Value Investing Weekly – Issue 5

This week’s article pertains to the ease and availability of purchasing stock at discounted commission prices. We have dedicated this site to research in finding appropriate stocks to purchase, but how does the value investor go about purchasing these shares? It is extremely easy to both open brokerage accounts and purchase stock with remarkably low commissions.

Firstly, if you are seeking to open a brokerage account there are countless low cost online brokers available. TD Ameritrade is my broker of choice, and I have had nothing but positive experiences with dealing with them. Their commission is a flat $9.99 fee for all equity trades regardless of size of transaction. Before, they used to charge a quarterly service charge for accounts with low balances, but they have since eliminated this all together. TD Ameritrade offers margin accounts, options trading, and short selling all for various commission charges that are low relative to the higher priced firms. Besides TD Ameritrade, there are numerous other firms to mention: Charles Schwab, Scottrade, and E*TRADE among others. All mentioned firms and others I failed to mention can offer the services you are seeking for nominal fee(s). Generally, in order to open an account a minimum deposit of $500 or so is required.

There are ways however to own stock without going through the above mentioned steps, by buying stock directly from the company itself. Essentially you own the stock but the company’s holding company physically holds the certificates until you request to have them mailed to you. You can then deposit these certificates into your brokerage accounts for a nominal fee and can trade them as though you purchased through your broker. The fee for participating in this purchase varies from firm to firm, but it is significantly lower than any online or traditional broker. A great listing of companies participating in this is Direct Stock Purchase Listing which shows current listings. I personally have never participated in this program, but I know that my partner Benjamin Clark has in the past.

All of these options allows the investor to eliminate as much unnecessary service and transaction costs in the acquisition of stock and increases overall rate of return. The high end brokers such as JP Morgan and Merrill Lynch are great companies, but for the investor with the knowledge to make their own investment decisions they are not necessarily the greatest fit. Keep costs low, maximize returns is the thinking in all investors minds, don’t waste your capital on commission.

As always please comment in our forum, your comments truly help! You may need to register before posting.

Neither Ben nor I own any of the above mentioned securities, please review our disclaimer.