For those of my readers that don’t know, I use Capital One 360 as my primary bank. I have both a checking and savings account through them. Every so often, I get an email from them regarding their investing arm through Sharebuilder. I never have been interested in Sharebuilder as I use Schwab for my investing. I have had no issues with Schwab and the fees that I pay to trade stocks are reasonable.
Most of the offers from Sharebuilder are for free trades, which I am not really interested in because I do not do a lot of trading. I mainly invest in mutual funds and ETF’s and hold for the long term. However, the recent offer I received for $50 interested me. I decided to look at the site.
While I feel that Sharebuilder is not ideal for stock purchases, it could be a nice starting point for small mutual fund investors. Through Sharebuilder you can invest in over 250 mutual funds from 8 fund families including American Century, PIMCO, Fidelity, T Rowe Price, and Vanguard. Unfortunately, if you invest in Vanguard, T Rowe Price, Fidelity, or Dodge & Cox, you will pay $19.95 per trade. If you want to set up an automatic investing plan, that will cost you $4 per investment.
I refuse to pay to invest in these fund families. Luckily though, there are some good funds offered through the other four fund families that do not charge a fee for you to invest in. They include American Century, PIMCO, ING Funds, and Dreyfus. Even better, if you invest in American Century directly, the fund minimums are $2,500. But, if you invest through Sharebuilder, the minimum is $250. This is great for small investors who don’t have $2,500 to start. From there, you will need $100 to invest each time again.
Sharebuilder Review: Stock Investing
The reason I am against Sharebuilder for stock investing is if you are a small investor, you should be focusing on investing in mutual funds so that you are diversified. Investing in one stock is not diversified. For normal stock trades, you will pay $6.95 per trade. If you sign up for the basic automatic investing plan, the fee is reduced to $4 per trade. If you upgrade to the advantage automatic investing plan, the fee is $12 per month which includes the first 12 trades. Any additional trades are $1 each.
If you are going to invest in a stock frequently, you have two options. The first is to save up the money you want to invest in the stock and make a one-time purchase for the $6.95 fee. It makes no sense to buy 1 share of stock each month for $4, or pay $12 per month for the privilege if you aren’t going to trade that frequently.
The second option is to accumulate investing credits. Each credit is worth one free automatic investing trade. I received on trade on my birthday and was awarded three more when I signed up. A quick online search yielded a handful of promo codes to try. Most weren’t accepted, but some were. In the end, I had eight trade credits. I set up an automatic investing plan in a stock I wanted. I bought once per month for eight months. I never paid a fee as the free trade credits were used each time.
Sharebuilder Review: Mutual Funds
I ended up buying a no-fee mutual fund through Sharebuilder for free. After I made my investment, I was credited with my $50. The account registration process was a breeze (I’m not sure if that was because I already had a Capital One 350 account or not). The transfers of money from Capital One to Sharebuilder are instantaneous, which is awesome. For how I am using Sharebuilder, I think it is a great service. You can find some good, no-load, no-fee mutual funds to invest in with a very low initial investment.
Sharebuilder Review: Other Features
There are three extra features that Sharebuilder offers that I need to mention:
Retire MyWay: This feature helps you to define a plan for the way you want to live in retirement. This is great since you need to have a plan in order to be a successful investor.
Heat Map: The Heat Map feature is a quick look to see how securities are performing by index, sector and more. It’s a great way to get caught up on the market at glance.
Portfolio Analysis: The Portfolio Analysis highlights the asset types and sectors represented in your portfolio.
Sharebuilder Review: Site Navigation
Using the website is easy. Everything was in a logical place. I didn’t have to search around for much. The only thing I did need to search for was how many free trades I had. Once I realized they were listed in the Automatic Investing tab, I had no other issues with the website.
Sharebuilder Review: Customer Service and the Rest
I contacted customer service on a whim, just to see how responsive they are. I actually contacted them a few times via email and each time, they responded within one business day. I thought this was acceptable.
When it comes to taxes, I received an email that my 1099 was ready and was available online. I logged into my account and there it was in the Tax Center.
Overall, the only issue I have with Sharebuilder is that they charge you a fee to close out your account. It is $75 for a full account closure and $40 for a partial closure.
Sharebuilder Review: Conclusion
My Sharebuilder review is complete. Here are the takeaways in bullet points:
- If you are looking at investing in certain mutual fund families, like Vanguard, you are better off saving up the $3,000 and investing directly with Vanguard as opposed to paying the $19.95 to Sharebuilder.
- Sharebuilder is great for no-load, no-fee mutual fund investing. They don’t have the relationships that Schwab has with mutual fund families, but they offer a good variety. Sharebuilder knows this, and this is why they offer sign up bonuses to get your business. If you see a fund family you want to invest in and Sharebuilder is offering a sign up bonus, I say go for it.
- For stocks, if you are making large, sporadic investments, the $6.95 per trade fee is in-line with the industry.
- If you are going to be trading stocks frequently, I suggest you sign up for the advantage investing plan for $12. If you trade more than two times per month, you’ve already saved money on the trading fee.