To this end, taking advantage of my last free trade at Scottrade before it expires, I bought El DuPont de Nemours & Co. (DD).
DD is one of the largest autopaint makers in the world. As the US economy heads for a slow down or a recession, this isn't that good for the company.
What should outweigh the bad above is that
1. DD is the 2nd largest in world in the agricultural business. The demand for food already outpaces production, and this should continue. Moreover, DD should benefit from rising corn seed prices because increased biofeul production.
2. Almost 60% of DD's sales come from outside the US. As the dollar falls, DD will make more on the currency exchange.
3. Right now it has a 3.6% dividend yield, which is pretty good. DD also has a long, steady history of increasing dividend payments. Just recently it raised its dividend by about 11%.
4. With a price/sales ratio of about 1.37, this is the cheapest DD has been in about a decade.
5. The company has bought back shares, and intends to buy back an additional $1.1 billion worth.
6. DD recently acquired IsoTherming Technology from Process Dynamics. This will help grow DD's Clean Technologies business because it provides refiners with a faster, cheaper way of producing cleaner fuel.
7. Eventually, the economy will improve, so DD's other business segments, which are flat or shrinking now, will improve.
I intend to keep DD forever, and add to my position on a hopefully regular basis. I might transfer it over to my Tradeking account, which has free dividend reinvestment, for compounded returns on the dividend.
My next stock purchase will most likely be additional shares of GE.
Update, sold DuPont.
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.
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?
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.
- I bought a stock because someone else recommended it (twice).
- I let my returns be crushed by commissions.
1. Never listen to the guys in the investment magazines, newsletters, and on the TV. Maybe they have great track records and their bad picks are just a fluke. They recommend so many stocks, however, that their picks are pretty much like an index, and over the long run indexes (large collection of stocks) tend to go up. Individual investors don't have enough money to invest in every single recommendation, and it might be that 20th or 30th stock that you had no more money to buy that would put your portfolio in positive territory.
If Warren Buffett had a stock recommendation show or column, would it last? I doubt it. Weeks would go by without a single stock pick. Stock pumpers on CNBC like Jim Cramer, however, have to find a new bunch of stocks five days a week. They make a living not on investment advice, but on entertainment. Don't listen to them.
2. Try to keep your brokerage commissions under 2%. Don't buy $100 worth of stock when the broker charges you $10 to buy and sell. In such a scenario, your stock has to go up 20% in price just so you break even!
What silly investing mistakes have you made? Feel free to post a comment.
1. To have a liquid net worth, adjusted for inflation, of at least $1,000,000
2. To have a steady source of passive income that pays for my and my family's living expenses and increases my net worth.
I want to do this with as little work as possible. This blog will document my progress.
Here's how it is at the start:
My current income stream:
Part time job: $270 - $360 per week
Bank interest & stock dividends: ~$70 a year
Ad income: $0
Savings account balances: $2,127.78
Scottrade cash: $317.92
Firstrade Roth cash (CAMXX): $100.52
Sharebuilder cash (BDMXX): $37.58
Tradeking cash (RUTXX): $3.17
Stocks and Funds:
Blackrock Enhanced Equity Yield Fund (EEF): $118.09
Janus Smart Growth Portfolio (JSPGX): $607.56
General Electric (GE): $74.46
Overseas Shipholding Group (OSG): $676.8
Reynolds American (RAI): $626.67
Royce Focus Trust (FUND): $130.34
Total Investments and Cash as of 12/9/07: $4,820.89
Graduate school tuition: ~$9,000 this year
Commuting: less than or equal to $75 a month
Entertainment/gifts: ~$100 a month
My short term goals are to increase my ad revenue. My medium term goal is to generate enough income, without getting a full time job, to cover my liabilities.