Zecco & Investment Strategies

I’ve had a regular investment account and a Roth IRA with Zecco.com for a few years now, and they’re by far my favorite online broker out of the several that I’ve tried. I find their web site easy to use, and they’re always very helpful when I call. But they’ve recently changed their pricing, which means that I may need to change my investment strategy.

Previously, they offered 10 free stock trades per month if your account qualified. Since I usually did fewer than 10 trades a month, that was perfect for me. No fees on my trades! But they’ve made a change, and eliminated the free trades. Zecco’s commissions for stock and ETF trades are still super low, and their mutual fund fees have stayed the same, which is great, but the elimination of the free trades is not so great for me.

You see, in addition to a few mutual funds, I have about 50 different stocks that I like to keep at the same cost basis — meaning I have close to the same dollar amount invested in each stock. I try to buy about $100 more of each stock each year, so that I’m diversified across industries and companies. While slow, this has worked out fine because I haven’t had to worry about commission costs. But now those same trades will cost me close to $250 per year if I keep the same strategy.

I may need to switch to buying larger dollar amounts of each stock — say $400ish per month — but that’ll mean it will take me more than 4 years to get all of my stocks “even” cost-basis wise. At $400ish per month, the trades would cost me about $60 per year, which seems reasonable. Or I could go to $200 per month, and spend around $120 per year. I’ve just got to weigh how important it is to keep my cost basis similar across stocks compared to how much the fees will eat.

On the other hand, maybe I should be focused more on the market value of my stocks, which is by no means “even” or close to even across all 50 stocks. (For example, at the time of this writing I have both FMCC and Netflix, two stocks on opposite ends of the spectrum market value-wise.) But since I generally use buy-and-hold, trying to keep them at similar market values would either take forever or generate even more trades.

Decisions, decisions.

What kind of investment strategy do you use, and what’s your reasoning behind it?

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11 comments

  • Have you ever looked into Sharebuilder for buying and holding stocks. They are only 4 dollars if you want to buy through there automatic investment plan. I have used them for two years now and have always had positive experiences.

    • Yup, I did try out Sharebuilder (and still have an account with them that I’m no longer doing anything with.) Because I invest in such a wide variety of stocks with limited funds, their automatic investment plan doesn’t really work out for me.

  • When I was looking for a low cost broker, I considered Zecco, but decided not to go with them since they had done this once raising the limit from $2500 to $25000.

    There are few options depending on what your goals are. I wrote about this in my recent post. Might be useful to you Jackie.

    http://www.moneycone.com/whats-next-for-zecco-users/

    • I’m not looking to switch, because I’ve tried 4-5 others and really like Zecco the best. I just need to figure out what to change with my strategy, if anything. But that’s a nice walk through you’ve got on your article :)

  • Although I own stocks, ETFs and mutual funds, I prefer mutual funds for a variety of reasons. Broader exposure, professional management and no load. Last, asset allocation is easier in a mutual fund. You may miss out on a home run, but you will also miss the strike outs.

    • I have a few mutual funds, but generally speaking I find it hard to figure out exactly what they’re invested in, and I don’t know when they make changes. So I kind of struggle with that…

  • Dan

    I know you’re probably not looking for an entire financial overhaul, but I’m with krantcents. I prefer mutual funds, and consider it to be a much safer investment than putting your eggs in just a few baskets of stocks (albeit, it sounds like you have some diversity). Most people I know who hand select stocks have some popular favorites, but they tend to perform similarly and don’t provide enough diversification.

    • I try to diversify across industries and across companies within the industries, although there are surely still things that I’m missing…

  • Hm, actually now that I think about it, I’m probably at 6% bonds, 40% single stocks, and 54% mutual funds. (Forgot about my 401k, which is all mutual funds…)

  • Rob

    Jackie,

    I use FolioInvesting for my accounts.

    As a value investor somewhere between novice and journeyman, I generally avoid arbitrary constraints like making sure my cost basis is even. I am looking for the most bang for my buck on each stock buy.

    What I do is wait until I have enough so my trading fee is <= 2% of my buy. Then I buy whichever stock is at the best price at the time. My trade fee is $4 per security, so I don't pull the trigger until I have at least $200 in the cash account. If none of the stocks in my portfolio are a good buy, I'll go fishing for something to add to it and not buy anything until I find something attractive or one of my other stocks becomes attractive again.