Why Sharebuilder.com is My Favorite Discount Broker

For a couple of years, I have been seeing ads for an online "brokerage" called Sharebuilder.com, but I never considered giving it a try until recently. I must say that this is a terrific service and one of my favorite ways to invest!

The first thing I like about Sharebuilder.com is their commission rates. The Basic plan has no monthly service plan and trades are $4 each. The Standard plan is $12 per month and includes 6 free trades. Additional trades are $2 each. The Advantage plan is $20 per month with 20 free trades, and additional trades are $1 each. They also offer a money market cash sweep account and margin trading with very competitive rates. You can even purchase fractional shares. You can choose from a wide array of stocks, ETF's, mutual funds, and Sharebuilder mutual funds.

Sharebuilder.com isn't your typical broker. They operate around the premise that you establish an automatic investing plan, recurring either weekly, bi-weekly, or monthly. Note that buying the same stock more than once a month constitutes multiple trades. The trades are always processed on Tuesday, at the market's close. By stipulating that all orders are placed only at this time, they can lump together all clients' orders, rather than processing all the trades real-time on a client by client basis as is usually the case. The result is that they can pass on tremendous savings on commissions.

One thing that intimidates people is having to deal with the timing of the trade (not advocating marking timing, for the record) or pay commission several times while making periodic investments in the stock. With Sharebuilder.com, if you have a company you believe to be a sound investment, you can take whatever amount you would typically invest at once and spread it over a couple of months-you can actually dollar cost average a stock without paying full commission over and over! For example, if you want to purchase $2000 of Microsoft, it would cost your $10 or so with another discount broker. You can take that same purchase and spread it out over 4 months (four $500 purchases) and your commission with Sharebuilder will be as low as $5 for all five of the trades!

My biggest complaint about Sharebuilder.com was that their market orders were not competitive. Sometimes, you just want to pull the trigger and buy or sell, rather than waiting until the next available trading day. I'm happy to say that they have recently lowered real-time orders to $9.95.

Sharebuilder.com was recently purchased by ING Direct, allowing you to combine Sharebuilder.com's investment accounts with ING Direct's Orange bank accounts. This may prove to be a happy union, but I am not a fan of ING Direct. I was a NetBank customer when ING Direct bought (and botched) NetBank. However, bundling services is almost always a good thing; hopefully they won't foul up my Sharebuilder account as they did NetBank or I might be writing a follow-up review.

Allow me to sum it up by saying that, with Sharebuilder, you get cheap commissions-especially if you prefer to dollar cost average your stock purchases, competitive margin and money market rates, and the flexibility to create an investment plan that suits your own financial goals. You just can't lose, unless ING Direct messes it up!