TD Ameritrade Discovers Database Breach

My Roth IRA is with TD Ameritrade and this morning I received an email, included below, from TD Ameritrade CEO Joe Moglia in which they explained that unauthorized code gave someone access to a database that included email addresses and social security numbers. It’s the social security number part that scares me but as long as you’re on top of your credit reports (you get free ones each year), it should be okay.

I also noticed an uptick in unfiltered spam to my Gmail account linked to this TD Ameritrade account early this week and didn’t make a connection to any external accounts because I generally don’t use that Gmail account for anything other than friendly correspondence. This underscores the importance of having multiple email accounts for your important correspondence so you can get a better indicator of list selling and breaches before they’re announced. For example, if I always had TD Ameritrade correspondence sent to a Gmail account and ONLY that Gmail, any spam there would indicate some sort of list selling or a breach.

Is there much anyone can do about this? Like any other breach, nothing except be diligent in your review. What is comforting is that TD Ameritrade’s Asset Protection Guarantee, which protects your principal from things outside your control such as breaches, will cover everything if something happens.

Email included after the jump.

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Zecco Minimum Opening Balance Drops To $0

I just received an email from Zecco that they’ve lowered their minimum balance from $2,500 to $0. I still haven’t opened the account (and provided a review) like I said I would, a bit busy lately with some other projects and haven’t had a chance to dig up the necessary documents, but I still plan on doing it. Those who want to trade on margin, a risky endeavor, will have to have a minimum balance of $2,000.

For comparative purposes, TradeKing requires no minimum balance, ETrade requires a minimum balance of $1k, TD Ameritrade requires a balance of $2k, and Charles Schwab requires a balance of $2.5k.

I’m not yet advocating you open a Zecco account, I haven’t myself, but their offering is getting more and more tempting.

 Investing, Retirement 

Go Open A Roth IRA Right Now!!!

Do you have a Roth IRA? If so, excellent job, you’ve already done one of the best things you could probably do to ensure you have a financially viable retirement. If not, why not? If your excuse isn’t, I make more than $110,000 and thus am not allowed to contribute, then your excuse is not good enough.

Don’t have enough time? It takes literally fifteen minutes. Do it while you’re watching American Idol or CSI: Saturn. Fifteen minutes. You spend more time getting dressed in the morning. Go to Vanguard, or Fidelity, or TD Ameritrade, or Etrade or your favorite brokerage firm. (I even linked to the Open Account page to save you a few seconds)

Don’t have enough money? Did you know that if you contributed $4,000 (max for 2006 and 2007) right now and it appreciated at a mere 7% for the next twenty years, you would have $15,478.74? While that doesn’t sound like a lot of money, 7% is a relatively conservative number for your investments. If you were to instead use 11%, you’d have $32,249.25. If you were to stretch the time out thirty years at 11%, you’re talking $91,569.19 – all from a single $4,000 contribution right now.

Now, ignoring all those crazy appreciation numbers, remember that you don’t have to contribute all $4,000. You can contribute $1,000 or $100, but you need to contribute something. (I’d argue that you want to contribute as much as you can to avoid low balance fees but $1,000 is better than $0)

Afraid you’ll need the money? Since your Roth contributions are after-tax contributions, you can withdraw those contributions whenever you want. Dire emergency and you have no choice but to raid the Roth? You can still do it. You can still change your mind.

Opening a Roth IRA is ridiculously easy and it’s not something to be afraid of. Don’t be afraid you don’t have enough money and instead challenge yourself to find a way to save a hundred bucks a month and at the end of the year you’ll have $1,200 saved away (worth $27,470.76 in thirty years at 11%) that you didn’t think you had. You have until April 16th to file your taxes this year so you have until April 16th to open up a Roth IRA and contribute to it for 2006. Go! Do it!


Broker Commission Fee Schedule Comparison

Thinking about investing in some securities? Well you’re going to need a brokerage account. While it’s hard to compare the qualitative differences between each brokerage, it’s easy to compare one of the big quantitative differences – fee schedules. So, below I’ll compare the fee schedules of each of the major brokerages in easy to understand language and hopefully it’ll make your decision just that much easier. In the discussion below, I only talk about online trades – no phone or in person (broker-assisted) transactions.

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Online Brokerage Comparison: I Gave Up on Scottrade!

This is a guest post authored by frugal at My1stMillionAt33.

Before I tell you about my terrible experience with Scottrade, let me first compare several online brokerage firms in terms of commission costs:

  1. TradeKing: Best for active traders. $4.95 per trade, even broker assisted trades, very cheap rate for option contract at $4.95 + $0.65 per contract. They’ve also won numerous awards from the likes of Barron’s, SmartMoney, etc. They were named Smart Money’s Best Discount Broker many years in a row.
  2. Scottrade: Best for casual traders and/or investors. $7 per trade. $0 for loaded mutual fund, but $17 for most other non-loaded mutual funds. Option contract at $7 + $1.25 per contract. Has offering on CD & fixed income bonds. Can only do the following option trades: buying put/call, or sell covered call.
  3. ETrade: More expensive compared to both Ameritrade Izone and Scottrade, unless trading more than 1500 trades per quarter.
  4. Sharebuilder: Good for long term investor. $4 for automatic investment, and can be as low as $1. Selling is $12 to $20 depending on the plan. The biggest downside is that you give up the control on the market timing for your buy order. Instead you will do time-averaging through automatic investment.
  5. BuyAndHold: Best for asset allocator and long term investor. I will recommend this to anyone who is currently using Sharebuilders. I like their $14.99 per month for unlimited number of “window” trades which get routed 3 times a day. With $120 $180 a year, you can buy and build 1000 stock portfolio if you want (just kidding, but it’s true). I don’t think you can beat this deal, especially after (under Ameritrade) is gone.
  6. FirsTrade: Even better than Scottrade. I’m sure everyone has lamented the reduction in the NTF program for mutual funds at Scottrade. Well, if you use FirsTrade, you can get it back. Yes, ALL mutual fund trades are FREE. And the stock trades are 5 cents cheaper at $6.95. Their pricing model is essentially the same as the old Scottrade. But they don’t have any physical branches.

Enough of cheap commissions, but if it is not reliable, it is pretty much useless. So back to my Scottrade bad experiences. My problems with them is that their internet servers are getting so unreliable, especially the first half hour right after the market opens, that it is no longer usable.

  1. One time I tried to day trade a stock, and I almost got sacked by Scottrade. I placed limit order, and I was barely able to cancel and modify my entry price in time because their servers kept non-responding.
  2. The second time, it was pretty much unforgiveable. I put in a limit order, and when I attempted to cancel the order, I simply cannot cancel it, even though it is still showing on my screen as open order. Somehow somewhere there is a server problem. Minutes later, my limit order became executable. I called up customer services, and they could not determine whether my order was filled or not. After an hour, my order got executed with a timestamp of an hour later. Scottrade claims that the timestamp is the reporting time, not the executed time, and my order was filled minutes later, instead of an hour later. Scottrade refused to correct anything, but simply blaimed everything on the delays of the market makers.
  3. Yesterday, again, stupid me, I was doing trades near market open. I am so certain that I cancelled my order. But I had some problem with their server again in the morning. After a couple of hours, I finally found out that my “un-cancelled” order got executed. They claimed that I never cancelled the order. They really have a big problem with this process. At the end of cancellation screen, there is never a confirmation number given out. I can never write down any # to prove that I have attempted to cancel my order. So after a long talk of repeating the same information over and over, and an eventual non-callback, it appears again that they will not do anything to my phantom trade becoming real and losing significant money in such a big down day.

I know that FirsTrade has its problems, especially with market quotes right after market starts. But at least there is never a problem with non-responding servers that give you a page-not-found error. Probably because they are smaller company. In any case, I am moving majority if not all of my money out of Scottrade. I’m so fed up with their parrot-talking customer non-service. I was planning to move my tradings to Ameritrade Izone, but after reading some comments at Dogs of the Dow, I’m a little hesitating now. If you have recent positive experience with Ameritrade or any online brokerages besides Scottrade, would you please suggest them to me? I don’t really know where I could find a reasonable priced and reliable brokerage now. I plan to use FirsTrade for now. Since I never tried their streamer, maybe FirsTrade streamer will not have quoting problem. I can always use the other online brokerage accounts for quote too, so it won’t be such a problem.

Thanks in advance for your online brokerage suggestions to me. Cheap commission is not everything. Without reliability, all (stock) bets are off. I’m planning to take my complaints to NASD. By the way, I really miss the reliability offered by Datek, which was bought by Ameritrade. That was my first reason of moving to Ameritrade since I assume that the platform would be similarly reliable. And I hope you will find both FirsTrade and BuyAndHold useful.


Freetrade: Commission-Free Trading

Update: Ameritrade has officially terminated FreeTrade and turned it into TDAmeritrade Izone, but you can get $0 commission trades through Zecco and $4.95 trades through TradeKing

Is this legitimate or even possible? Freetrade claims to give you your first 20 trades (market, limit, stop, stop-limit, short sell, odd-lot and OTCBB) for free. Your next 80 trades are only $3, the 100 after that are only $2, and anything else is $1. Your first thought would be SCAM until you see “by Ameritrade (not TDAmeritrade)” right next to its name. The next cheapest brokerage house is BrownCo at $5 a pop. Still skeptical? So was I so I signed up.

How can they afford to do this? Well, you know how ING Direct is all virtual and so they can give you such good rates? Freetrade follows that philosophy and all your interaction with Freetrade will be entirely electronic. You won’t be able to call them up and ask a question, all correspondence will be via email. You won’t receive a paper statement and you can only place trades via the Internet or through the automated telephone system. You will not be able to talk to a human being. Again, if you’re not comfortable with that then I would strongly suggest you don’t use them.

I wanted to see how it worked so I signed up for a “Cash, Margin & Option” account. You’ll be required to fill out all sorts of personal information including your current profession, salary, and employer so have that information handy. The entire process took me only a few minutes and before I knew it I had directions on how to wire them money. Since it’s automated, I could either pay them $25 to initiate a wire transfer or simply do it myself (and pay my own bank fees) with their provided directions. After your initial wire, all other transfers can be ACH. There is a minimum account balance requirement of $5,000 for it to become and remain Freetrade” account, otherwise it considered an “Ameritrade” account with $10.99 trades!

The account itself is like most other brokerage accounts except you don’t have real time quotes (you can buy Ameritrade’s Screener for $9.99/month) and you don’t get access to any research. For me, that’s not important because my Roth IRA is held at TD Waterhouse (now TD Ameritrade) so I can use the research and RT quotes there (At nearly $18 a trade, I better). A few other niceties that you won’t are automatic dividend reinvestment and fractional share purchases, but that may not be significant for you.

Any hidden fees? There are a few that they don’t advertise (obviously, but hardly hidden) and that you should check out. Click on Account Services and then on the link for Fee Schedule and you should see them. Your first two incoming or outgoing wire transfers are free, otherwise they’re $25, and brokerage transfers are $25 inbound and $50 outbound.

I have yet to wire money into the account (I opened it yesterday) or enter any orders in but I will update this article as soon as I do and let you all know how it goes. Anyone any experience with Freetrade? For me, the Ameritrade name gives it legitimacy and I’m not too worried about it.

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