I have heard by way of Sun at Sun’s Financial Diary that Zecco has removed their $2500 account minimum to lure more investors.

This doesn’t seem to bode well for the company. I’ve posted my thoughts on them previously, and the cons…

And why is that? In order to properly diversify? What about those who subscribe to the Warren Buffett school of thought which equates roughly to do your research on companies, buy a good portion of them and then hold forever (pretty much eschewing the concept of diversification)?

It is IMO poor logic to state that new stock traders need to be upwards of $10k to trade since their losses in this new “game” could be huge and therefore psychologically damaging (potentially) compared to getting started small and learning the basics of individual stock risk and how to evaluate companies.

Think of it this way, a new investor puts in $100 to Zecco and places it on 2 stocks out of the blue, then both companies close doors. He’s out now $100, but doesn’t feel so bad since he can stomach the loss. Have him save up and place $10k in thirty stocks, and then have the whole market turn into a huge bear therefore losing 5K and potentially turning him off to this whole stock business. Is this really a better idea than starting small?

The only time when saving huge amounts before getting into stocks is a good idea is if trading costs are involved, but since Zecco has none, there is no good reason for a small investor curious about stocks and willing to put money on them to not try this.

FT