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Finally, You Can Trade Stocks For Free!

By Frugaling 3 Comments

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Wall Street Free Stock Trading
Get ready world! Wall Street is about to get a lot more friendly.
Photo: Michael Daddino/Flickr

Back then, free stock trades weren’t possible

Free stock trading isn’t exactly new. In fact, plenty of companies have tried and failed in the process. Any number of problems have beset these pioneering companies. From beginning to charge commissions and fees to questionable management to poor corporate reputations, they haven’t stood the test of time.

When I first started investing and researching individual stocks, I was a wee middle schooler. As I tried to understand the markets, my burgeoning interest was dampened by trading fees. With only a couple hundred dollars to my name, stock trading fees of about $50 made it financially oppressive. I couldn’t invest in Apple (ticker: AAPL) right after the iPod was released, but I wanted to.

Fees destroy profits and wreak long-term havoc on investment returns — especially for those getting started. Thankfully, fees have been on a precipitous decline in recent years. From that abominable $50-fee time to now, you can see great change. Most online brokerage companies are around $10 or less per trade.

Unfortunately, if you’re an average investor — or even a day trader — you’ll spend money every year rebalancing your portfolio to better diversify. Whether you choose individual stocks (more risky) or exchange traded index funds (more diversified), you’ll be spending about $20 per stock to get in and out. And that should be frightening to anyone. Heck, that’s 10% of my monthly food budget!

The hope for fee-free stock trades

The lingering question: Is there actually a non-scammy, reputable way to trade for free? Until very recently the answer was still no. Unless you had gobs of wealth ready to trade, investment and brokerage companies had no interest in providing for the little guy or gal. Free didn’t really exist; the handful that tried, failed.

Today, there’s good news for everyone — at every income level — because data and tech companies have solved this wretched problem. Today, I’m making a rather lofty prediction: nobody in the United States will pay to trade at average investor levels within 7-10 years. Today, there’s hope on the horizon for a more affordable, accessible investing world.

The cost of everything tech-related has fallen. We can store more and get data faster than ever before. It makes all of our consumer products less expensive to purchase, and has the added benefit of making cloud applications cheaper, too.

We are just beginning to benefit from these reduced costs, as many cloud-based providers have opted to slash costs for services. For instance, Google Drive offers 15GB free and for $2.00 per month, you can receive 100GB. Think about it, only a few years ago we were working with floppy disks that stored about 1.5MB!

As technology prices decline, the consumer has benefited appreciably. And it’s leaving room for innovators to save us even more when trading stocks. If a company can utilize the latest technology, reduce brick and mortar costs by only having an online presence, make money off of user data, and turn cash-on-hand into interest for them, then you could have a success story.

Robinhood saves money for everyone

The other day I was reading up on a new tech startup that’s aiming to do everything I mentioned. They have an office — not hundreds or thousands of offices. They have a staff of coders, developers, graphic designers, and technical support to make something for the 21st century.

The company’s called Robinhood. I don’t know if they could come up with a better name than that! They aim to “democratize” stock trades by removing the “$10 [fees] for every trade.” Now, the wealthy and the hopefully-soon-to-be wealthy can participate in the market without being eaten alive by trading fees.

Instead of porting over old ways about investing, Robinhood revolutionizes everything about trading. All you need is a smartphone (iOS only, Android coming soon). With a few taps, anyone can invest for free.

Here’s where I want you to ask, What’s the catch, Sam? Nothing in life is free, right?

True. Nothing in life is completely free. There’s always some trade off. The fees that used to be captured by older brokerage houses are eliminated; instead, the company profits off of unused cash balances in portfolios. For instance, say you deposit $1,000 in a Robinhood account. Until you formally invest in a stock, that money is borrowed by the company and put in an interest-bearing bank account for them. As you research and decide on a stock to buy, they scoop up a little interest in the process.

Additionally, Robinhood uses advanced technical features that will likely be able to track user data far better than stodgy companies. I’m always cautious about data-based companies, but the potential gain is worth the information loss.

Robinhood Investors Google Ventures

Robinhood is backed by some of the biggest names in Silicon Valley, including Andreessen Horowitz and Google Ventures. That has provided them with some much needed funding to get off the ground and running. With Google behind them, I trust their platform and user-focused future. This isn’t a company that will crash and burn like Zecco did.

First impressions on this new app and trading platform

Robinhood iOS App

I deposited my first funds into Robinhood’s iOS app a few days ago. Trading stocks and ETFs were easy. As if conditioned to wince over the costs like before, I clicked and beared for some strange $7-10 trading fee. It never came.

Robinhood is an honest platform with some exciting energy. When I reached out for support via their FAQ forums and Twitter account, responses were delivered within 24 hours — usually in a couple hours. That’s impressive for a small staff with plenty of new accounts. The company seems to understand that if it’s to appeal to younger, more tech savvy generations, they’ll need to meet them where they are — Twitter included.

Reducing these trading is a wonderful first step towards a more accessible, affordable stock market for all. The dangers of stock market manipulation are still ever present, but being able to enter the market without these fees is amazing. And having a terrific platform on top of it is a wonderful thing!

Want to try it out? Unfortunately, it’s invite-only at this stage, but I have 3 invite codes up for grabs! Comment below and share this article on Twitter. I’ll email the codes to 3 people within 7 days of this article.

Filed Under: Save Money Tagged With: Free, invest, investing, market, money, review, risk, Robin Hood, Robinhood, stock, trades, trading, Wall Street

Frugal Articles of the Week

By Frugaling 2 Comments

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Reading Nook Photo

Every week I like to feature a few frugal articles that caught my eyes. Curl up in your favorite reading nook and enjoy. Hopefully these encourage you to live frugal lives!

This Cold House by Ken Ilgunas
The semi-famous Millennial writer of Walden on Wheels was just published in the New York Times! He’s lived out of vans, hiked the length of the proposed Keystone XL pipeline route, and now he’s turning the temperature down — way down. In this latest experiment, Ken turned down the thermostat of a 4,000 square foot house to 45 degrees. He would’ve gone colder, but then the pipes might burst. Join him on this mini adventure! It’s a fun one.

No Sidebar: A New Approach to Life by Brian Gardner
Minimalism can prevent distraction. Brian Gardner designs incredible WordPress themes and websites with this effect in mind. He gets readers to focus on content, instead of widgets, ads, and sidebars. In this article, he explains how website design is the tip of the iceberg — it’s a way of life.

The Best Things in Life are Free — Or Dirt Cheap by Laurie
The Frugal Farmer is one of my favorite personal finance and frugal living blogs. Laurie captures the many complex issues of living near poverty, with a depression-era nod here and there. In this latest article, she talks about things. It can be powerful to realize that the best things in life don’t cost anything — or shouldn’t!

Hotel 22 by Elizabeth Lo
Occasionally, the New York Times chooses video over the written word to capture a story. Elizabeth Lo has captured a deeply saddening scene in San Francisco. There’s a 24-hour bus line that becomes an impromptu home and warm room for homeless people.  Watch, listen, and gain an empathy for those struggling to survive.

Filed Under: Save Money Tagged With: Article, Free, Frugal, homeless, Homelessness, Keystone, Minimalism, Walden

Starbucks Reserve Coffee: A Symptom Of Income Inequality

By Frugaling 13 Comments

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Starbucks Reserve Coffee Expensive Income Inequality
Just got a fresh cup of Starbucks Reserve coffee. It only costs $4 per cup!

More companies are moving to two-class business models — catering to a growing divide in income brackets. Essentially, it’s the difference between the dollar-menu and the deluxe package. Look no further than your local Starbucks, where they created an elite status for coffee drinkers. It’s called, “Starbucks Reserve.” Like our broader economy, it’s not made for everyone — intentionally.

Reserve drinks come in a black Starbucks drink sleeves which say, “Exotic, rare and exquisite coffee.” Today, I got to order one because I’m using a free drink reward from a 12oz bag of coffee. In a way, I’m circumventing the traditional class system of drinks.

Before choosing a Reserve coffee, the employee tells me she recommends the fancy-something-sundried-special-faraway-coffee. I’m out of my element, and gladly accept the suggestion. All I know is that I’m drinking something from Hawaii and it’ll be brewed on an $11,000 machine. It’s supposed to be good.

When I look up at the menu board above the employee, I gasp at the price: $3.95 for a tall (12oz) cup. At more than $4 per cup after taxes, the Kona Perry coffee is the most expensive coffee choice by far. A normal cup of coffee at Starbucks is half the price — about $2.

I’m was reeling at the exorbitant price. I thought, “How can someone spend $4 for a cup of coffee?” It’s then that I realize something stupidly simple. The economy is more divided than ever. Perhaps this an oversimplification, but the middle class is quickly disappearing. The popular buzzword is income inequality. Starbucks’s response is a new, atmospheric price structure that caters to the wealthy.

After a couple minutes, the barista says, “Sam, your tall Kona Perry coffee, brewed on the Clover machine, is ready.” I gingerly pick up the coffee and realize they’ve purposely advertised my status/drink to everyone in the building. While smart marketing, I’m frankly embarrassed by the complexity of my order. I feel like apologizing to those around me. “Sorry, it was free, I assure you I didn’t just pay more than $4 for black coffee!”

I take my first sip, and immediately notice how smooth it is. It tastes wonderful. For a moment, I imagine $4 being totally worth the expense (despite being more than my lunch on most days). I take another sip, and smile. I take another sip and realize how nice it is to pretend I’m wealthy for a day. This is the good life — for a moment.

As the drink disappears, it occurs to me that I don’t know how this compares to the lower priced Starbucks coffee. I’m not sure if I’m tasting class or actual quality. Is my mind playing a trick on me? Is the quality all psychological? Whatever the reality, I can’t afford this regularly. It’s a nice treat/aside from the everyday option. I see this as a growing business model for most industries (from airlines to restaurants to hotels). Unfortunately, as the economy becomes more polar and divided, so do consumables. Starbucks Reserve coffees are just a consequence of this income inequality.

Filed Under: Save Money, Social Justice Tagged With: Beans, Class, Coffee, Free, Income, Income Inequality, Kona Perry, money, Reserve, Save Money, Starbucks

Love is a click away, but is it worth paying for online dating?

By Frugaling 4 Comments

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Online dating: From stigma to commonplace

We sat in the high school parking lot, and I laughed every now and then — awkwardly I may add. David Gray blasted over the car speakers, and I squirmed with tension and anxiety. My hands felt sweaty, and I remember rubbing them on my pants to dry them off. After an impossibly long period of time — my mind spinning with questions — I leaned over and had my first kiss.

Dating was different back then. When I graduated high school in 2007, love and like were simple, in-person concepts. That was one month prior to Apple’s famous iPhone release. After that, the Internet was accessible everywhere. Everything completed IRL (“In Real Life”) could be duplicated online — a mirror.

Online dating started to boom in popularity and I heard news/rumors about this growing trend. Honestly, it seemed like it was only for old farts and socially awkward people. Dating seemed effortless in college. In a way, I thought you had to fail at “real life” to turn to online dating.

I had a huge bias: Why would anybody turn to online dating?

This is more popular than I thought

11% of American adults…have used online dating sites or mobile dating apps (Pew Internet Research)

By the time I graduated college, online dating was much less stigmatized. In fact, a shocking number of people have tried it. Based on U.S. Census numbers, that equates to about 33 million people in America who’ve tried online dating. TechCrunch reported that, “38% of people who are ‘single and looking’ have used a dating site or app.”

After I graduated college and was suddenly single, I decided to start my first profile. I was embarrassed to tell anyone. Uploading my pictures and customizing that profile made it real. I tried to represent myself as best as I could, but always felt askew — was this really me? Off and on throughout the years I joined dating sites and actually had some entertaining meetups. Slowly, my stigma began to disappear. Despite all this acceptance, I’ve never paid for online dating.

Should/would you pay for online dating?

Free dating sites have exploded in popularity among Millennials, and the options are plentiful. From swipe-to-date apps like Tinder to the question-and-match power of OkCupid, these sites are exceptionally popular with younger generations. OkCupid offers one of the largest populations of potential matches — all free. People can try out the site, message freely, and quit whenever they want. The intention and commitment is minimal, and the potential is great.

Stalwart dating sites such as Match and eHarmony charge monthly fees for access/communication with other prospective daters. Match.com offers an easy, free signup where you can look at matches, but you can’t send messages or get a phone number until you pay the fee. It costs about $35.99 per month to use this service. eHarmony provides a similar dating and match service for potential compatibility. The site offers a detailed personality inventory to gauge your needs in a potential match. To access these features, you’re looking at $59.95 per month. At these prices, it’s hard not to feel like they’re gauging your wallet to gauge your compatibility.

To pay $36 or $60 a month for an opportunity to meet someone is a scary amount of money — especially if you stay online for multiple months. But sometimes it’s worth the price. Paying for online dating sites is a proof of your intention and seriousness to other people. That monthly fee suggests you’re likely desiring a committed relationship. Likewise, that purpose attracts a community of people that can be hard to come by on free dating sites.

Unfortunately, the for-pay websites often use shady tactics to attract visitors and hook people with longer-term contracts. For instance, Match.com doesn’t show you who can receive messages. And eHarmony forces you to take a survey that takes about 30-40 minutes, suggests you’ll see your “matches,” but then limits how much of the profiles can be seen without a price. These tricky business practices scare me, and they should scare your budget. Here are some eHarmony reviews if you wanted to get some more information about the dating app.

When it comes to paying for online dating, I can’t imagine spending the money. Maybe I’ll eat my words someday, but I don’t want to spend money on something that’s available for free elsewhere — regardless of the overall intention among members. I’m excited that people are interested and open to meeting through new mediums, but I question the expense.

Would you ever pay for online dating? Have you noticed any difference between free or subscription-based sites?

Filed Under: Save Money Tagged With: apps, Budget, date, dating, eharmony, Free, love, match, Millennials, money, okcupid, online dating, relationships, smartphone, tinder

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