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Sharebuilder Review

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ShareBuilder - Welcome page Sharebuilder built its reputation buy having low commissions ($4 a trade) and completely buy-in into the dollar cost averaging mantra. Much like how you have regular retirement account contributions, Sharebuilder helps you cheaply buy into positions with individual companies (back then, ETFs didn’t exist) on a regular monthly schedule. They made a good name for themselves doing this in an era when trades cost at least twice that.

Summary

Unfortunately, I think the days of Sharebuilder may be numbered as brokerage firm commissions get lower and lower. TradeKing now offers $4.95 commission trades, a mere 95 cents more than Sharebuilder with the option of trading whenever you feel like it. That being said, Sharebuilder still offers tools like the ability to buy fractional shares, regularly scheduled transfers and orders – all of those features take away the hassle of managing a dollar cost averaging strategy yourself.

If you want to dollar cost average, Sharebuilder is the best brokerage to work with.

Account Features

I mentioned some of the features that assist in dollar cost averaging and they are:
Buying fractional shares: To my knowledge, no other brokerage allows you to buy fractional shares of stock. Mutual fund companies, like Vanguard, will let you buy fractional shares of their mutual funds, but I don’t know of any that will let you buy half a share of Google. This lets you designate $100 a month towards Google (or anything else) and focuses on the dollar amount, not the share price.

Scheduled trades: You can schedule your trade on any Tuesday of the month and each trade is a mere $4, which is still the cheapest commission available on a trade. You can participate in plans that can lower the per trade value (like a Standard plan that costs $12/mo and gives you six trades) but $4 is the base. Another nice feature of these schedule trades is that it can deduct the funds directly from your bank account. You don’t need to transfer the funds, wait, and then buy.

Free dividend reinvestment: This is another feature that plays into the DCA mantra of reinvesting dividends on the investments that pay them out. This reinvestment feature is free, which is especially nice.

No account minimums or inactivity fees: In helping with the small time DCA investor, there are no account minimums or inactivity fees that were so prevalent with many brokerages. This feature is more widely available nowadays but back when Sharebuilder started, it was unheard of.

Weaknesses

The same things that make Sharebuilder good for DCA also make it bad for typical traders. There are no real time stock quotes, not a problem if you schedule your trades ahead of time, and there is no way to set a limit order. All of your trades are made at market prices, which can be a good thing or a bad thing. Another negative is that all sales are made real time with a commission of $9.95, there’s no concept of “scheduled” selling. Finally, they don’t offer a lot of market research.

Ultimately, Sharebuilder is a great DCA brokerage and a weak everything else. If dollar cost averaging is your thing, I think that Sharebuilder is a great option. If not, it’s better to go with another firm (try one on SmartMoney’s 2008 Best Broker listing).

{ 18 comments, please add your thoughts now! }

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18 Responses to “Sharebuilder Review”

  1. Glenn Lasher says:

    Jim, I have a naïve question about brokerages in general, which I haven’t been able to find a clean answer to. . . When they say $x.xx per trade, I assume that they are talking about everything that takes place in a single transaction, and not per share?

    Let me give an example: Suppose I go to a brokerage that wants $5/trade. I go in and buy 3 shares of Acme and 2 of Apex. Do I owe them $5 for one transaction, $10 for two transactions (one for each stock) or $25 for five transactions (1 per share)? I have always assumed it to be $5.

    Again, I realize this question is wicked naïve, but it is one of the questions to which the answer always seems to be assumed, and “trade”, as a noun, specifically as a unit of stock market activity, has not been defined anywhere that I have seen.

    • Anonymous says:

      PEr transaction is per trade is $10 total, $5 for each trade. not per share…only in some penny stock transactions with thousands of shares do you get a per share fee, and that is usually micro-cents on the dollar.

  2. Jillian says:

    Sharebuilder actually does do limit orders for “real time” trades (the ones that cost $9.95) – I set one up the other day!

  3. Evan says:

    Sogoinvest / Sogotrade used to have a better deal where it was 3 buck trades when you did it on your own OR 10/month for 10 auto trades and the auto trades were done on the day you chose. But I guess they found it unprofitable…cause they stopped it!

    There has to be a better option than Sharebuilder?

  4. Donny Gamble says:

    The best feature that I like about sharebuilder is the option to buy a stock with express funding. If you don’t have any money in your sharebuilder account, for an extra $5 you can purchase the stock any way and they will automatically take the money out of your checking account

  5. Scott says:

    While Dollar-Cost Averaging is a part of the appeal, I find ShareBuilder to be best suited for the first-time investor interested in a buy-and-hold strategy. The site design is much more user friendly than TradeKing, Zecco, and OptionsXpress (the others I have used), and the lack of maintenance fees and minimum investment requirements reduce the risk of getting started.
    Also, ShareBuilder can link to your ING Direct savings account. Having the accounts linked allows me to instantly transfer funds from my savings into my investment account so I don’t have to wait for the funds to arrive (as much as 3-4 days with my other accounts). This way, I can take advantage of the higher interest rates of my savings account without sacrificing the ability to capitalize on the buying opportunities that are so abundant right now.
    As an update: ShareBuilder has just recently (in the past few days) added Real Time quotes to their website.

  6. Miss M says:

    Sharebuilder isn’t the best but they do offer sign up bonuses (like the one for costco members) and you can occassionally get free trade promotions. Between the two I’d say they are OK for the casual investor, someone who only buys/sells once or twice a year. I dollar cost average into no-load mutual funds, why pay any commission, especially when you are investing small amounts. Even $4 is a lot compared to the $50/month investments I make.

  7. I peronally feel that Sharebuilder is the biggest waste of time and money. Yes, it is easy and cheap, but purchasing stocks takes research and informed decision-making which cannot be done with the site on its own. If an investor happens to have access to other tools as well, that may be fine but the fact that trades only occur on certain days in order to take advantage of group purchases is ridiculous. When investing there should be clearly defined entry and exit points-established by each investor based on their own preferences or comfort levels-and that simply cannot be accomplished with this company. In order to do that, you would need to place real-time trades, which put the pricing level on par with most other discount brokers who have much more in-depth research which can be invaluable. And, if the investor is inexperienced and just trying to get a feel, most feature-full discount brokers do not charge anything for no-load no-transaction-fee mutual funds, which would beat Sharebuilder hands down. Plus, if you are only worried about Dollar Cost Averaging, then this Tuesday-only trading really is of no benefit, since there is literally no control over the price point. Just my opinion, but I would much rather pay a little more and go with an E*Trade or TD Ameritrade and get much more research and info (not to mention value) for my invested money.

  8. jim says:

    @Glenn: You’d owe them $10, one for each company.

  9. Cap says:

    @Glenn: uh jim’s phrasing may make it more confusing but what jim means when he says “one for each company” is one transaction for each company you bought. so yeah, you’d owe the brokerage $10 – $5 for each transaction.

  10. cbecerril says:

    We just went through a nightmare experience with sharebuilder & think everyone should look at this company a little closer. First, we bought 200000 shares of stock, over 186000.00 and were charged 6000.00 in commission fees by sharebuilder. We asked why after the 6000.00 was deducted from out account. We were told that it was a “over the limit” commission fee. we complained, contacted them directly by phone. A few days later we logged on to our account only find that it had been “restricted”. Contacted sharebuilder again, by phone to find out what was going on, they began to request proof of id. we faxed in copies of all they requested, drivers license & a bill with our address on it. 2 days later still no answer, called back & again was told to fax in copy of DL. They asked us this 2 more times, so the 4th time we had a copy of the DL notarized for verification. This went on for 3 weeks, at the end of the 3rd week we asked our Lawyer to call and find out what was going on. The day he called, Sharebuilder closed out account, sold our stock, without permission, resulting in a 10000.00 lose. We still could not get anyone on the phone to talk to us, they would not connect us to their legal department or upper management. 3 days later our money, minus what we losted, minus the another 6000.00 that they charged us for selling out stock as it was also consider “a large order sell, what was left of our money was returned to our bank. We are considering legal action as to this date, we have had not explanation for any of this. After receiving our money back we opened an account with etrade, purchased 196000 shares of the stock back, expecting to be charged somekind of “over the limit” charge by them as well, and guess what? Etrade only charged exactly what they said, no extra charge, no hidden fees after the stocks were bought, just a one time 9.95 fee. We are still just blown away by Sharebuilder and can’t understand what happened. We have had an account for our children for over 3 years with sharebuilder and never had any problems till now. Only after we invested our life savings. Our childrens account has also been closed and they also sold the stock in that account and it is still frozen. So far Sharebuilder has not even released the funds back into our daughters account. So please be careful with Sharebuilder. I know you will be getting charged a lot more than you are quoted & if you complain, you will loss. CBecerril

    • Alicia says:

      Oh my God!!!! Thanks for writing this Post. I will Never dare to start investing with them again.

    • Jack says:

      I agree, I am having the same issue right now…I needed to make a sell this morning but can’t due to my account being restricted. Now, they need my driver’s license, bill with my name and address, and a copy of my SSN fax to them…can’t do anything.

    • Andy says:

      Yeah. I thought I was the only one with this experience. When u have an issue with sharebuilder, that’s when u will know u we’re dealing with minsters and beasts.

  11. Alicia says:

    Well, I was getting ready to start investing with Sharebuilder; but after reading the nightmare, some people have had with Sharebuilder.com, I’ve decided to go Somewhere else.

  12. thunderthighs says:

    I have primarily been trading with free automatic and real-time credits I’ve racked up via promotional codes. Unfortunately, I’ve been having trouble finding codes on the usual blogs, forums, etc. around the Internet lately. It seems Sharebuilder has really scaled the promotions back. I’m interested in hearing others’ opinions on the $12-per-month Advantage plan, which includes 12 auto trades and real-time trades for $7.95 (versus $9.95 with Basic). Has anyone here tried out Advantage? Do you think the subscription fee is worth it?

  13. Abhishek says:

    I had the worst experience with Sharebuilder. They have restricted my account because I had opened 2 accounts. They wanted the verification from the bank, the copy of my SSN and driver’s license.

    The customer service sucks big time.

  14. Adam says:

    To add to this list of horrible experiences, my accounts were restricted as well. Because I transferred part of my Overdraft Line from my Electric Orange Account to Sharebuilder. I just started college and wanted to do a little investing, to learn things out, transferred $2000 to my Sharebuilder Account. After making some gains, they restricted my account too, with open Options positions that are expiring. They didn’t care that my Options were expiring. This bank has problems. HOWEVER, not 100% sure if it worked or not, but before they restricted my account, I printed out a Direct Deposit Form. I remembered this because what they did bothered me so much, so I wanted to see if I pay my credit card bill using the Sharebuilder routing number and account number (which was different than the number they give you when you sign on). The payment went through and my credit card company said that they received the funds. So I did another payment, this time a little larger.

    Hopefully it goes through.


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