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Why The Individual Online Broker Is Getting Screwed



October 11, 2010 – Comments (12) | RELATED TICKERS: JNJ , MO , WIN

Not sure if you all have noticed or not.  I just did.  My glorious and once unstoppable online broker Tradeking has become just another great broker destroyed by corruption, misleading emails, and a new system that has made many loyal customers like myself looking where to go from here.  Tradeking used to be awesome.  It was $4.95/trade and very straight forward.  Customer service was awesome.  The interface was up-to-date and clear.  Then a little something happened that made the broker go down the drain.  What was that little something?  Well while they were doing the conversion process (which has now gone on for over 3 weeks and this doesn't include the numerous alerts in previous months about when it would happen), they decided that the DRIP program was going to be changed forever.

Before DRIPS were awesome at Tradeking.  They let you DRIP on practically any stock and even let you do fractional shares for the small individual shareholder that isn't ballin like Bill Gates.  When Jim Cramer on Mad Money would shout DRIPS, I felt like "yeah Jim, I'm with you on that!"  I can't say that anymore.  Tradeking has removed their fractional shares.  What does this mean?  Well let's take a solid big time company like JNJ.  Since you can't invest fractional shares, how much do you need to invest just to even get a solid 1 share to show up?  Based on today 10-11-10:

JNJ Share Price: $63.12, Div Yield per Quarter $0.54 --> $63.12/0.54 = 116.888 shares or $7378.03!

Yes that is right boys and girls.  To make JNJ work for you, you need to invest at least $7378 just so you can get DRIPS to work.  And heaven forbid you want that extra share, just invest $7378 more.  Now you understand the seriousness of where online brokers are heading.  It just isn't Tradeking either.  Here are some other top online brokers that have really ruined it for many individual traders:

OptionsHouse, Scottrade, thinkorswim, Zecco, and more. 

Luckily I have Vanguard also and they haven't screwed me over yet.  My MO holding there is great  and still soaring. 

Bottom line, next time you think about an online broker, look into the fine print.  Great things aren't always as great as their first appear to be.  Good luck!

12 Comments – Post Your Own

#1) On October 11, 2010 at 3:57 PM, BearishKW (< 20) wrote:

Wait, so basically you couldn't reinvest dividends automatically unless you received them in whole share blocks?  Hence needing $7k to reinvest on JNJ each quarter...

That sounds rediculous, why wouldn't they just keep the status quo?

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#2) On October 11, 2010 at 4:19 PM, mikecart1 (79.71) wrote:

BearishKW, you know how business is.  Nothing good lasts forever.  Any improvement is usually at the expense of the customer.  Take a look anywhere and everywhere from road construction (higher toll prices in exchange for nicer roads) to lousy DRIP systems. 

Yes on your question.  1st of all you can't even do the DRIP until you realize you aren't getting it.  You have to first contact them and then get the ok.  So it was doing well for a long time.  They decided to change that.  So if you got now 0.99999 of a share to reinvest in the stock itself, think again!  You will get nothing but a little cash in your account and that's that. 

Money in the account is no where near the same as an automatic DRIP.  Those fractional shares you got after years and years are now history.  You might as well start buying in huge increments or at least do the math before you buy from now on.  I think many online brokers are heading that direction. 

For those unaware, take TODAY'S PRICE and TODAY'S QUARTERLY DIVIDEND.  Divide those and that is how many shares you need to have a DRIP work for you in the future.

Yes it sucks!

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#3) On October 11, 2010 at 4:53 PM, ikkyu2 (97.93) wrote:

I can't understand why the entire planet doesn't use Fidelity.  Just my 2 cents as a happy customer since 2003.

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#4) On October 11, 2010 at 4:55 PM, mikecart1 (79.71) wrote:

ikkyu2, how much do trades on Fidelity cost?  Tradeking is $4.95 all trades with exception to those under $1.00.  Tradeking also lets you buy unlimited amount of shares at $4.95.

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#5) On October 11, 2010 at 6:12 PM, Valyooo (38.19) wrote:

I love tradeking but this conversion process is pissing me off

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#6) On October 11, 2010 at 7:18 PM, AltData (31.91) wrote:

Have you heard that NFL branding motto?

"You want the NFL?- - - - Go to the NFL!"


You want JNJ?- - - - Go to JNJ!

DRIP here.


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#7) On October 11, 2010 at 7:47 PM, mikecart1 (79.71) wrote:

Valyooo, I had an intense chat today with one of their representatives.  I put my entire account on the line and asked nicely how I go about switching to a competitor.

An hour later I got an email giving me free trades with no commission on my next trades for the stocks in question.  It is somewhat of a nice thing.  But I can't go back in time and put DRIPS on stocks that have already passed.  It kind of defeats the purpose.

But yeah, I've never in my entire trading career come across such a lousy and unprofessional manner of "converting" a company online.  Imagine if your bank did a "conversion" and suddenly you couldn't withdraw money for 1 week, could not pay bills through the bank for a month, and have all your data screwed up for what seems like an entire quarter.  I swear I have seen Tradeking email me more "warnings" of this dumb conversion and their delays than actually telling the customer how it will affect US.

I saw a thread in the forum today after I nearly blew up on a chat with their customer service and others were complaining too.  I wouldn't be surprised if Tradeking loses a good % of their customers since it does cater to a certain sector of consumer shareholders - low trade costs, great DRIPS, and reliable service.

Oh and don't get me started on the 3-4 days the past year where the site has been down during a trading day.  I nearly took my account then too.


blesto, I have no interest in buying JNJ at this time but with Tradeking's current "conversion" still continuing, I wouldn't trust a quarter expecting to get DRIPS to occur when it most likely will be a sweep.

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#8) On October 11, 2010 at 8:11 PM, TMFBabo (100.00) wrote:

Fidelity is my favorite as well.  It's $8.00 (or $7.95??) per trade up to 10,000 shares.  I've used E-trade, Firstrade, Scottrade, and Sogotrade.  There were reasons I didn't use Zecco, Tradeking, and Interactive Brokers but I don't remember the exact reasons anymore.  It probably had something to do with online reviews I read on them.

I use Fidelity for buying and selling common stock (that's all I do).  It allows AON for 100+ shares and blocks way fewer OTC stocks than any of the other brokerages I've tried.  $8.00 doesn't seem as cheap as some other brokerages, but my plan is to use only Fidelity going forward; I'm just too happy with it compared to the other 4 I've tried.

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#9) On October 11, 2010 at 10:45 PM, Option1307 (30.63) wrote:

TDAmeritrade/TOS for life, and now that they are one, life is grand!

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#10) On October 11, 2010 at 11:50 PM, mikecart1 (79.71) wrote:

bullishbabo, haha it isn't every day that the #1 ranked investor on The Motley Fool comments on a blog.  Thanks man!  I got Vanguard now for Roth so I might just use that since their trades are $7/order.  Plus the interface is familiar for me.  It just sucks because I don't want to open yet another online broker just to get DRIPS on smaller orders.  I get DRIPS on Vanguard but the orders are somewhat expensive.


Option1307, haha you are lucky.  Life is not grand for me lately when it comes to Tradeking.

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#11) On October 13, 2010 at 12:55 AM, TMFBabo (100.00) wrote:

Actually, it just might be everyday! I comment pretty often, but only on posts that pique my interest.  You'll never see me comment on political blogs, market prediction blogs, and others because they don't interest me.

Fidelity has done a lot of the same things that Vanguard has, what with the low cost index funds and such.  I don't know who struck first with the lower cost trades, but I remember both Fidelity and Vanguard once had extremely expensive trades for individual stocks.  I was stoked to hear about the low cost trades at Fidelity, since the only thing I didn't like about Fidelity before that was the high trade cost.

I do know Fidelity offers DRIPS as well (which in the end is all you cared about from the start).  I'm guessing it's similar to Vanguard's stuff, so I bet there's nothing new for you there.

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#12) On October 13, 2010 at 11:17 AM, mikecart1 (79.71) wrote:


Yeah I opened a separate account at Vanguard since I already got stuff there for Roth and other things.  Their trades are $7/share for the first 25 of the year.  I don't trade dividend stocks that often so that is fine by me.  I like their trading system too and they don't mess with month long conversion processes like Tradeking does.  I plan to use Tradeking for stocks with no dividend and stocks I plan to trade often and Vanguard for my dividend stocks.  Would rather not open another account at another company.  It gets annoying trying to remember where all my money is haha. 

Oh and Tradeking as of today is still in the "conversion" process.  I believe we are past a month already.  I guess their next "conversion" should be their hardware since it is taking forever lol.  The forums on there are now full of customers planning to leave.  I was about to chat with customer service today because more data is coming up inconsitent across the site (different $ values for holdings depending on which section you are in on the site), but I am tired of getting heated.  I might try tomorrow haha.

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