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ETrade IRA Review

With their large advertising budget and amusing commercials featuring money-savvy babies, E*Trade has bought their way into the minds of investors. But are they actually a good place to invest? I recently opened an ETrade IRA to find out.

E*Trade Costs and Fees

E*Trade charges no annual fee for an IRA. They have a graduated cost structure for stock/ETF trades:

  • A flat $9.99 commission per stock or ETF trade, or
  • $7.99 per trade if you place 150 or more trades per quarter.

That’s a bit more expensive than some other discount brokerage firms, but it’s not entirely unreasonable.

E*Trade does not charge any commission on purchases of U.S. Treasury Bonds (including TIPS) when you buy them at auction. As far as I know, the only other brokerage firms that allow for commission-free Treasury purchases are Schwab and Fidelity. For investors with a sizable fixed-income portfolio, this can be a big money saver.

E*Trade Mutual Fund Marketplace

At E*Trade, you’ll also have access to a “no transaction fee” marketplace with over 1,000 no-load mutual funds. That said, many of the high profile fund families (Vanguard or Fidelity for instance) aren’t available without a transaction fee.

Free Trades for the First Month

If you open an IRA prior to 12/31/2010, E*Trade will give you free trades for the first 30 days (up to 100 trades). If you’re a buy & hold investor like myself (I place approximately 2 buy orders each month), this obviously isn’t that big of a deal. That said, free money is free money. No complaints here.

E*Trade Customer Service and Website

E*Trade’s email customer service isn’t the speediest. (You might not even get an answer back on the same day.) On the other hand, in my experience calling and asking the automated system for a customer service rep, I’m immediately connected to somebody who can answer my questions.

Perhaps my favorite thing about E*Trade is how fast and easy it is to fund my account. At Vanguard or Schwab, it takes a couple days for an online money transfer. At TradeKing, you have to write a paper check and mail it to them. At E*Trade, I can do an online transfer and have the cash available to invest on the same day.

Summary

Pros:

  • Reasonably cheap trades,
  • Easy-to-use website with same-day money transfers,
  • Commission-free purchases of U.S. Treasury bonds,
  • Free stock/ETF trades for first month,
  • Quick response to customer service phone calls.

Cons:

  • (Slightly) less expensive stock/ETF trades are available elsewhere,
  • Slow response to customer service emails.

Open an E*Trade Account

If you think that E*Trade sounds like a good fit for you, here’s the page where you would open an account.


Review: Scottrade IRA

Update: Over the last couple years, several brokerage firms have begun offering entirely commission-free trades on stocks and certain ETFs. As a result, for most investors these days, I’d suggest using a different firm rather than Scottrade. (See here for why we’ve moved our money to Vanguard.)

Back in 2001, I opened a Roth IRA with Scottrade. I kept it there for several years, and for the most part, I was quite happy with it. After all, there’s plenty to like about Scottrade:

  • They offer low-cost purchases of ETFs and other stocks–it’s been $7 per trade for several years,
  • Their online interface is easy to use,
  • There’s no annual fee for having an IRA with them,
  • Their customer service is pretty good, and
  • They offer access to tons of no-load mutual funds.

So why don’t I use Scottrade anymore?

One reason: They don’t allow for automatic reinvestment of dividends with ETFs. Every time an ETF pays you a dividend, that money will sit in cash until you pay another $7 to invest it. And even if you don’t mind paying $7 to reinvest your dividends, Scottrade doesn’t allow for the purchase of fractional shares, so you’ll have a little money sitting in cash regardless.

Important note: With regular open-end no-load mutual funds, Scottrade does allow for both:

  • Free, automatic dividend reinvestment, and
  • Fractional share purchases.

Would I recommend Scottrade?

That depends on what you intend to invest in:

  • If you intend to stick with your typical no-load mutual funds, then yes, I think Scottrade is a great place to invest.
  • If, however, you intend to invest via ETFs (or other individual stocks), there’s no reason to have your money sitting on the sidelines when you could just go to a different brokerage firm — Vanguard, for example — and sign up for (free) automatic dividend reinvestment.

TradeKing IRA Review

Update: TradeKing no longer allows for the purchase of fractional shares with their dividend reinvestment program. In addition, other brokerage firms have begun offering entirely commission-free trades on several ETFs. For most investors these days, I’d suggest using a different firm rather than TradeKing. (See here for why we’ve moved our money to Vanguard.)

I’m a big believer that one of the most reliable ways to improve your investment returns is to reduce your costs. Exchange Traded Funds (ETFs) purchased through TradeKing are an extremely low-cost way to invest.

[Background information: ETFs are essentially index funds that trade like regular stocks. In many cases, they have even lower expense ratios than traditional index funds.]

When buying ETFs, you’ll have to pay a commission for each purchase. However, at TradeKing, the commission per purchase is only $4.95, so if you plan to own the investment for an extended period–or if you’re investing a large sum of money–the super-low ETF expense ratios should more than make up for the small commission.

Free Dividend Reinvestment

One important point is that TradeKing also offers free dividend reinvestment. For somebody buying ETFs in an IRA, this is important. Better to have the cash reinvested right away rather than having it wait around.

How is TradeKing’s Customer Service?

My wife and I have only had a few interactions with them as of yet. But the answer is definitely “so far, so good.” I’ve contacted them via email twice and received replies very promptly. My wife has also called once in regard to her own IRA, and she reports that the service was great. Polite and helpful customer service rep and very short wait time.

In Summary

There’s no way I can promise you that you’ll be happy with them. All I can say is that I’ve been very pleased so far.

Opening an Account

Go to this page to open an account. The application process takes a few minutes, but it’s very straightforward. (The second page is where you’ll designate the type of account you want to open–regular brokerage account, traditional IRA, Roth IRA, etc.)


Know anybody 50 or older?

For as long as I can remember, my mom has been saying that she wants to live to be 100.

And she’s not kidding around. She might have the healthiest diet of anyone I know (not surprising–she’s a dietitian), and she’s passionate about fitness–swimming, running, yoga, you name it.

But she made one mistake: She waited until age 53 to get a colonoscopy. She didn’t wait until 60. She didn’t wait until 55. She waited to 53.

…and it almost killed her.

The colonoscopy and ensuing tests showed that Mom had Stage IV colon cancer. (Stage IV is the most advanced stage of cancer–it means that the cancer has spread to other organs. Statistical survival rates for stage IV colon cancer aren’t exactly promising: 8-15% chance of surviving 5 years beyond diagnosis.)

That was in August. Since then, she’s had 10 inches of her large intestine removed, 5 months of chemotherapy with a whole list of terrible side effects, and–just this last week–20% of her liver removed.

Based on the information we have at the moment, she’s now cancer-free. (Woohoo! 😀)

It’s worth noting, however, that:

  1. If Mom had waited until 54 instead of 53…Well, according to her doctors, she wouldn’t have made it to 54.
  2. If Mom hadn’t been in super shape (cancer notwithstanding), this would have gone far worse than it has.

What does this have to do with personal finance?

A few things, I guess:

  • Cancer treatment is expensive,
  • Health insurance is essential, and
  • Missing 5 months of work isn’t great for one’s finances.

But that’s not really why I’m bringing this up. I’m bringing this up because my Mom almost died–completely unnecessarily. This whole thing was entirely avoidable. From the Center for Disease Control and Prevention:

“Colorectal cancer almost always develops from precancerous polyps (abnormal growths) in the colon or rectum. Screening tests can find precancerous polyps, so that they can be removed before they turn into cancer.”

Please don’t wait until you’re 53 to get a colonoscopy.

And tell your loved ones, too.

I know it’s not an easy thing to slip into a conversation. Conveniently, March happens to be Colon Cancer Awareness Month, so perhaps you could use that as an opener. 🙂

A Note on Risk Factors

Aside from her age, my mom had precisely none of the risk factors involved with colon cancer. But she got it anyway. Please don’t put off getting tested just because you don’t fit the mold of somebody at high risk for colon cancer.


Charles Schwab IRA Review

I recently opened a Roth IRA with Charles Schwab.

It’s not my primary IRA–that’s with Vanguard. In fact, the only reason I initially opened the account was to take advantage of Schwab’s 2% cash back credit card. (With the card, the cashback bonuses are deposited into a Schwab brokerage account. From there, you can have the money swept into a Schwab IRA.)

That said, I’ve been quite pleased with Schwab so far. Over the last year, they’ve become significantly more appealing to buy & hold investors like myself due to their reduction in trade commissions (to $8.95/trade) and release of commission-free ETFs.

Schwab Commission-Free ETFs

Schwab’s selection of in-house ETFs (on which they don’t charge trade commissions) seems to grow by the month. Currently the selection includes:

Domestic Stock ETFs

  • SCHB: A domestic, broad-market ETF, with an expense ratio of 0.06%.
  • SCHA: A domestic small-cap ETF with an expense ratio of 0.13%
  • SCHV: A domestic large-cap value ETF with an expense ratio of 0.13%

International Stock ETFs

  • SCHF: An international equity ETF with an expense ratio of 0.13%
  • SCHE: An emerging markets ETF with an expense ratio of 0.25%.

Bond ETFs

  • SCHP: A TIPS ETF with an expense ratio of 0.14%.
  • SCHO: A short-term US Treasuries ETF with an expense ratio of 0.12%.
  • SCHR: An intermediate-term US Treasuries ETF with an expense ratio of 0.12%.

Between those 8 ETFs, you can easily put together a diversified portfolio with super low costs.

No-Commission Treasury Bond and CD Purchases.

Also, at Schwab you can purchase Treasuries (both TIPS and nominal) at auction without paying any commission. Purchases of new-issue CDs are commission-free as well. So if you would prefer not to use a bond ETF, you can just put together a CD or bond ladder for the fixed-income portion of your portfolio.

Schwab Customer Service

To date, I’ve only contacted Schwab’s customer service once. At the time I called (a weekday afternoon), there was literally no hold time. Of course, I can’t say that would necessarily be the case at other times of day or on weekends. And I have yet to contact their customer service via email, so I can’t say anything about that one way or the other.

Where to Open an Account

If you think Schwab might be a good fit for you, here’s the page to open an account.

If you’d like to compare Schwab to other brokerage firms, here’s a comparison of IRAs at various discount brokerage firms.


Mint Review: Why I Use Mint.com

About a month ago, my wife and I were noticing that our number of accounts at various financial institutions was becoming a bit unwieldy. We had:

  • A 401k at one place
  • An IRA at another
  • Checking accounts at two different places (one personal, one business)
  • Two savings accounts (one personal, one business) at the same institution as each other, but at a different institution than any of the other accounts.
  • A credit card with yet another financial institution
  • Student loans with yet one more institution.

Yikes! The thing is, they all made sense for various reasons, and to try to move them all to one place would have meant sacrificing something worthwhile (whether rate of return with the savings, a great cashback rewards plan with the credit card, or very convenient locations with the bank).

Enter mint.com. With a (free) account at mint we can now look at all of our info in one place.

Mint automatically pulls information from all of our different accounts, so there’s no need for us to update anything manually. (My previous system was to keep it all in a manually-updated spreadsheet. It got to be a bit of a pain in the neck!)

So that’s why we created an account. And it completely solved the problem. After having an account for a while though, I realized something else it does for us:

It tracks spending very nicely.

For anybody who tracks their spending, Mint is absolutely awesome. It automatically tallies up how much you spend each month with every individual vendor. What I find more useful, however, is the way that it groups vendors to give us information as to how much we’re spending in various categories.

Then it gives us nice, pretty charts. Like this:

piechart

What’s more helpful for me, however, is the ability to look at trends over time. For example, we can look at changes in our monthly grocery expenditures:

barchart

(The November number is artificially low because it only includes data for a portion of the month.)

One thing I’d advise, however, is checking how mint categorizes each of the vendors with which you spend money. It gets most of them right, but probably 1/15 categorizations will be completely incorrect. (For example, it placed our dental insurance payment in the “entertainment: sports” category.) Luckily, changing the categorization of a vendor (or creating entirely new spending categories) is quite easy.

Security concerns?

I’ve heard a few people voice concerns about security with online systems like this. Rather than try to answer them myself, I’ll just point you to this video from the CEO of mint. (It covered all the concerns I had, as well as some others.)

In short

  • Mint lets me see all our accounts in one place.
  • Mint tracks our spending for us, making it easy to spot trends.
  • It’s costs me nothing, and they don’t send me any spam.

Just thought I’d share my thoughts on it, as it’s been quite helpful for us. I hope you find it as helpful as I do. 🙂


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