Partially.

A couple of weeks ago, I wrote that Scottrade, my long-time stock broker is about to launch its own flexible dividend reinvestment program, which the brokerage firm says will be different from the traditional dividend reinvestment program (DRIP) that automatically reinvest dividends after they have been received without investors’ intervention. In fact, none of the dividend reinvestment programs as far as I know, whether they are for stocks, ETFs, or mutual funds, require manual action from investors. So when I first read “flexible” in Scottrade’s short description of the program, I was suspicious and became even more so when it appeared that the program may not offer the option to automatically reinvest dividend payouts after all. However, I still wanted confirmation from Scottrade before making any change on how I will continue to invest in dividend-paying stocks. My long standing position on dividend reinvestment when it comes to Scottrade, which is a rare exception because it doesn’t allow dividend reinvestment for stocks and ETFs, is that I want a traditional DRIP that automatically invest payouts without fees. I felt very disappointed when I sensed from their announcement that I may not get what I have been waiting it for years after all.

So the next day after that article, I tweeted Scottrade with my question on whether the flexible reinvestment program will allow automatic dividend reinvestment for free. This is how I asked my question:

“Your flexible reinvestment program, can I auto reinvest dividend for free?”

Later in the afternoon, the answer from Scottrade came back as

“Hi Sun, no manual trades will be required in the reinvestment program and it is free of charges and commissions”

When I got the response, my interpretation, from how I asked the question, was that the program does not allow automatic reinvestment (I was later pointed out the answer actually meant “no manual trades will be required”, not “no, manual trades will be required” as I read, but it still only solved part of the problem I have with the program, so it won’t change my decision anyway.). Even though it will be commission-free to invest dividends, the biggest problem of the program, from my view point, is that I can’t reinvest all the dividend payment because it only allow the purchase of whole shares.  If the distribution is not enough to buy even one share of the stock, not just the stock issuing the dividend but any stock, which is usually the case at the beginning, then the money will be sitting there doing me nothing good until the next dividend time or new fund is added.

Somehow I felt that by doing this, Scottrade benefits itself more from the program than its customers do. To me, the program is useless and, thus, it’s time to take my dividend paying stocks elsewhere. The destination of my choice is TradeKing because it has a traditional DRIP program that I have been using since became a customer in 2007. The next day, I sent paperwork to TradeKing to transfer all eight stocks that distribute regular dividends from Scottrade to TradeKing.

• China Life Insurance (LFC)
• Bank of America (BAC)
• Las Vagas Sand (LVS)
• PowerShares Golden Dragon China Portfolio (PGJ)
• Apple (APPL)
• Citigroup (C)
• Powershares Water Resource Portfolio (PHO)
• Visa (V)

It’s not my entire stock holdings at Scottrade, but a large portion of it.

The transfer occurred rather quickly, but not without a glitch. To transfer a, brokerage account to TradeKing, an ACAT form needs to be submitted and that’s basically the only thing I need to do for the transfer. However, since I was doing a partial transfer, I needed to list all the eight stocks. TradeKing’s ACAT has one page for partial account transfer, but it has only space to list four securities, so the rest has to be listed on a separate page that also came with the ACAT form. I submitted the entire ACAT form including the additional page with four stocks to TradeKing on May 10th to initiate the transfer.

Last Friday, when I logged into my TradeKing account, I saw only the first four stocks were transferred. The last four are still with Scottrade. I then called TradeKing to ask why, the representative on the phone, after did his research, told me the clearing office might have overlooked the additional page because that page is not normally used. Of course, I was not very happy with the answer because that page was not that I inserted myself, rather it was part of form. I was even more annoyed when he kept saying he was there to help me and asking me whether I want to request the rest four stocks being transferred.

Well, the instruction was very clear on what to transfer and what not. If they did their job, then there wouldn’t be the opportunity for him to help me on the phone in the first place. And instead of telling me that they will go back and fix the error they made, he kept asking whether I want to transfer the other four. Of course, I wanted to transfer all eight. Isn’t that the instruction?

Even though this stock transfer was completed rather quickly, I was not that satisfied about how it was handle. 

Original Post on www.thesunsfinancialdiary.com

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This time last year, I wrote that Scottrade, a discount online stock brokerage that I have been using since 2001, was about to launch its own free dividend reinvestment program. I was really excited when I first heard that the program might be available in the fall of 2012 because that’s what I have been waiting for years. As a long time investor with Scottrade, I have every reason to like the broker, but one thing that’s missing from the otherwise great service from Scottrade is free automatic dividend reinvestment.

Over the years, I have gradually shifted part of my investments into stocks that pay regular dividends and a big portion of that investments is in stocks held at Scottrade. For the income generated from these dividend paying stocks, I don’t want to take it as cash distribution or use the money to buy other stocks. Rather I would like to reinvest the distribution and buy more shares of the stock that pays the dividend because, by reinvesting the dividend, I want to have a bigger payout later, at which time I may need to take the distribution as cash. However, since Scottrade doesn’t allow free dividend reinvestment, all the distributions I have received so far ended up being used to buy other stocks, not the way I want to use the payouts.

Well, the fall of 2012 has long gone and Scottrade’s dividend reinvestment is still a program in the making. Early this year, I contacted Scottrade to see when, or ever, the dividend reinvestment will be available. At that time, I even thought about moving my brokerage account from Scottrade to TradeKing because I was tired of waiting. Scottrade told me in January that the program will be available some time this year and asked for my patience.

Since I have been waiting for it for so long, I thought a few more months won’t hurt too much. So I waited. Last night, when I logged into my Scottrade account, I noticed this announcement “Coming Soon … Dividend Reinvestment on Your Terms”. So it’s finally coming? I clicked the link and was led to the “Flexible Reinvestment Program Overview” page that explains a little more what “on your terms” means:

Scottrade will soon offer a commission-free flexible dividend reinvestment program that will allow you to invest dividends from most dividend-paying stocks or exchange-traded funds that you own into most stocks or ETFs.

The program will be different from a traditional dividend reinvestment program (DRIP), which requires you to reinvest dividends back into the securities that paid the dividends. In the Scottrade program, dividends will accumulate into a pool of funds that you can use to purchase shares of almost any stock or ETF. The choice is yours.

The Scottrade program will provide significant flexibility and is designed to let you tailor your dividend reinvestment tactics to your overall investment strategy.

My suspicion from the above program description is that the program is not automatic and I have to the reinvestment myself but since it’s “commission free” I won’t pay the regular commission for reinvesting the dividend. When I contacted Scottrade about dividend reinvestment before, I was offered trading credits that, as I was told, could be used to reinvest dividends I received which accumulated into a pool of cash. With those trading credits, I could reinvest the dividends or use the dividends to purchase shares of any stock or ETF commission-free 

If this is what Scottrade has come up with after all these years, then I have to say that the time for me to move out of Scottrade has finally come because this is NOT what I wanted, a dividend reinvestment program that automatically reinvest dividends for free, the traditional DRIP.

I will need some confirmation from Scottrade on whether the Flexible Reinvestment Program has the option to let me automatically reinvest the dividend for free. If so, I will stey; otherwise, I will leave.

I don’t understand why they try to be creative here.

Original Post on www.thesunsfinancialdiary.com

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1. Open an OptionsHouse brokerage account using promo code FIRE during the promotional period;
2. Fund the new account with $10,000 or more within 60 days of account opening;
3. Make 15 commissionable trades within 90 days after funding your account;
4. Get a free Google Nexus Table within 30 days after the above conditions are met.

Retail values totaling $600 or more during the calendar year will be included in your consolidated Form 1099.

Original Post on www.thesunsfinancialdiary.com

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I have been a Scottrade customer for years and whenever I need to add fund to my brokerage account, I use an external bank account linked to the Scottrade brokerage account to transfer money before buying stocks (see my post on how to fund Scottrade brokerage account). It is quite convenient actually, though the system has changed a couple of times. Basically, I can transfer money from my bank account at any time during the day and use the money just transferred to buy stocks immediately even before the fund is settled (the exception is stocks below $4 a share which require cleared funds in order to purchase). This actually is one of the features I prefer Scottrade over other discount brokers because most of them require at least 3 business days of waiting period before any new money can be used for trading.

In addition to using Scotrade Money Direct to transfer fund from an external bank to Scottrade, you can also use Scottrade Bank account to fund your brokerage account. 

Though I don’t have a Scottrade Bank account, I would imagine that money in the Bank account can be used to purchase stocks immediately without the above mentioned limitation because the money in the bank account would have already been settled by the time you want to buy shares (there’s no point to transfer money from an external bank account to the Scottrade Bank account right before purchasing stocks).Of course, having fast fund transfer is one of the benefits, or conveniences, of having a Scottrade Bank account. Just like what I usually do when selecting a bank account, I also want to have the benefit of having my money in the account, i.e., the return of the money. That’s exactly the reason I don’t want to keep any extra money in the brokerage account because I got nothing for having the money there, though I can use the money to buy shares with no restrictions. Unfortunately, the new Scottrade Bank accounts, including checking, savings, CD and Money Market account, don’t impress me in terms of returns. For example, the savings account has a rate of 0.03% APY for balance below $10,000. That’s close to nothing. And if the daily balance goes up to $100,000, the yield is just 0.10%, better than nothing but still.

So basically, the Scottrade Bank account is a better place to park your money that you want to be ready for purchasing shares, cheap or expensive, than the brokerage account, though you still earn almost nothing for your money.

In addition of being a better tool to transfer money between Scottrade broker account and bank account, there are some other features of the new Scottrade Bank account, including

• No monthly account maintenance fees
• Free online bill pay
• ATM fee refunds on cash withdrawals (you will be charged when withdrawing cash using Scottrade debit card, but Scottrade Bank will reimburse the sum total of your transaction charges at the end of the month)
• Free Scottrade debit card
• Convenient local customer support
• FDIC insurance

There’s one condition for the Scottrade Bank account though. The bank account is tied to Scottrade brokerage account, which means that you have to have a Scottrade brokerage account including individual, joint, trust, traditional IRA or roth IRA. So you can’t open the bank account directly without having a broker account first. Scottrade Bank has no minimum account balance requirement.

The initial deposit for the bank account is $100, which is pretty low. And you can fund the new account through a external account. The Scottrade Bank ABA routing number is 081086674.

If you are interested in a Scottrade brokerage account and a bank account, you can open open a Scottrade account using promo code KGKP0724 to get 3 commission free trades.

Original Post on www.thesunsfinancialdiary.com

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It looks like buying ETFs without commission is getting a lot easier these days. Late last week, Charles Schwab, the brokerage firm that introduced no-transaction fee mutual fund supermarket 20 years ago, announced the creation of the equivlant of ETF supermarket, called Schwab ETF OneSource. The online ETF trading platform allows Schwab customers to buy and sell 105 exchange-traded funds (ETFs) without the usual commission fees charged by stock brokers under normal circumstance (since ETFs are traded like stocks, trading commissions usually apply for each transaction).

So what’s the big deal about this? Well, one of the proven strategies of long-term investing is dollar cost averaging (DCA), which lets investors accumulate shares by investing a small amount each time (such as $100 per month), eliminating the burden of having to come up with a large lump sum of money and the concern of when to invest. DCA works very well for mutual fund investing because there’s no fee involved in subsequent investments with the fund firm. For ETFs, however, DCA doesn’t make too much sense if the investor has to pay a fee for each transaction (brokers charge the same amount of commission for ETF trading as for stocks). You don’t want to pay $5 (TradeKing) or $7 (Scottrade) commission when buying $100 worth of an ETF, do you? Now with commission-free ETFs, using dollar cost averaging to build an all ETF portfolio becomes possible.

Related: How to Buy and Sell ETFs for Free

In the past a couple of years, we have seen more and more firms start offering their clients zero-commission ETFs. There are firms like Vanguard which only have their own ETFs free of commission for their customers. We’ve also got companies like Fidelity and TD Ameritrade, which don’t have their own ETF offerings, but arrange to have third-party funds available for investors commission free (TD Ameritrade also has more than 100 commission-free ETFs). In the case of Charles Schwab, it’s a mix of both. As I have discussed before, Schwab has its own low-cost ETFs (some even beat Vanguard in terms of expenses) that are already commission-free for Schwab brokerage account customers. With the introduction of Schwab ETF OneSource, Schwab increased the number of commission-free ETF offerings to 105 by including funds from other ETF providers such as State Street (SPDR), PowerShares, Guggenheim, ETF Securities, and U.S. Commodity Funds. If you are an ETF investor, then you must have known, maybe even already owned, some of the biggest ETFs out there, like SPDR S&P 500 (SPY), PowerShares QQQ (QQQ) and SPDR Gold Shares (GLD). Now there are all available commission-free at Schwab ETF OneSource. If the ETF supermarket continues to grow, then we can expect that more funds will be available with zero trading commission in the future.

In addition to the ETF OneSource platform, Schwab also launched ETF Portfolio Builder for those who are interested in building a diversified portfolio using nothing but ETFs. With the Portfolio Builder, you can either select a pre-defined portfolio, such as Conservative, Moderately Conservative, Moderate,
Moderately Aggressive, or Aggressive, or, if you are a self-directed investor, build one of your own with the 105 available ETFs based on your asset allocation.

Related: What’s Asset Allocation and Why It Is Important

So, what do you think of this new Schwab ETF supermarket? Is it a real “game changer” in the ETF industry?

My first impression is that it’s pretty nice to be able to trade some very popular ETFs, like those mentioned above, free of commissions, but I won’t call it “game changer” just yet, because both Fidelity and TD Ameritrade already have more than 100 commission-free ETFs for their customers. In that sense, there’s no difference to me whether those ETFs are offered on a dedicated platform like Schwab ETF OneSource, or just like any other ETFs.

Original Post on www.thesunsfinancialdiary.com

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