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Month: January 2009

The end of free trades at Zecco and my review of them

The end of free trades at Zecco and my review of them

All good things must come to an end. Last night I received the following email from Jeroen Veth the founder of Zecco

Dear Zecco Trading client,

I’m writing to tell you that as of March 1st, 2009, we’re increasing the minimum level of assets needed to earn 10 free trades per month to $25,000. We’re also adding a new way to get free trades: customers who make at least 25 total trades per month will also qualify for 10 free stock trades per month.

Now I understand some of the reasons for the need for them to switch their cost structure with interest rates being as low as they are, companies cutting advertising, less money being invested, etc, but to be honest if you don’t have a $25,000 balance with Zecco there is no reason to stay a customer with them, and even then you should seriously question whether Zecco is the best place for your money.

I’ve been a customer of theirs for about a year now and I have 3 trading accounts with them (two IRA and one taxable). There have been a number of occasions where I was going to write a pretty nasty review of their trading platform and customer service, but never got around to it and after all I figured you get what you pay for and for $0 per trade I figured I could put up with a lot of the hokey issues you deal with when you are a customer of Zecco.

Granted they have improved a number of items such as the website constantly throwing errors and puking on itself, but you still have to deal with the fact that your account balances and money available for trading are just plain wrong on a consistent basis. One day (during the days of “Which bank/financial institution is going to fail today?”) a good portion of their customers logged in to see their equity balance, cash balance, etc all sitting at $0.00. Needless to say you could not get through to their customer service over the phone because the lines were overloaded and any attempts by customers to post messages on their message boards asking what was going on were promptly deleted by Zecco staff.

Zecco has a habit of cherry picking posts it leaves on its message boards, any posts that reflect negatively on Zecco or question some of their practices are deleted by their staff. Which is the last thing you as a customer want to see when major issues like none of your investment money or cash show up in your account and you can’t get a straight answer from anyone at Zecco. I’d be surprised if this post is still there when I publish this, but here is a thread on Zecco with people complaining about Zecco deleting posts that put them in a negative light.

The issue that caused the $0 account balances is a recurring event. The cash and equity balances are not updated real-time like they are at every other brokerage I have ever used, they are done nightly via a batch job and this batch job often fails or just screws everything up. Every weekend my money available for trading is greater than it should be. It always seems to forget about any limit orders you have in the queue on the weekend and says your money available for trading is whatever cash you have and does not subtract this open limit orders. This allows you to put in orders for more money than you have cash for (which if you make regular deposits and don’t trade that often and don’t know what the balance should be is quite dangerous). Currently my Roth IRA account should have trading power of $7.04, but instead it shows $407.04 and will let me put in an additional order for that amount even though I currently have an open limit order for 10 shares of Chipotle at $40.

To make it worse this happens on my two IRA accounts and when I called Zecco to complain after I noticed a negative trading balance after the nightly batch job got the balance right the following Monday, I asked what would have happened if I would not have caught this and I would have purchased stock with money I didn’t have? Their response was it would have been treated as trading on a margin and I would have been charged interest. So apparently with Zecco if you fall victim to this bug or I guess exploit it you can trade on a margin with a retirement account! I called in on this error last July and have followed up at least 3 other times and it still has not been resolved.

There are quite a few other less serious nuisances that you put up with, but in the end I always justified it with my 10 free trades so even though I don’t trade that often it allowed me to dollar cost average into stocks and not have to worry about my money going to brokerage fees. Essentially I could put up with the annual $30 IRA fee, wrong balances, and overall just a bad website as long as I was saving money.

Now that the $0 trades are gone (granted one of my accounts is usually over $25k, but as of right now its not) Zecco has put themselves on a fairly even playing field with most of the other discount brokers such as TradeKing, Scottrade, Etrade, etc that provide professional working websites and respectable customer service and IMHO no one in their right mind should be a customer of Zecco when any of those other options are available for roughly the same cost.

I don’t want to come off as just being a big baby and I’m just saying this because I’m whining about Zecco removing my free trades. My experience with Zecco has been a pretty poor one from the start and even with the $0 free trades I had twice queued up scathing reviews of Zecco for this blog, but just never put the effort to finish them. Now that the free trades are gone it just motivated me to do a public service and warn of just some of the issue with Zecco so that none of my readers accidentally signed up with them over another brokerage because their commission is still relatively cheap (trust me its not worth the hassle).

Will carrying a credit card balance through month end hurt your credit score

Will carrying a credit card balance through month end hurt your credit score

As I vaguely mentioned in my $100,000 by Age 30 year end recap post my wife and I are starting to save for a house we want to build down the road (probably 2-3 years from now). While I’ve been planning this already for a few years, now that I have a savings account setup and a general timeframe in my head I’ve really started to up my planning and research.

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$100,000 in principal by Age 30 – 2008 year end recap

$100,000 in principal by Age 30 – 2008 year end recap

Well it is time for my annual check up on my $100,000 by age 30 goal. I guess I had a little foresight when setting up this goal as it is based solely on principal (my contributions) and investment performance does not matter. This way everything is under my control and I am not hurt or helped by short-term swings in the stock market. Which is good because currently my contributions are roughly $19,000 of my current nest egg value 🙂

The whole idea of this goal was to make sure that I was in a good situation in regards to my retirement planning. You can go ahead and read the original post here, but idea was to give myself an aggressive savings goal that would have me well on my way in my retirement planning. You can see where I currently stand vs my original plan below.

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Retirement Nestegg Report – December 2008 (+8.54%)

Retirement Nestegg Report – December 2008 (+8.54%)

Well 2008 sure was an exciting year and I certainly learned a lot in the process. As for my retirement nestegg I actually lost just over 5% for the year. That is not the whole story though because I also contributed about $15-$20k this year that is not currently showing up on paper.

I guess if I had just checked my balance at Jan 1, 2008 and and Jan 1,2009 it probably would have been a pretty boring year and to be honest this is probably what most people should do so they don’t’ get caught up in all of the nonesense and excitement that is the stock market that the mainstream media portrays to the average investor.

Me on the other hand the only real reason I check is to keep this blog updated and well I’ve got a pretty strong stomach and actually found some of the massive drops to be quite entertaining this year. I also think this year of being fully invested will make me a much better investor going forward. It will certainly be a while before I start sweating a 3% drop in one day. Heck if its not double digits I’m not sure why the media wastes their time reporting it 🙂

I’ve also learned to keep my cool, not act irrationally, and believe the mantra that “if its too good to be true” it always is. Ever since I started this blog I’ve harped on and on about how I wanted a major recession when I was young and would actually prefer to lose money on my investments and see my nestegg shrink than grow. I’ve got time on my side and I don’t need any of this money right now. I need it in 2038 so if the stock market wants to tank from 2004-2024 I am ok with that as long as I have a job. I’d much rather be an investor now than in the 1990s when stocks did nothing but go up.

Anyway here is my December report and a graph of my nestegg growth or lack thereof for the exciting year that was 2008.

Traditional Rollover IRA – $8,250.71 (+7.89%)
My Roth IRA – $23,843.67 (+4.00%)
Wife Roth IRA – $12,943.64 (+18.40%)
Current Traditional 401k – $23,538.41 (+8.80%)

Roth/Traditional % = 53.64% (tax free)

Total Retirement Nest Egg $68,576.43 (+8.54%)

My Contributions for 2008 $30,510.38
SPY Performance for 2008 -38.42%
Investment Performance for 2008 -47.98% (-9.56%)
Individual Stock Performance for 2008 -37.00% (+1.42%)
Total Investment Return -$35,108.72

Nestegg Growth