought 2000 shares @ $0.47;
• 10/14/2002: Sold 2000 shares @ $0.55;
• 10/15/2002: Bought 2000 shares @ $0.60;
• 10/21/2002: Sold 2000 shares @ $0.77;
• 11/19/2002: Bought 2000 shares @ $1.40;
• 12/04/2002: Sold 2000 shares @ $2.02;
• 12/10/2002: Bought 2000 shares @ $1.69;
• 11/21/2003: Sold 2000 shares @ $4.08;
• 01/21/2004: Bought 1000 shares @ $6.67;
• 05/06/2004: Bought 1000 shares @ $3.95;
• 10/27/2004: Bought 400 shares @ $3.27;
• 08/07/2006: Bought 320 shares @ $1.99;
• 01/16/2007: Sold 72 shares @ $27.22 (NT conducted a 10:1 reverse split in December 2006);
• 03/18/2008: Sold 200 shares @ $6.23

Now that Nortel has avoided “a slow death” by filing for bankruptcy protection, can it emerge as a different company later?

*Photo from Reuters

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Why Invest in Dividend Stocks?

If you are not, then I ask you to take a look at this chart from the S&P. It’s the cumulative return of $1 invested in 1930 with two different investment schemes. The red line is the return with dividend reinvestment and the blue one is price return only. As you can see, the difference between the two is huge, because of the compounding effect of dividend income.

The whole deal about dividend reinvestment is that when dividend is distributed, you don’t take the cash distribution. Instead, you use the dividend to buy more shares of the stock. Over time, even without any new contribution, you will own more shares from the reinvestment, as long as the dividend keeps coming and you keep reinvesting it.

Does the above chart interest you? I hope it does

How to Invest in Dividend Paying Stocks?

Now you know dividend can make a difference in the long term, the next question is where to find best dividend-paying stocks to invest? You have a couple of options.

First, if you want to buy individual stocks, then the recently published S&P 500 Dividend Aristocrats (PDF file) is a  source to get you started. In Class of 2009, S&P selected 52 stocks from the index which have increased their dividends every year for at least 25 consecutive years. The full list of 52 dividend aristocrats is shown in the following , where I also added each stock’s dividend yield and current price (as of 01/13/09). To invest in individual stocks, you can either use cheap brokers such Zecco (10 zero commision trades per month) , which does offer free dividend reinvestment, or buy them through a DRIP program.

If, on the other hand, you don’t want to own individual stocks because of the volatility and risk, then another options is investing in exchange-traded funds (ETFs) specializing in catching dividends. A while ago, I discussed how to use dividend paying ETFs to generate passive income. Check out that post to see which ETF has be best dividend yield. That post does need an update, though.

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