Thursday, November 24, 2016

Robinhood: Commission Free Stock Trades

Last week I wrote about Loyal3, which is one commission-free stock broker.  This week I am writing about another, Robinhood. 

What is Robinhood?

Robinhood is a smart-phone based stock brokerage.  All transactions are done via phone app.  In order to use Robinhood, users can register on the website but then must download either the Android or Apple version of the Robinhood app.  No trades can be conducted via the website.  

How Do You Use Robinhood?

Once the app is installed on your phone, you can enter your banking information and transfer money to your Robinhood account.   A feature known as "Robinhood Instant", if activated, gives you immediate access to up to $1,000 that is en route from your bank account.  It also gives you instant access to money made via selling shares.  

To purchase shares of stock, simply search for the ticker symbol or company name on the app. Tell the app how many shares you want to purchase and whether you want a market order (meaning you'll pay whatever the going price is at the time the trade is made) or a limit order (meaning you tell the app how much you are willing to pay per share and if the stock is at or below that price, the shares will be purchased.  Selling shares works the same way--you tell the app how many shares to sell, and whether you want to sell for the market price, or whether you only want to sell if a certain price is reached. 

How Much Does Robinhood Cost?

Robinhood does not charge for stock trades involving US stocks, so you can buy one share or a hundred without worrying about trading fees.  Robinhood does have fees for transferring your account to another broker, for buying foreign stocks (even Canadian) and for paper statements or confirmations. 

Robinhood also offers  a service called Robinhood Gold that allows you to buy stocks with borrowed money, allows you to trade after hours (without it, orders placed after the market closes are executed first thing in the morning) and gives you instant access to larger deposits.   The cost of Robinhood Gold increases as the size of your account increases.  

What Can You Not Do With Robinhood?

As with most things, a lower price means a lower level of service.  Some things you can do with a full service broker that you cannot do with Robinhood include:
  • You cannot buy or sell options 
  • You cannot short sell stocks
  • Robinhood's terms of service indicate that limits are in place to make the platform unsuitable for day trading
  • They do not guarantee instant execution of trades
  • They do not offer any research on companies or any investment advice
  • They do not currently offer retirement accounts
  • There is no website access; all trades must be accomplished on a smartphone or tablet app

Have I Used Robinhood?

I'm a Baby Boomer, not a Millenial.  I do not own a smartphone and don't particularly want the bill that comes with one.  I have a "blackberry" style phone which, to me, is easier to text on that a smartphone.  I have wanted to try Robinhood for some time but have been unable to do so because I lacked a smartphone.  However, my husband recently needed a new phone so we got him a smartphone (which he hates).  

I was able to register online and download the app with no trouble.  Getting all the needed information into the app was a bit of a pain---he has a small cheap smartphone and typing errors were common.  However once it was set up and money was in the account, trading was easy.  I put in market orders for two shares of AT&T and one share of Lending Club.  Those executed at the opening price the next day (I placed the orders after hours). 

Once that was done, I entered an order to sell the Lending Club stock if the price increased by 10% and to buy another share if it decreased by 10%.  So far those orders haven't executed and from what I can see on financial websites, those prices haven't been reached.  

How Does Robinhood Compare to Loyal3?

Robinhood offers far more choices and far greater flexibility than Loyal3 does.  It allows you to trade any US listed stock at no charge and to have control over the price you pay or receive.  

The only advantage of Loyal3 (assuming you are willing to trade via app rather than website) is that Loyal3 sells fractional shares, and therefore allows you to invest as little as $10 per company, no matter what the price of the shares.  While the lack of commissions makes it feasible to buy only one share of a company on Robinhood, the cost of those shares means that $50 is likely to only buy you part of one company, rather than part of five.  

Investors who want to buy stock in a variety of companies for a small amount of money may find they prefer Loyal3.  If you have several stocks on their list that you want to own, if those stocks are not very volatile and you want to invest as little as $10 per purchase, you may be happier with Loyal3 than with Robinhood. The fact that Loyal3 limits your choice of stock can be an advantage (limiting your choices generally makes decisions easier) or a disadvantage (if you want a stock not on their list). 

If you want to invest in volatile stocks and want some say over the purchase price, or at the least want to be able to push a button and buy "now" (realizing that "now" will have some lag), then Robinhood will better meet your needs. 

Have you used Robinhood or Loyal3?  What do you think?

If you want to try Robinhood, use this link and both you and I will get a free share of stock. 


Friday, November 18, 2016

Loyal3: An Introduction to the Stock Market

If you look at the top of my blog on my links bar, you'll see a link to my Loyal3 Lunch portfolio.  It was a gimmick I tried last year to reward myself for bringing my lunch to work rather than buying the mediocre food from the lunch counter downstairs.  I've pretty much dropped that idea--it wasn't changing my behavior all that much, and people weren't reading my posts about the portfolio--but I have kept my account and I have added to it.  I wrote about Loyal3 about eighteen months ago, so I thought it was time to take another look at it.

What is Loyal3?

Loyal3 is an online stock broker whose target market is people who are just beginning to invest in individual stocks or who do not invest a lot of money at one time.  

What Makes Loyal3 Different from Other Brokers?

There are a number of ways Loyal3 is different from other stock brokers:

Loyal3 does not charge sales commissions. 

Most brokerage firms make their money by charging a fee every time a customer makes a purchase or sale.  Generally they charge by the transaction so that the commission as a percent of the price goes down as the size of the transaction goes up--which means sales commissions are very high for small transactions.  Loyal3 does not charge sales commissions so when you buy $10 worth of stock,  you get $10 worth of stock.

Loyal3 does not offer the entire stock market. 

In fact, it only offers stock in about seventy companies, most of which are well-known household names.  If you want stock in a different company, you will have to look elsewhere. This is both a strength and a weakness.  It is a strength because it helps narrow the research field for new investors.  Too often people do not invest because they don't know what to buy.  The Loyal3 stocks, for the most part, are household names 

Loyal3 utilizes batch trading and does not guarantee any price.

 With most brokerage houses you can tell them you want to buy a certain number of shares of XYZ and that you are willing to pay up to $xx.xx per share--or you can tell them to buy (or sell) shares RIGHT NOW.  Loyal3 customers tell Loyal3 how many dollars worth of which stock they wish to purchase.  Once per day Loyal3 goes to market and buys the needed number of shares at the current price.  If they stock you are buying is very volatile, it may cost you significantly more or less than you anticipated. 

Loyal3 does not offer IRAs, Roth IRAs or anything but a basic taxable account. 

 Many people prefer to own stock inside tax-advantaged accounts.  Loyal3 does not offer those account.

Loyal3 sells fractional shares. 

 While the orders placed with most brokerage houses are for a certain number of shares of a particular company, orders with Loyal3 are made by dollar amount.  Since you can invest as little as $10, this means that you often by fractional shares.  

Loyal3 does not offer margin accounts.  

While most brokerage houses allow you to borrow money from them to buy shares of stock, Loyal3 operates strictly on a cash basis.  They link to your bank account and when you place a buy order, if you do not have cash in your Loyal3 account, they withdraw it from your bank, and once it hits their account, the stock is purchased. Recently I ordered some shares on 11/16.  They were purchased on 11/18, and judging by the daily price chart on Yahoo, it looks like there were purchased about 10:30 a.m.

Is Loyal3 for Me?

No business is the right fit for every customer.  Loyal3 is a terrific brokerage house for the beginning or hobby investor.  My Loyal3 account is a toy for me--I hope to make money but I don't have enough invested with them to cause any major problem if my investments lose money.  I firmly believe that for most people (including me) the majority of their assets should be in mutual funds.  However, to me, investing in the stock of companies I can follow is interesting.  Loyal3 allows me to invest a little money without having it eaten up by fees.

Loyal3 does not allow you to name the price you are willing to pay for your shares, or accept for them, if selling,  which, in my opinion, makes it unsuitable for investing large amounts of money at one time.  In fact, Loyal3 will not allow you to buy more than $2,500 worth shares per transaction or more than $5,000 per month per company. 

Loyal3 does not provide investing information or advice.  Since that information is freely available in many places, I consider that only a slight weakness.  The fact that they offer only a limited number of stocks makes it easy to set up watch lists or run Google Alerts on the companies in which you are interested.  


Friday, November 11, 2016

Should I Do the (Side) Hustle?

"Do the Hustle..."If you are of a certain age, that phrase brings back memories of disco balls and leisure suits and dancing with your friends at your favorite college bar.  Today, the term "side hustle" refers to a job you perform, usually as an independent contractor, outside of your usual job.  So, should you have a side hustle?

Do You Need the Money?

That's the first question.  Can you pay the bills every month, save for retirement, pay off any debts you have incurred and save for major expenses that you know you will be incurring in the near future on what you make at your regular job?  If the answer to that question is yes, then you don't need a side hustle, so you can decide if you want one.  If the answer to that question is no, if an unexpected expense has you paying interest on a credit card to pay for it,  then you either need a new full time job or a side hustle. 

Can You Meet Your Family Obligations?

As you have no doubt heard before, people don't lay on their deathbed wishing they had spent more time at work.  If you don't need a side hustle to make ends meet, you need to consider family time before taking one.  If your side hustle means that you regularly do not see your children when they are awake, you need to reconsider whether the side hustle is a good thing in your life.  If your spouse is complaining that s/he never sees you, the side hustle may cost you your marriage.  Just because you can have a side hustle doesn't mean you should have one.

Do You Like Your Side Hustle?

Maybe you have a side hustle that is more like a hobby that  work--one that pretty much functions to pay for your hobby.  Maybe you make quilts and sell them, making enough to pay for the materials for the next quilt and put a (very) few dollars in your pocket. Maybe you blog for review copies of books and a couple of dollars a week from AdSense.  Perhaps you love animals and pick up some extra cash walking the neighbor's dog.  Side hustles that you enjoy, and would consider doing even if they didn't pay, can be a great part of your life.  On the other hand, if you groan when your side hustle email box shows a new message, it could be time to pull the plug on it, or redirect your side hustle to another path.  

Are You Gaining a Skill You Can Apply to Your Career?

A side hustle can give you the chance to acquire and practise skills that can be valuable to your career, even if your side hustle is in a totally different area.  You learn to sell yourself, deal with clients, and perform the job tasks without a direct supervisor.  Those are skills it never hurts to put on a resume, and if you need them to move up at work, then sacrificing evenings and weekends to obtain them may be worth it.  On the other hand, if your side hustle isn't teaching you anything, then it is time to consider if you have one of the other reasons for keeping it.  

Are You Trying Out a New Career Path?

Some people start a side hustle in a field they are considering for a new full time job.  You may want to be writer, but not a starving artist.  If you can build up a freelance clientele by working evenings and weekends, then quiting your job to be a freelance writer isn't so scary.  Walking the neighbor's dog could grow into a pet care business.  While working full time and building a freelance business can mean some long hours, if you give yourself a deadline --I'll be making enough to quit my day job by (date) or I'll quit (or cut back on) the side hustle.

So, Should You Have a Side Hustle?

If you don't need one, then you should have a side hustle only if you want one, or have a good reason to have one.  You should regularly re-evaluate whether the side hustle is meeting your needs and the needs of your family (including the need for free time) and keep hustling only if it is good for you and your family.  
*Part of Financially Savvy Saturdays on brokeGIRLrich. *

Saturday, November 5, 2016

Quick Book Review: The Daily Telegraph Guide to Investing

About the Book:

The Daily Telegraph Guide to Investing is your complete guide to the reliable opportunities and exciting niches that could help you boost your bank balance and make the most of your cash pile. The world of stocks, shares and investments can seem intimidating but, with the right information at your disposal, you will be able to work out how best to protect and boost your savings.

Whether you're a total beginner or a more experienced investor keen to learn about some new options, this easy-to-understand guide covers many of the various asset classes and alternative investments that are currently available to you. Each investing opportunity is assessed for levels of risk and potential of returns, from the safer options (including bonds, equities, ETFs, gold and property) to the riskier (including buy-to-let, FOREX, cryptocurrencies, futures and options).

The Daily Telegraph Guide to Investing gives you the straight-forward advice you need to make sensible decisions about your hard-earned wealth. From the glamorous (including fine wines, whisky, classic cars) to the quirky (including lego, stamps, memorabilia), this guide will give you a firm understanding of investment principles and what to look out for. Technical terms and phrases are all made clear and full guidance is provided on the potential pitfalls, dangers and scams that can face investors.

My Comments:

UK readers will probably find this book more useful than US readers as it covers retirement accounts available there, rather than IRAs, Roths and 401ks.  Still there is a lot of general investing information and the book covers some investments like FOREX that you see on blogs but rarely in investing books.  

Friday, November 4, 2016

Prosper versus Lending Club: My Results

Prosper and Lending Club are both "marketplace" or "peer-to-peer" lenders.  Both allow people who want to borrow money to apply online.  Both allow small investors to buy portions of many loans and both make their money on application fees and servicing fees.  As an investor it is important to look at the differences between the companies before investing your money.  In the battle of Lending Club versus Prosper, who wins?