Schmacker
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What things should be considered when choosing a company to use for purchasing investments through?
I'm considering companies like Scottrade, TD Ameritrade, T Rowe, etc. I've just begun my research and I realize they have differences like minimum investments, # and quality of mutual funds available, local office or not, et.c etc. But what I don't know is which of those things (or others) are important to consider as I try to select one.
Most of my retirement money is currently scattered amongst several places such as a local investment firm that is in a town where I no longer live, retirement and 401k accounts from previous employers, current employer retirement and 401k accounts, etc.
I want to consoldiate the monies to one central place that I can begin to manage myself. I do not plan to do a lot of trading. will invest mostly in mutual funds but plan to have a small portion set aside to do more active trading.
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Wed Aug 29, 2007 12:33 am |
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eaf
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Location: Alaska
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quote:
Originally posted by coaster
The number one reason traders fail is inadequate capitalization. If you don't have $50K you can afford to lose, stick with investing and put off the trading until you meet that.
That's an interesting comment. Would you elaborate? I'm wondering if you're talking about trading fees eating up too much of the account? If a guy's only making $500 trades, he'll end up spending a disproportionate amount on fees, but after he passes $5k or $10k on a trade, he's not getting gouged too much unless he's a day trader trying to shave pennies. Maybe it depends on trading style.
One other thing, too, is that opening a trading account with $50k right off the get-go without much trading experience can end in disaster. Paper trading works okay for some folks to learn the ropes, but it's different when there's money on the table, and a lot of traders tend to lose money at first. I've found that the more money I have in a trade, the harder it is to be objective about the it. I consider myself a somewhat experienced and well-read trader and I still catch myself doing stupid things (in fact, right now I'm down $13k on a trade gone hideously awry and I'm just kicking myself for it).
Eh, blabbering on. Sorry about that. Just wanted to know what you meant.
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Wed Aug 29, 2007 9:23 am |
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Schmacker
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But, what about my question? Forget I said anything at all about trading. 
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Wed Aug 29, 2007 12:17 pm |
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eaf
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Location: Alaska
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Coaster, I see what you mean, though I suppose draw-down is different depending on the trading methodology. A good friend of mine had a trading account of $20k and regularly made $10k-$15k trades, but was very conservative on his downside. He would baby the hell out of his trades, and tended to cut his losses VERY early (sometimes at less than 1/2%) and he did very well for himself. Note that he was not a day trader. My philosophy was to play it a little looser and, consequently, my trading account would experience more significant swings and drawdowns than his. The "beginner factor" is another thing entirely. I'm not sure how much it costs for a beginner to get off the ground, but for investors interested in playing with large sums, I've heard that "tuition" can be as much as $20k. Course, it varies from person to person...
Schmacker, what kind of "instruments" are you looking to buy? Stocks? Mutual funds? CD's? Everything under the sun? Different companies do different things. I use TD Ameritrade for stocks (though after what efflandt said, I'm considering thinkorswim.com) but I would never use them for mutual funds, since they charge a fairly high fee of $40 per transaction for the funds I'm interested in. Likewise, when I played with futures I used an entirely different company (hahaha, that didn't last very long for me). Anyway, what do you want this account to do for you?
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Wed Aug 29, 2007 3:05 pm |
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Schmacker
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quote:
Originally posted by eaf
Schmacker, what kind of "instruments" are you looking to buy? Stocks? Mutual funds? CD's? Everything under the sun? ...... Anyway, what do you want this account to do for you?
This will be a good portion of my retirement account. The rest is in 401k and retirement accounts at work. I expect the majority of the funds will be invested in a variety of mutual funds. I may purchase some stocks and eventually some bonds or CDs. I'm ashamed to admit it but right now I can't even tell you the current value of what I have mostly because I have not been paying close enough attention and have been depending on others to watch things for me. Those days are soon to be history.
I'm 48 yrs old and would like to think I would not have to work much more than about 10 more years. I have no debt and my kids are grown (though not yet out on their own, however the "Bank of Dad" is closed!), so college expenses are not an issue. Like others I have seen post previously I don't expect to fully retire just move to a vocation that is less stressful and more flexible. I do computer technical stuff now so maybe the future includes something like developing the occassional website out of the back of a motorhome parked at a beach or on some mountain top instead of the current 9-5 race.
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Thu Aug 30, 2007 1:04 am |
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eaf
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Schmacker, my priorities are as follows:
- Decide what MF's you want to trade
- Find a list of well-established brokers that allow you to buy into these funds
- Look for the cheapest trades
Well, it's not much of a priority list, but it's a start. I don't place a premium on services, though fund screeners and quotes can be useful if you're doing a lot of research and the free stuff from Yahoo or Morningstar or your generic consumer financial magazine isn't cutting the mustard.
As an example, I was just looking at TD Ameritrade. They offer a list of "no fee" mutual funds that you can trade for free. Unfortunately, it has very few of the funds that I would purchase. For other funds, Ameritrade charges $40 a trade, which is pretty pricey, especially if you're not investing a whole ton of money (consider that it is a 1% load on a $4k investment). So I don't use Ameritrade for anything except for stocks and the occasional ETF.
What I've done is try to find families of Mutual Funds that I like (for instance, I'm a big Vanguard fan) and then set up a brokerage account with them. Purchases made through my Vanguard account are free, and I have the ability to move money around pretty easily. Course, I don't jump in and out of my funds very often, since that's not what the account is for, but at least I have a "home base" for a large chunk of my money. There are a lot of other pretty good fund families. T. Rowe Price seems to offer some pretty good stuff. My 401k is with Fidelity. Once you retire, you may consider rolling your 401k into your new account in order to consolidate your money.
There's nothing that says you need to consolidate everything into one account, and there may well be reasons why it's a good idea not to have all your money with one manager (as a previous post mentions). I'm not sure if there's one place that will meet all of your needs perfectly.
Alright, I've typed enough already. It would be interesting to hear what other folks think.
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Thu Aug 30, 2007 12:33 pm |
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WylieMoney
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Location: Boston, MA
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Schmacker,
If you are looking at primarily investing in Mutual funds, then you should look at the number of funds available, the price for buying and selling those funds, and any other fees you might incur.
I would also look at money market yields.
I wrote a post about this on my blog Which includes some links to resources to help pick.
I use etrade because it has over 1000 funds available for no fee and no load, it allows easy investing of additional contributions. The screener tool for mutual funds is also a decent place to start your research.
The one thing to consider with Etrade or Ameritrade is that they might merge and if they do and etrade accounts get transfered to Ameritrade, that experience may be dreadful. I have had my brokerage change many times and it never goes smoothly and all the detail transaction records you need for taxes never transfer over completely.
I hope this helps!
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Fri Aug 31, 2007 3:36 pm |
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pf101
Senior Member
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Location: Portland, OR
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What funds to you want to buy? My suggestion is to choose a fund family you want to work with and then open an account directly with them. That way you don't have to worry about paying middle-man transaction fees.
If you do decide that you want to trade some stocks, I'd have a separate brokerage account for that portion of your money. If you really want them all together in one account (funds and stocks) then I'd suggest Fidelity. They have low trading fees (higher than some but if you're not trading a lot it shouldn't matter too much) and you won't have to pay anything extra to buy their funds.
I personally would still do a separate account for funds and stocks just so I could go with a lower priced stock trade, but if you prefer the convenience of being all in one place then Fidelity is, IMO, your best bet.
Personal Finance 101
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Wed Sep 12, 2007 8:48 pm |
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