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Investing Question - Purchasing stocks online in small quantities worth it?

B

BS911

Senior member
I've been thinking about investing some money in stocks online. I don't have a great deal of extra cash but I was thinking of picking up a share or two here and there and building my portfolio slowly. My question is, is it worth doing in small quantities? I looked on Etrade & Scottrade which both look to charge $7 per transaction. If I'm buying a $20 stock and I only get a couple of them, this seems a bit cost prohibitive? Is there a better way to go about this? Should I only buy in larger quantities?

Thanks for any advice!

 
Originally posted by: BS911
Should I only buy in larger quantities?
Click to expand...
Yes for individual stocks!

But why not look into mutual funds? I don't believe there are transactions fee per transactions like stocks.
 
IIRC, you can buy stocks through Sharebuilder for around $4.00. I have also seen companies that let you pay a set fee ($35 for example) but you can purchase up to 15 stocks and create your own portfolio. I'll see if I can find it.

Anyone used Zecco? (Free trades)
 
That's what I figured. I was hoping there was a better way but it appears not. I do have a mutual fund through Vanguard but it is a growth fund and doesn't yield much return annually. It is one my parents purchased for me a long time ago and I really don't know much about it. I'm assuming there are higher risk mutual funds as well? Do mutual funds typically require large up front purchases as well? I'd like to find something I could invest small quantities into. I tend to waste a lot of cash so I figure I could just throw $20-$50 at something every week and start growing something! Ideas?
 
Originally posted by: Engineer
IIRC, you can buy stocks through Sharebuilder for around $4.00. I have also seen companies that let you pay a set fee ($35 for example) but you can purchase up to 15 stocks and create your own portfolio. I'll see if I can find it.

Anyone used Zecco? (Free trades)
Click to expand...

I did find this info on another site about Zecco:

» Stock Trades - Yes, it?s free and yes, it?s limited. You get up to 10 free market or limit online orders per day, up to 40 per month. After that, they cost $3.50 per trade.

That sounds intriguing though. If you don't trade much that might be the ticket!
 
I've been wondering about Zecco myself. I currently use Ameritrade, but their financial data is inaccurate and they charge $9.99 per stock trade (and something like $50 for mutual funds!). NOT a quality you want in your broker.
 
I'm tempted to try Zecco. I've read some positive & negative reviews on them. It looks like for a small investor just buying & selling they are pretty good though. My only concern would be, what if they tank and go under? If I have $500 invested with them for instance, what happens to my shares / money?

 
Originally posted by: BS911
That's what I figured. I was hoping there was a better way but it appears not. I do have a mutual fund through Vanguard but it is a growth fund and doesn't yield much return annually. It is one my parents purchased for me a long time ago and I really don't know much about it. I'm assuming there are higher risk mutual funds as well? Do mutual funds typically require large up front purchases as well? I'd like to find something I could invest small quantities into. I tend to waste a lot of cash so I figure I could just throw $20-$50 at something every week and start growing something! Ideas?
Click to expand...
Which Vanguard fund do you have? And what do you mean by "yield"? If you mean dividend yield then no, growth equity funds aren't going to give you high yields at all, that's not the point. If you want "yield" you should not be investing in equities.

If the fund you have is Vanguard U.S. Growth fund then I understand why you are frustrated; this particular fund has been a poor performer for many years. However almost all of the other Vanguard "growth" funds returned over 10% last year.

And I do not recommend buying individual stocks. The Industry markets brokerage services heavily because it is rather profitable for the firms but you will have a very difficult time making more money picking stocks (especially with a small balance) than going with a low-cost mutual fund.

Everybody thinks they can beat the market but it is impossible by definition for everybody to be "above average".
 
>what if they tank and go under?

Was just looking at their website myself, they claim they have protection for that:
Accounts Protected to $35 Million
Zecco Trading is a division of Equinox Securities, a fully disclosed broker/dealer and member of the NASD and SIPC. Customer securities accounts are protected by the Securities Investor Protection Corporation (SIPC), up to $500,000 (including up to $100,000 for cash claims). A detailed explanation is available upon request or at www.sipc.org. Additional securities protection is provided by Lloyd?s of London with an aggregate limit of $200 million providing that the combined return from Trustee distributions, SIPC and London to any customer does not exceed $35 million including a London cash sub-limit of $900,000. This coverage provides protection against brokerage insolvency and does not protect against loss of market value of securities.
Click to expand...

 
Originally posted by: mithrandir2001
Originally posted by: BS911
That's what I figured. I was hoping there was a better way but it appears not. I do have a mutual fund through Vanguard but it is a growth fund and doesn't yield much return annually. It is one my parents purchased for me a long time ago and I really don't know much about it. I'm assuming there are higher risk mutual funds as well? Do mutual funds typically require large up front purchases as well? I'd like to find something I could invest small quantities into. I tend to waste a lot of cash so I figure I could just throw $20-$50 at something every week and start growing something! Ideas?
Click to expand...
Which Vanguard fund do you have? And what do you mean by "yield"? If you mean dividend yield then no, growth equity funds aren't going to give you high yields at all, that's not the point. If you want "yield" you should not be investing in equities.

If the fund you have is Vanguard U.S. Growth fund then I understand why you are frustrated; this particular fund has been a poor performer for many years. However almost all of the other Vanguard "growth" funds returned over 10% last year.

And I do not recommend buying individual stocks. The Industry markets brokerage services heavily because it is rather profitable for the firms but you will have a very difficult time making more money picking stocks (especially with a small balance) than going with a low-cost mutual fund.

Everybody thinks they can beat the market but it is impossible by definition for everybody to be "above average".
Click to expand...

The fund I have is:

Vanguard Growth Index Fund Investor Shares (VIGRX)

I believe this is the same fund you are talking about and it has seemed to do nothing at all since I've had it in 1998. In 9 years I think i've made a whopping $12 overall. 😱

Do you recommend that I switch this fund to something else? I keep thinking that maybe in the long haul this fund will pay off but it sure doesn't seem to be!

Thanks for all of your advice and tips everyone!

 
Originally posted by: BS911
Originally posted by: mithrandir2001
Originally posted by: BS911
That's what I figured. I was hoping there was a better way but it appears not. I do have a mutual fund through Vanguard but it is a growth fund and doesn't yield much return annually. It is one my parents purchased for me a long time ago and I really don't know much about it. I'm assuming there are higher risk mutual funds as well? Do mutual funds typically require large up front purchases as well? I'd like to find something I could invest small quantities into. I tend to waste a lot of cash so I figure I could just throw $20-$50 at something every week and start growing something! Ideas?
Click to expand...
Which Vanguard fund do you have? And what do you mean by "yield"? If you mean dividend yield then no, growth equity funds aren't going to give you high yields at all, that's not the point. If you want "yield" you should not be investing in equities.

If the fund you have is Vanguard U.S. Growth fund then I understand why you are frustrated; this particular fund has been a poor performer for many years. However almost all of the other Vanguard "growth" funds returned over 10% last year.

And I do not recommend buying individual stocks. The Industry markets brokerage services heavily because it is rather profitable for the firms but you will have a very difficult time making more money picking stocks (especially with a small balance) than going with a low-cost mutual fund.

Everybody thinks they can beat the market but it is impossible by definition for everybody to be "above average".
Click to expand...

The fund I have is:

Vanguard Growth Index Fund Investor Shares (VIGRX)

I believe this is the same fund you are talking about and it has seemed to do nothing at all since I've had it in 1998. In 9 years I think i've made a whopping $12 overall. 😱

Do you recommend that I switch this fund to something else? I keep thinking that maybe in the long haul this fund will pay off but it sure doesn't seem to be!

Thanks for all of your advice and tips everyone!
Click to expand...

Geez that's crappy. I've made about $2,300 in the last 3 years with AmericanFunds Capital World Growth Index Fund. Maybe you should take your money somewhere else. Even with a hit in taxes you'll probably make up for it in performance.
 
Originally posted by: BS911
The fund I have is:

Vanguard Growth Index Fund Investor Shares (VIGRX)

I believe this is the same fund you are talking about and it has seemed to do nothing at all since I've had it in 1998. In 9 years I think i've made a whopping $12 overall. 😱

Do you recommend that I switch this fund to something else? I keep thinking that maybe in the long haul this fund will pay off but it sure doesn't seem to be!

Thanks for all of your advice and tips everyone!
Click to expand...

VIGRX is different from U.S. Growth (VWUSX), though it has not performed well over the last 5 years either. However, it is an index fund and it has not performed well because growth stocks have been very out of favor since the dot-com collapse in 2000...there's nothing inherently wrong with the fund.

The opposite of growth stocks are value stocks. These have been in vogue with investors for several years, thanks in part to all the fears of throwing money into another dot-com disaster. While Growth Index has returned 3.37% annually over the past 5 years, Vanguard Value Index has returned 8.78%. Compounded, that's 52% versus 18%. Yes, big difference.

I wouldn't recommend selling your Growth Index fund. For one thing, favorites come and go and there is reason to believe that growth will outperform value in the future. They tend to go back and forth. Value has been a favorite for so long it almost seems foolhardy to rush into value now. I would leave your investment alone.

For the money you have sitting on the sidelines you may want to consider Vanguard STAR fund. It has a $1,000 minimum, the lowest of all Vanguard funds. It is a balanced fund comprised of stocks, bonds and cash. Additional investments must be at least $100 per transaction. While this is much higher than $20-$50, Vanguard charges no fees.
 
Originally posted by: Gooberlx2
Geez that's crappy. I've made about $2,300 in the last 3 years with AmericanFunds Capital World Growth Index Fund. Maybe you should take your money somewhere else. Even with a hit in taxes you'll probably make up for it in performance.
Click to expand...
You are missing the point. You can't look at a fund's performance record alone and make inferences about how "good" that fund is. Using this logic people should be investing money in Russian mutual funds. Watch out!

If the fund is an index fund then unless the fund has a high expense ratio (moot point with Vanguard) any low return is a reflection of the market's. Growth Index fund tracks big domestic growth stocks. The fund has not "done well" because this part of the market has not "done well". This is why it is often wise to invest in broadly-diversified funds like Vanguard Total Stock Market index, which invests in large, medium, small companies along both the value and growth spectrum.
 

I believe E-trade and Scottrade both have minimum balance requirements. But if they don't, and if you do buy $20 worth of stock, you'll want to hold onto that for a very long period of time before selling. Otherwise, as other people have noted, the cost to buy/sell ($14 total at the sites you mentioned) will quickly erase your profits.

Mutual funds are OK, but many of them have a minimum amount required to invest in them. Plus some have 'loads' that will cut into your profits.
 
You can also check to see if you can buy directly from the company--typically this happens in a dividend reinvestment plan. There might be a $250 or $500 minimum investment, but after that, you can often purchase with no transaction fee.
 
Originally posted by: BS911
The fund I have is:

Vanguard Growth Index Fund Investor Shares (VIGRX)

I believe this is the same fund you are talking about and it has seemed to do nothing at all since I've had it in 1998. In 9 years I think i've made a whopping $12 overall. 😱
Click to expand...
VIGRX ave annual return
7.15% - 10 year
4.32% - 9 year
3.37% - 5 year
9.01% - 1 year

Minimun investment in VIGRX thru Vanguard is $3,000. After 9 years that $3,000 = $4,391.
 
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