Jim over at Bargaineering wonders why anybody would want to use Sharebuilder. OptionsHouse and Tradeking, respectively, offer $2.95 and $4.95 buy and sell fees—compared to $4 to buy at $9.95 to sell at Sharebuilder. Sharebuilder once uniquely offered free dividend re-investment plans; now all services offer the convenience. He concludes:
Short of taking advantage of the free money offers using a Sharebuilder promotion code , I'm not sure Sharebuilder makes much sense anymore. What used to separate them from the competition is now common among discount stock brokers and they never innovated to keep up.
Am I missing something?
Here's a couple other potential quibbles about Sharebuilder.
- Their basic pricing structure can be a little confusing at first. When you say you want to purchase $500 worth of stock, Sharebuilder actually buys $496 worth and keeps $4 commission.
- They fail to provide a convenient chart showing return on investment over time.
- You can buy only on Tuesdays.
That said, I still use Sharebuilder, and I think Jim is indeed missing something. Here is why.
For one thing, Sharebuilder is still the cheapest broker out there. Its fee plans are cheaper than $4 each if opt for the monthly packages of $12 a month or 6 trades, or $20 for 20 trades.
Here's the big thing. What you have to understand is that Sharebuilder markets itself as a service for the small-time, buy-and-hold, index fund-preferring, conservative investor who prefers keeping things simple. All its features (and shortcomings) derive from this.
Sharebuilder is not competing for the active trader, so a Tuesday-only investing time schedule is not a concern. Stocks and ETFs that interest the Sharebuilder investor are not so volatile that waiting a few days for a purchase will make much of a difference.
The expensive selling fee? I wish the fee was smaller, but it's not a dealbreaker either; a Sharebuilder user will likely have made several stock purchases at $2 or $4 each before incurring the expensive $9.95 sell fee.
The other major convenience Sharebuilder offers is the option to purchase a precise dollar amount of stock, as opposed to the traditional way of purchasing, which is to purchase X number of shares. For example, say you have $1,000, and not a penny more, to invest in Acme Corp, which is selling at $101 a share. With Sharebuilder, you can purchase exactly $1,000 worth of shares of the company, and have 9.9 shares of the company. With other brokers, you purchase 10 shares at the selling price. If it's selling at $101 a share, you can either purchase 9 shares $909.
The final reason I use Sharebuilder is the weakest. As I've written countless times, I love my ING account. I love the lack of fees, the interface, the customer service, the services. Since ING owns Sharebuilder, I enjoy instant transfers to my Sharebuilder account. The reason I started with Sharebuilder was the $50 bonus, and the nudge that ING offered.
