Writer's note 10/26/07: They say all good things come to an end. Or maybe more apropos, nobody rides for free. As of October 1, 2007, you must maintain a minimum balance of $2,500 dollars in order to trade for free with Zecco. Under that amount, and it'll cost you $4.50 a pop.
What if you were independently wealthy tomorrow? What would you do?
There are countless answers to this question. Mansions, cars, dream vacations, ending world hunger. And high on my list would be, never having to be gainfully employed again (unless I just wanted to).
The more difficult question, though, unless you are already independently wealthy, is how does one get to be independently wealthy?
You could work most of your life, but that takes a long time. You could play the lottery, but the odds of winning are slim and none. Robbery or extortion could work, but I wouldn't recommend it.
So what are you going to do to become independently wealthy?
One answer may be, playing the stock market.
Wait, you say. What's new about playing stocks?
The answer to that question is, zecco.com.
For the past couple of years, zecco.com has offered something to stock shoppers that was hard to get elsewhere: no commission stock trades. In other words, you don't have to pay some fee to Zecco simply for them to make a stock trade on your behalf. The only fee was a $.01 regulatory charge, which is levied on all stock sales handled on the stock exchange, and which anyone would have to pay.
Rival online stock sale companies like sharebuilder.com and foliofn.com offer sales commissions for under $5, some of the lowest out there. However, these commissions are levied on both the purchase and the sale of your shares. For example, on foliofn.com, you can sell or buy many (but not all) stocks available on the stock exchange for a $4 pop. Thusly, a stock share or shares you buy and later sell must have gone up by $8 in total value for you to simply break even. And not that $8 is a bank breaker, but if you're reading this far into my article, you're probably not already independently wealthy enough to simply ignore an $8 hit on every stock you move in and out of a position.
And, of course, such an $8 hit really only matters if you make any money. If your stock never goes well, then, at foliofn.com for example, you will end up spending $8 to handle a stock that you lost money on anyway. For example, my first stock ever purchased was XM radio (symbol XMSR). Having professed my preference to XM over Sirius roughly a year prior, and given my belief that the stock would grow, I plunked down $96 plus $4 commission fees in January of 2006 to acquire 3.624 shares of XMSR at $26.49 a share. This turned out to be one of the worst stocks I bought, ever! I have currently lost about 1/2 of the value of these shares, and may well never see this back.
And yet, I continue to hold this stock. Why? (1) With rumors of a possible Sirius / XM merger swirling, I keep hoping that an uplift of value may occur in the near future. But more importantly, (2) I haven't wanted to pay $4 through foliofn.com to dump the stock on top of all the money it's already cost me, because it so pains me to throw good money after bad. And though I'm only talking about $4, it's the principle of the thing. No one wants to call a loss a loss. And I keep holding XMSR a little longer in an attempt to not lose more money in a sale, and in the ever dying hopes that, maybe one day, the stock may come back around to the high-value it once held.
Zecco.com has eliminated the slap in the face of a fee for a stock sale on top of a stock value loss. Now, if you get a stock for $15 and it goes to $10, you lose only the $5 that the stock value went down, instead of that plus a fee for someone to make that lousy trade for you. And that is a much more comfortable hit to take. In this way, you can take the money you still have and roll it over into another stock that (you hope) does better to recoup the losses. At foliofn.com or sharebuilder.com, not only will you pay the selling commission to get off your sinking-stock-ship, but you'll pay another commission when you purchase the replacement stock, cutting further into you precious funds. A sell of one stock / reinvest into another is much more pleasant and palatable when nothing additional is being charged to you in the process. Zecco.com now offers this painless transfer.
Moreover, earlier this year, zecco.com eliminated the minimum account balance that once used to be required to maintain in order to get free trades. So you won't need any funds more than those you need to buy the shares you want.
Previously, the only other company I knew of that has free stock trades is Bank of America, but in order to get this, you had to have $25,000 deposited in accounts with them. But I don't have that sort of scratch lying around.
So, pre-zecco, I held onto my foliofn.com account with its $4 commissions, hoping that the overall value of the shares would go up by more than $8 just so I could break even. And in some cases I hit and surpass the $8 raise in stock values, with companies like RS, CAT, and NTO, to name a few. Still, many others I had to sell at a minimal loss, or at practically a break-even point because the total value never made it over the $8 increase I needed.
Not to mention, an $8 increase of a few shares of any stock occurs usually pretty slowly. So, even a break-even point with an $8 curve may take several months.
Since joining zecco.com, I have sold a couple of items within a week of their purchase. The total value of my shares may have only increased a few dollars, but cashing out with a few extra dollars in a short amount of time is still way more satisfying that waiting a few months for a stock I bought with foliofn.com to increase by much larger percentage just so I could achieve the same net gain.
My strategy with zecco.com is to have a "watch list" of stocks I am interested in. These tend to be well-known and major stocks that fluctuate between a range of values. When I see one is too low, I grab it. Often times, the stock will rebound to a more moderate level, and then I sell, taking the profit.
Sure, the gains are relatively small. The BIG leaps on Wall Street tend to be much riskier stocks. While the newest startup may jump many points in its first year, five of its competitors will tank. Therefore, I tend not to take these small company risks anymore except in specific circumstances, finding several small gains in major companies tends to be more predictable and realistic than shooting for the moon with an unknown.
Some say, "what about the capital gains taxes?" Yes, it is true that you will need to pay taxes on your gains earned from stocks. But they still are gains, after all. If you didn't make a gain, you'd just have what you started with. That's no way to become independently wealthy! With the event of a capital gain through a stock sale, you will pay something, but I am not aware of a capital gain tax that ever exceeded what a person actually gained. So in the end, even with some taxation, you still come out ahead.
You could try a safer route of capital gain. An internet search of savings accounts interest rates currently would demonstrate that a 5.25% A.P.R. is obtainable in many cases, usually provided that you have at least $1,000 to deposit. If you do have $1,000 or so of liquid money sitting around, and place it in an account at such an interest rate, you'll net about $50 extra a year. And guess what? you'll pay capital gains interest on that, too.
Perhaps $50 interest off of $1,000 seems like a good deal to you. If so, zecco.com is probably not for you. But if you don't have $1,000 lying around, to get the 5.25% interest, or if you don't believe that $50 a year per $1,000 of investment is a great return, you may want to take a jump into zecco's pool.
Lastly, for those of you who don't think you know anything about stocks, don't let that be a factor. Exhibit "A" is: Mary Sue Williams, of St. Clairsville, Ohio, a waitress and former welder who had never bought a stock before in her life, was deemed the winner of a recent stock-picking contest held by CNBC. Her strategy was to invest in companies that make products she uses, such as rust repellent WD-40.
There are companies on Wall Street that are already making money on you for many of the things you buy, eat, consume, put batteries in, write on, or play with. If you're feeling lucky, you can try to make some money off of them by buying their stocks. Coke, i-pods, DVDs, cars, casinos: all the things you would buy if you were independently wealthy can be yours now, sort of, by purchasing shares in the companies who make them. You might make a couple of bucks in the process, too. And if your company isn't doing well, then you can sell their stock and try another.
Also, the money you make doesn't know where it comes from. Hate the major gas companies? I made money off of the buy and sell of BP shares earlier this year. While I don't like big oil any more than I did before, I'm still happy to take my earnings to the bank. I don't know anyone who can't like that.
There are many risks in life that are never taken. No taking the chance to make some money for yourself should not be one of them. Find a corporation you like, check the value of their shares, watch how they fluctuate for a few weeks, join zecco.com, and buy a few shares when the values seem low. Their gains may be the off-ramp to your future of independent wealth.
A practicing attorney and semi-professional musician, Walker writes for his own amusement, for the sake of opinion, to garner a couple of laughs, and to perhaps provoke a question or two, but otherwise, he doesn't think it'll amount to much.
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IF YOU LIKED THIS COLUMN...
7.18.07 @ 3:31p
So do you just do a daily check on things and play around/switch up accordingly?
I'm afraid I don't have the accumen to keep up with this that frequently. It's all I can do to understand my quarterly statements.
And, in my marriage, we have to find a happy medium between Ms. "sure, let's take a chance" and Mr. "if I hide this under the mattress and sleep on it every night, it's mine, all mine!"
7.18.07 @ 3:48p
I watch what is happening daily, but don't trade that often.
The fine print at Zecco forbids "buy / sell" the same day - this amounts to day-trading, and is regulated. Also, you can do (I think) up to 40 trades a month for free, so I'm not constantly tinkering for fear of going over.
I start by using YAHOO's "finance" page. Here, you can create a portfolio that will track your selected stocks daily, + give you all news headlines relating to said companies. The running graph will keep you informed of the % up or down of each stock you choose.
I watch the charts -- when one of my stocks seems to be dipping low, and there are no obvious headlines which trigger a "something is wrong here" situation, I'll buy one or more shares. In a few days when it goes up (presumably), I'll sell it back. With a solid performer, you can do this all year long, just moving in and out of the same stock, skimming off profits as you go.
If the stock doesn't go up right away, I will either wait it out, or else sell and then try to make up the difference elsewhere.
I don't invest ALL my savings -- I have a stash in a savings account, too, so I'm not left broke in case of a huge market crash. Less than half of my "saved" liquid capital goes to buying stocks at this point. I only started with about $100 to invest, and have slowly increased what I'm playing with as time (and my ability to pick) has improved. Slowly, I am now only recycling funds I deposited before, but still slowing growing the total amount invested.
Remember, if you try stock swapping and don't do well, you can always sell it all and put it back under the mattress.
7.18.07 @ 9:10p
This sounds like a pretty sweet deal with no commissions. Especially if you are a small time investor. Nothing worse that dumping $100 in sharebuilder and having to make an 8% return just to break even!
Capital gains can be a pain but if you are really worried about those then invest in the companies that will always be around like Coke, P&G, GE, etc. as they don't fluctuate too much and are good to hold onto for longer periods.
7.18.07 @ 11:42p
Small time investor, I am.
But even if I get to the point that I'm big time, after getting used to this free commission thing, I doubt that I'll be running to sign up with anyone else to pay for my trading.
10.30.07 @ 1:56p
Writer's note 10/26/07: They say all good things come to an end. Or maybe more apropos, nobody rides for free.
As of October 1, 2007, you must maintain a minimum balance of $2,500 dollars in order to trade for free with Zecco. Under that amount, and it'll cost you $4.50 a pop.