12/11/07

ING Direct Sharebuilder Review

Regular Individual Account

Here's the good:

1. You can buy fractional shares. You just specify the dollar amount. This means that you can invest any amount you like, no matter how much a share costs. For example, you can buy $200 worth of Berkshire Hathaway (BRK-A, over $100,000 a share).

2. For automatic investments (based on a schedule or by amount, i.e. you pick which Tuesday of the month to invest, or you specify how much to invest and when you have this sum in your account Sharebuilder invests it for you), in the Basic plan the commission is $4 a trade. The Standard plan, which costs $12 a month, gives you six free automatic investments per month. Each additional investment is $2. The Advantage plan, for $20 a month, gives you 20 free automatic investments per month. Additional investments are $1 each. Depending on how many investments you're planning to make per month, each plan has its advantages and can dramatically lower your costs.

3. Deposits into your account take about 1 business day if you make them electronically.

4. For automatic investments, you can buy shares with funds from your bank account without any extra fees; you don't have to have money in your Sharebuilder account.

5. There are no fees for taking your money out, and once the initial hold is gone (usually 3 days after your deposit) you can take your money out within a day. E.g. if you have cash in your account and want to transfer it to your bank account, if you do it before 5 P.M., you'll have the money the next day.

6. Free dividend reinvestment if you choose to have it. You have a choice for every dividend paying stock whether you want to automatically reinvest dividends.

7. No account minimums or inactivity fees. As of November 2008, there are no IRA maintenance fees (used to be $25 a year).

8. Sharebuilder now offers mutual funds (although a very limited selection so far).

9. You can trade options (but this is expensive).

10. Free real-time quotes. (Thanks to the anonymous commenter below for alerting me to this change.)



The not so good:


1. You can't specify a limit price for automatic investments. They're made at market price.

2. Automatic investments are only on Tuesdays, and you have to place your order by Monday afternoon.

3. There is an initial hold of a few days after every deposit, so you can't have your money back right away.

4. The site is a bit hard to navigate.

5. Express funding for mutual funds and real-time trades, unlike for automatic trades, costs $5 (unless you have an ING Electric Orange bank account).

6. Customer service is somewhat slow, at least with email. It takes from 24 to 48 hours to get a response (unless you write them on Friday, in which case you probably have to wait at least until Tuesday), and some of the responses I've received were form emails having nothing to do with my question.

7. Transferring your account to another brokerage costs $50 and takes up to 30 days. Transferring individual securities to another broker costs $10 each (but $50 maximum--for example, it's $50 if you transfer 5 stocks or 20.) Unless your commissions at the other broker are free, this is cheaper than selling the stocks in Sharebuilder and buying them at the other broker.

8. While automatic investments cost $4 (or less, depending on your plan), you have to make a real-time trade when selling. That's $9.95 (but better than the $15.95 it used to be).

10. The research section of the site is not as good as it can be, but getting better. It must be noted that Sharebuilder is not a broker for traders. The tools it offers are for buy and hold investors.


The bad:

1. Execution is much slower than other brokerages. The one position I sold went through my limit price (I saw real-time quotes on Scottrade) a couple of times before the order was executed.

2. The number of different stocks, ETFs, and mutual funds that you can buy is limited.

3. No bid/ask displayed for real time trades.

4. No bid/ask for options trades.

5. Where's the symbol lookup for options?

Bottom line:

An ING Sharebuilder individual account is great for buy and hold investors who use dollar cost averaging by investing small amounts on a regular basis. Just make sure to keep the commissions under 2% of your order. Sharebuilder is terrible for traders, as the execution is bad, and the fees will eat you alive.

This review will be updated periodically. Sharebuilder is getting better. There have been significant improvements since ING bought it. Let's hope this continues.

Updated December 28, 2008.