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Why Choose Sharebuilder?

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Before investing in the stock market was opened to the masses with brokers offering cheap stock trades, Sharebuilder was the only one with a commission in the single digits. Four bucks was all it cost to buy a stock, as long as you were willing to schedule your purchase ahead of time (the following Tuesday). Real time trades cost you $9.95, which puts it on par with the more “expensive” discount brokers. Any sale of stock was considered a real time trade so the total round-trip commissions would cost you $13.95.

Since then, there are close to a dozen brokers offering stock trades for less than $10 a trade, buy or sell. The slight competitive advantage Sharebuilder once had was now gone and I’m wondering why anyone would choose Sharebuilder?

Commissions

Ten years ago, this was considered cheap. Back then, brokers would routinely charge you $15 a trade. However, today, there are several brokers that charge less then $4 a real time trade. OptionsHouse charges a flat $2.95 rate with no catches or gimmicks. TradeKing, frequently lauded for their customer service, only charges you $4.95 a trade – $9.90 round-trip. Zecco does it for free if you meet some of their qualifications, though they’ve received some bad press about their customer service (as they say, you get what you pay for).

Dividend Reinvestment

Years ago, free dividend reinvestment was only available with mutual funds or through direct dividend reinvestment programs (DRIP). Sharebuilder was one of the first brokers to offer free dividend reinvestment but now everyone offers it for free. For example, TradeKing can automatically reinvest dividends on the dividend payable date as long as the security is DTC eligible.

Regular, Automatic Investments

The last benefit Sharebuilder offers is regular automatic investments on a weekly, bi-weekly, or monthly basis. This is probably one of the only things that Sharebuilder does that no other pure stock broker offers (that I’m aware of). You can schedule purchases, at $4 a piece, the same way you can set up regular transfers at an online bank. Mutual fund companies, like Vanguard and Fidelity, offer this and it’s usually commission free if you buy their funds.

Short of taking advantage of the free money offers using a Sharebuilder promotion code , I’m not sure Sharebuilder makes much sense anymore. What used to separate them from the competition is now common among discount stock brokers and they never innovated to keep up.

Am I missing something?

{ 24 comments, please add your thoughts now! }

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24 Responses to “Why Choose Sharebuilder?”

  1. Seth @ Boy Meets Food says:

    So, if I am reading this correctly, you are saying that while Sharebuilder used to be a leader in the industry, most of the other firms have caught up. However, Sharebuilder is still very competitive on their rates, and they are the only one to offer the regular, automatic investments. Despite these facts you are saying you don’t understand why people would invest with Sharebuilder??? As long as they are competitive, why not??? I don’t think it is fair to completely rule them out, just because they are not as far ahead of the other firms as they used to be (especially when they do still have a small advantage over the others).

    As long as the investors are of the buy and hold type, Sharebuilder’s rates are still very competitive, at least when using the regular, automatic investments.

    Based on personal experience, I can say that I have been happy with Sharebuilder.

    • Jim says:

      Sorry, my point was that $4 a trade might be nice but $15 on the back end (or $15 on a real time purchase) is WAY too much. I don’t think they’re still competitive on their rates.

  2. ddan7 says:

    I saw two advantages to sharebuilder when I went with them last March:

    1. No annual fees or minimum trades. I’m a long term investor, not a day trader. I’ve made three stock purchases all year and would like to hold them for 20 years.

    2. I liked that it was linked with ING, sort of gave it some extra credibility that it might be around for the long term. Again, I plan on keeping my purchases for a long time. I didn’t want a fly by night company.

    However, I did get get screwed on my first two purchases, I thought I was getting the $4 trade, but it was $10 for the real time. But, what’s $12 on two stocks up over 50%? Especially when I got $50 just to open an account.

    All in all, I’m pretty happy but maybe there’s a better, cheaper way and I just don’t know it.

  3. Frank Jerome says:

    I believe Sharebuilder to be one of the best online brokerages out there.

    One of the best features, outside of what you all mentioned previously, is the fact that you can buy fractional shares. I don’t know any other discount broker that does that right now. The fact that I can buy partial shares of Berkshire Hathaway, and constantly build my position until I actually own a full share is a huge benefit, especially if you don’t have the dollar amount necessary.

    Also, I agree with ddan7. I am also a net buyer of companies and hold for the long term. So the fact that real-time sales are $15 does not have a significant impact on me. I can pay $2.00 per trade (buys) if I take the standard package and buy into six companies using the automatic investment option which reduces commission costs drastically. I can sleep well at night knowing that it is also backed by ING as well.

    I believe Sharebuilder is more for the long-term (buy and hold) investor and not trader. That’s why it is not called ShareTrader.:)
    If you are this type of investor, a net-buyer of stocks, then Sharebuilder is for you.

  4. Daniel says:

    I have been tempted to open an account solely for the $50 sign-up bonus but have seen little advantage in using them for long term investing. Has anybody signed up for the sign-up bonus and then left the account dormant? Any downside to this?

    • Jim says:

      I’ve done it before and the only real downside is that you have a few bucks locked up in an account you still need to keep an eye on every once and a while. With ING Direct integration, it’s a lot easier than it used to be.

    • cpwilson5 says:

      I’ll second that. The new ING integration makes it very easy but I’m sure it was a pain before. Plus I always try to simplify my accounts. There are some real benefits to keeping that financial network map with as few lines as possible. If you are a Costco member look for the promotion in the flyers they send out every other month…usually the last page.

      http://content.sharebuilder.com/mgdcon/jump/partner/costco/mvm09/?cobrand=www (usually it’s $90 but they’ve reduced it…seems to go in cycles)

  5. Evan says:

    Jim,

    Great Post – I literally JUST asked Flexo the same question on Twitter 2 nights ago! It doesn’t make any sense, anymore.

  6. cpwilson5 says:

    I completely agree. The only 2 reasons I setup shop with Sharebuilder recently was to get the bonus (I did it through Costco and got 90 bucks as an executive member…they run the special frequently). Other than that the ING link was nice but now that I created my financial network map (to visualize it) as Jim had posted in another article and using Mint.com it’s all “linked” anyways.

    I agree though…stock trades aren’t cheap and I’m just waiting for a good TradeKing promotion to jump on…I don’t have the 2500 right now but would love to get in for a little less. TradeKing sounds great! Currently I use Scottrade (Joint Brokerage and both of our Roth IRAs) and Sharebuilder (Joint but they don’t have all mutual funds so we just do ETFs and a couple stocks).

    The bonus was very easy to get and no problems with them crediting the account…really the sole reason to get in with Sharebuilder. Other than that go TradeKing.

  7. cpwilson5 says:

    Meant to say “I agree with Jim”…stock trades are overpriced and I’m surprised since ING has them under their wing now. You’d think the rates would drop since ING encourages saving. Waiting for the day when commissions don’t exist…

  8. wayne says:

    The other similar service is http://www.buyandhold.com, can buy fractional and automatic reinvestment of dividends. Pricing plan is different. Pay 6.99 month for 2 trades (additional is 2.99) and 14.99 for unlimited.

    I use both, buyandhold for my own and SB for joint acct

  9. BrianC says:

    I have a Sharebuilder account, but I don’t find myself using it. I have a number of other brokerage accounts, and the two I find myself using the most are Tradeking and Optionsxpress. Tradeking has a good mix of low price and good customer service. Optionsxpress has excellent customer service, and also the ability to autotrade an account.

  10. James says:

    Jim

    Good posting. I have about 1500 in sharebuilder. I opened the account back before they were bought by ING and were offering 50 dollar promotions.

    In addition to no longer being compeditive, sharebuilder also dings you 100 bucks if you want to transfer or consolidate your accounts. So, its gotten hard to get out if you aren’t happy with their set up or want to move your money elsewhere.

    Thanks,

    James

    • Jim says:

      Fortunately other brokers are willing to reimburse you those transfer fees, so that’s an easy way to transfer it for free.

  11. Izalot says:

    I agree with Jim’s comments. I have no idea why anyone would select ShareBuilder other then the promotional codes. I think there site is slick but the costs are way too much compare to other services. I’ve use BuyandHold for years and while not not the website is not as slick as ShareBuilder very reasonable costs.

  12. eric says:

    I actually used the bonus $50 to buy a stock for fun. Maybe decades from now it’ll worth something? lol.

  13. lostAnnfound says:

    I did the same thing as Eric. Used the $50.00 bonus to buy and will just let it sit. Who knows, SB might change there fees at some point and they may more competitive again.

  14. Gaurav says:

    I have Sharebuilder account but I don’t use it Since BOA Investment services gives me better deal, just link your bank account with Investment account and maintain 25K and 30 real time trades are free every month so why would I sent around $10 per trade and they don’t even give access to extend trading while in BOA you can trade in extended hours too!

  15. Foo Finance says:

    I just closed a position in Sharebuilder that I bought a couple years ago. Delta offered a lot of bonus miles that I needed for a free flight so I tossed $50 at GLD. It has done so well that I actually turned a $4 (8%) profit after round trip commissions ($4 in, $9.95 out) which in total, $15, is on average for a normal broker round trip.

    That said Sharebuilder would have very limited uses. Here is what I think they are good for:

    - You want to invest fixed dollar amounts, instead of shares, in a certain stock or ETF. No other broker allows you to buy $100 worth of GE or IWF, for example.

    - You want to start small. You can buy less than 1 share if you want and simply put $25 or $50 towards any position you like. You can build up to a sizable position to transfer to another broker later. No $1,000 to $2,500 minimums to meet if you use ETF’s.

    - DRIP plans simplified. If you have a few stocks that pay dividends you can invest with Sharebuilder and get the free reinvestment. They allow for partial shares like DRIPs and you can do fixed dollar amounts instead of share amounts.

    Other than the above I guess the free $50 would be nice. If you planned to transfer the account out later the $50 bonus up front washed the $50 transfer out fee in the end.

    That’s my 2 cents!

    - Foo

  16. Vacboy says:

    I use Sharebuilder and I don’t have any issues with them or their prices. With buyandhold.com you get charged $6.99 if you trade or not. If you don’t buy that month,the charge is still $6.99. I love Sharebuilder and never had any troubles with them.
    I am thinking about opening an account with Sogotrade.com ($3.00 a trade in and out and any minute of the day). If your happy with Sharebuilder just stay with them. They will be here in 10 years when some brokers may not. Just my 2 cents.
    Dave

  17. Frank Jerome says:

    I totally agree Vacboy. I looked at buyandhold.com based on the recommendation above, but was not impressed. You get charged whether you trade or not, which is a significant disadvantage.

    I am fully satisfied with Sharebuilder. I think they do target more of a long-term investor rather than a frequent trader though.

    • aua868s says:

      I was never into ETF because I was little nervous that I would lose a significant part of my investment in commissions…but now with Schwab’s no commission ETFs, I am all upbeat to try my hand in ETF…thanks Schwab!

  18. luxluxlux says:

    Someone mentioned that you can’t switch back from the standard $12 per month plan to the basic no-subscription plan. That isn’t true, you can.

    I think sharebuilder is a good deal if you want to do dollar cost averaging. It’s a good way to build up your portfolio of stocks and not have to lose sleep over short term share price fluctuations.

    $12/month for 6 trades or $20/month for 20 trades…that’s $2 or $1 dollar per trade…a great way to build up a diverse portfolio over time.


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