The State of My Budget
So, sometimes we blog about finance or current events. Other times we blog about personal matters. This posting deals with my limited budget and how I'm investing despite having little money.
I'm currently pulling in about $1,850 before taxes. This is primarily from two sources of income; my assistantship at the University and dividends from our stock market investments. The university pays about $1,200 per month, and our stocks are paying about $650 per month. This totals to $1,850.
In order to feed our ravenous mortgage, my university pay of $1,200 goes straight into an ING account my wife Miel uses to pay bills. The stock dividends of $650 covers my miscellaneous costs like clothing, food, the power bill and my cell phone. Since I don't have expensive tastes, usually there is $50 - $120 left at the end of the month.
Fifty to one twenty isn't a lot. So, I've been thinking about ways to invest small amounts of money. This month, I put $50 into prosper.com. Prosper is good for small amounts because the transaction costs are only 1% and you can make a 20% or better return. Since my wife and I set the goal of maxing out our retirement, I put $75 into my Sharebuilder ROTH IRA. Sharebuilder charges $4 per trade, so it also has low transaction costs. When my trade goes through on April 6th, I should be the proud of owner of $71 worth of Johnson Controls (JCI).
Best,
James
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5 comments:
Hi,
Just a quick comment about Sharebuilder. I started investing through them and I kick myself every single time I see the statements because I lost so much to fees and selling is so expensive. I'm really not a fan of this brokerage for several reasons. The biggest reason is that the price sounds good, but really it's not. You're paying almost 5% commission on that $75 transaction which is not even close to being a good deal even though $4 sounds great. That doesn't even take into account the sales fee which is about $15. The rule of thumb that I teach my students is that if your transaction expenses are more than what you would pay annually for a good fund (less than .5%) then you don't have enough money to invest in individual stocks. You'll get eaten up by fees and it's a fact that high fees are one of the things that can most damage your investment returns.
On top of that, you aren't diversified because you're only buying one stock at a time and you have zero control over when you buy.
A much better idea would be to invest in a no-load fund through Vanguard or Fidelity. Or, if you don't have enough for the minimum to start an account with those brokerages, T-Rowe Price has a program where you can start a Roth with as little as $50 if you sign up for automatic contributions.
The benefits of this would be 1 - you wouldn't be wasting money on transaction fees (who wants to have a 5% guaranteed loss the second you purchase the stock?!), 2 - you would be diversified instead of risking your money on just a couple stocks.
If you really insist on using Sharebuilder I'd consider buying an ETF instead of an individual stock. You'll still be losing a big chunk to transaction costs but at least you'll be diversified. Personally I love DVY and since Sharebuilder allows free DRIP it's good for that brokerage.
So, sorry for butting in but I hate to see people spending more than is necessary.
Good luck and if you have any questions don’t hesitate to ask.
Mandy
pf101
Sorry if you have blogged about this, but I am relatively new to the PFBlog world and your site. My question, if you don't mind, is how much have you invested, where do you invest it, and how do you get so much money monthly from your stock investments? You mention dividends, but what would a person have to do to bring in those types of numbers?
Thanks for all that you do!
Use Zecco.com for free trades. It's utterly stupid to continue to pay brokers fees.
i reccommend you switch your account to zecco.com.
they have free stock and etf trades.
however funds cost money.
its the opposite in tdameritrade so i recommend you have an account there too if you want to invest in both.
also the customer support at zecco is a bit lacking.
Ameritrade charge $50 to buy a no-load fund...
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