Thursday, April 10, 2014

Saving money on trading fees

We recently read many blog posts on the ways of saving on brokerage fees, so we thought we would join the conversation and talk about what we use. We use Merrill Edge as our brokerage for our taxable investments. The reason why we decided picked Merrill was because they offer FREE equity and ETF trades, which we'll discuss more below.

Let's start with some history on our brokerages and how we ended up with Merrill Edge. We initially started investing with Fidelity, because Mr Y's former employer's 401k was through them. Fidelity charges you a $7.95 fee for each trade. This is fine if you don't trade frequently. We did a few trades a year, but we had to think very carefully before making each trade because it costs us $7.95, which was really not ideal but OK at the time.

Eventually, Mr. Y decided he wanted to trade futures. That didn't go too well or lasted too long before he quit after a year (we didn't lose or gain much money). The platform we used for doing that was Interactive Brokers, which is targeted for professional traders. We then realized they allowed you to trade stocks also, and had some really low fees. Their rates vary depending on the size and value of your trade, but for us, this came down to $1 per trade. We used this for a while, but realized they were charging us monthly fees due to our low activity level. Interactive Brokers caters towards active traders so we had to pay another $10 monthly fee for the months where we didn't do much trading.

When we were looking at switching/joining a bank and getting a new credit card, we found Bank of America. A long time ago, we used to bank with them, but switched due to their low interest rates. One of their credit card offers caught our eyes. It was the BankAmericard Privileges, offering $200 credit when you spend over a certain amount within 3 months. Better yet, if you cash out their rewards directly into a Bank of America account, there is a 50% bonus. That turns your $100 dollars rewards into $150 cash in either your checking or savings account. What can be better than cash, right?!! We also found out that their brokerage offered commission FREE trades! However, to qualify, you must be a Platinum Privileges member - which requires just a minimum of $50,000 combined in all of your Bank of America accounts.

A $50,000 combined balance in our checking and investments is no problem for us (I don't think it would be a difficult requirement for most of the soon-to-be financial independent/diligent savers in the world of personal finance blogs). We promptly opened a Bank of America account, transferred our assets over (this process took a while because their banking and brokerage systems are not integrated), and finally reached the Platinum Privileges level. We now get up to 30 commission free trades a month and it's more than enough since we don't trade that frequently. We don't have to spend as much time planning a trade since there are no fees anymore, and we can always buy more shares in the future or whenever we think it's time to invest some more.

The other bonus is that you can easily transfer funds between your investment and checking accounts, and with so many branches and ATMs, you have really easy access to your money. The Merrill Edge trading interface is also easy to use, with access to tons of research and investment information. We don't foresee changing brokerages anytime soon, and hopefully they'll keep offering free trades for their Platinum Privileges members.

Sunday, April 6, 2014

Y Household March Spending

During the month of March, we spent significantly more on groceries. As the weather warms up, fruits and vegetables are more in season, so we ended up eating more fresh vegetables. We also spent more and stocked on food when they went on sale. We made multiple trips to Costco as well and stocked up on meat, and now our freezer is finally full and we won't need things for a while.

Mrs. Y started working again towards the end of March and started her very long commute. As part of the preparation for the new situation, we started to prepare and cook more on Sunday. This also led Mrs. Y to start experimenting with making her own frozen food. We did not like the high sodium content and other artificial ingredients in most store brought frozen foods and we wanted to keep our promise of consuming less processed food. Making our own frozen food has been an adventure so far, and it is very interesting that there is actually a whole new community out there for this type of thing. 

We also did not want to go out to eat or order take out all the time. So far for 2014, we ate out once so far - which has been good for our expenses.