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Friday, May 7, 2010

Where/how to buy/sell?

I have a mutual fund that I have been putting a small amount of money into over the past 1.5 years. The transaction happens automatically every month and was setup through a financial planner that I was using at the time because I didn't know where to start. Because of this, I lose a small amount of the investment every month to fees, maybe something like 1%. I am looking to reduce or eliminate this loss. I may also be looking to buy individual stocks which the financial planner doesn't do.

I have looked at a few different online trading sites, but never really got a good feel for any of them. How is everyone else here buying and selling?


  1. You should definitely get rid of that arrangement. Losing a 1% a year that you shouldn't be losing really hurts over time.

    I have used an E*Trade account for my trading, but if you want slightly lower commissions you can start up a Scottrade, Ameritrade, or whatever. It's pretty simple to set up. You just need to have your checking account and routing numbers and you can wire money in pretty easily. What's nice about most of the online brokers is that they also offer easy ways to buy into various mutual funds if that's what you're after.

    As for the mutual fund, what sort of mutual fund is it? As I am assuming that you are using this for a core position, I would recommend a simple index fund (S&P 500, Wilshire 5000, or some balanced index fund) that has low fees and tracks the overall market. As far as where to go for that, I really can't argue against going to Vanguard. It's pretty easy to set up automatic investments there and the fees are quite low (0.25% or even 0 in many if not most cases).

    Take a look around their website and let me know what snags you run into. I'll be happy to guide you through.

  2. The fund is Growth Fund of America (American Funds - AGTHX). Looking at MarketWatch I'm reminded that it's actually 5.75% per transaction. Lame. But that's not something that can be avoided by buying shares of the fund myself is it?

  3. No. I would advise very heavily changing to a low fee alternative like Vanguard that doesn't have loads (those 5.75% fees you are talking about). Those will absolutely murder your long term performance.

  4. Personally, I use TD Ameritrade and it is really easy to buy Vanguard index funds.

  5. What are their fees for automatic investments on TD Ameritrade? Obviously Lucho will still be saving money, but I was wondering what they charged.

  6. I currently use Scottrade to maintain my small positions in a few individual stocks. I would highly recommend it, on the strength of its low transactions fees and ease of use.

    From what I understand of your investment strategy, I think you should really look at Sharebuilder. They don't offer you a lot of flexibility in timing your trades unless you pay extra, but you get very, very cheap fees, and the idea behind the site is periodic investments like you are talking about.

    I would agree with Brian in selecting a lower-fee investment.

  7. Sharebuilder really is a good service for building DRIP-style holdings. Good call there.