The New Kid at the Table
An interesting concept started in June 2012 on a crowdsourcing model. At MotifInvesting.com, you can buy a themed, weighted group of 20 to 30 stocks with a fee of $9.95 for the entire group. Popular themes include fracking-related stocks, high-yield stocks and trendy tech sectors like 3-D printing. You can also backtest and rebalance a motif, which will cost $9.95 or less. You start with a minimum of $250 with no upward cap. You can also create your own motif, and you'll get royalties when others buy your bundle.
While some motifs are professionally created and weighted, others are crowdsourced, so due diligence is essential. But, just as they are for people who use the major trading platforms, your investments up to $500,000 are protected by the Securities Investor Protection Corp. And Motif has street cred (Wall Street cred, that is) with Goldman Sachs (GS) as an investor and Jerry Gramaglia, the former E-Trade president, as an adviser on the board. As the Brits say, it might be worth a flutter.
Promotions at Online Trading Platforms
The major online trading platforms frequently offer deals like 100 free trades or commission-free trading for 30 to 60 days. Scottrade, E-Trade (ETFC), TD Ameritrade (AMTD), Merrill Edge (BAC) and Schwab (SCHW) offer these promotions for new customers. Most of this promotion trading is plain vanilla buying and selling of stocks or exchange-traded funds (which have their own fees). Still, such a deal: Scottrade charges $7 per trade, Merrill Edge $6.95.
Check the fine print for services (like free dividend reinvesting and the ability to use options) and rules (like a minimum balance). For instance, Schwab offers 300 commission-free trades with a minimum $50,000 balance.
These platforms will automatically generate year-end tax statements of cost basis, gains and losses, and split by short- or long-term gains. Theoretically, one could set up a portfolio and hold it forever free of any more charges. All these platforms also have useful investor advice sections and fine customer service departments. I have used TD Ameritrade and E-Trade customer service to great satisfaction.
Direct Investing Plans
Hundreds of companies have direct investing plans. In most instances, you set up an account with a minimum balance, $25 in the case of Abbott Laboratories (ABT),
Some cap the amount you can invest in a year or quarter, with amounts varying widely, from $20,000 a year at Briggs & Stratton (BGS) to $250,000 annually at McDonald's (MCD). Most companies will automatically reinvest your dividends at no charge. Some generate those end of year tax statements. Many make it easy to view your holdings online, like McDonald's does through Compushare.
Most importantly, if you buy stocks in one of these ways, you will not get advice from a broker. If you're in this game, it's up to you, as Kenny Rogers sang, to "know when to hold 'em, know when to fold 'em and know when to walk away."