With the stock market desperately searching for its bottom I’ve been thinking about buying in. I’d want to get a Dow (or S&P) tracker, nothing fancy and certainly nothing “creative” (creative has gotten poor reputation in the financial community lately). If I decide to do this, what brokerage/financial firm/whatever should I go with? I’ve heard good things about Vanguard but I’ve never done this before.
Concerns:
I want an operation that I can deal with entirely online.
I can put in enough to clear most minimums, but we’re not talking a fortune.
Keeping fees down could be a major plus.
Any advice out there? Places to go, places to avoid?
I use SogoTrade and T. Rowe Price. I’ve never had a problem with either brokerage. SogoTrade has lower trading fees, but it’s not as established as T. Rowe Price, and so not as hefty in the customer service department. They’re both SIPC insured though.
I don’t understand what you mean by a “tracker”. Trackers are free and available everywhere, they are added into just about every OS, IM and browser program these days and headline every news site. From the context clearly this isn’t what you mean, are you just asking which brokerage house to trade with or something different?
Charles Schwab has an S and P index fund that has a minimum of only $100 and you can subsequently invest any amount over a dollar into the fund. You can buy and sell any Schwab mutual fund on the website with no charge. There are no account maintenance fees.
*I do work for the company, but I’m not in sales and don’t make any commissions.
Good to know! Thanks. Also thanks for the disclaimer. If I understand the vanguard correctly they also have no fees if you get statements online. 3k minimum, though I can clear that. hmm…
And yes, by tracker i mean a fund that buys collections of stocks that mirror some section of the market (i.e. a Dow tracker goes up and down as a close mirror of the Dow, an S&P tracker the S&P etc). I know that I can’t “beat the market” as such, so buying a tracker simplifies the decision to “will the market go up in the moderate term future Yes/No?”
Vanguard is famous for low-cost funds, particularly index funds. Another way to go is to purchase exchange-traded funds, which are lower-cost but you might need to pay a commission each time you buy shares.
I am always happy to recommend Vanguard to people; they have been most excellent to me.
In addition to a regular account with them, I also do my Roth IRA through Vanguard. Their selection of funds ranges from your basic index funds (what you want) to more risky mutual funds. They also have ETFs which can be purchased through a broker.
Their index funds are all very, very cheap. When I started with them I think the minimum buy-in was only $2000. Looks like they’ve raised it to $3000 since then.
When looking at index funds (i.e. mutual funds designed to mirror the returns of a given stock market index), pay careful attention to the expense ratios. This is the percent of your investment that goes to pay for the operation of the fund. For example, an expense ratio of 1% means you lose 1% of your investment each year to expenses. (Although you are not charged directly, it will reduce the return you receive.) With index funds, this should be very low, as there are no formal investment decisions to be made. The manager does not have to research stocks, economies or other such stuff – he (or she) just runs some computer models and automatically rebalances to match the index holdings.
With that in mind, I will give you another vote for Vanguard. Their S&P 500 Index Fund Investor Shares (ticker VFINX) currently has an expense ratio of 0.15%, provided you can make the minimum $3,000 investment. You can transact entirely online – although you will have to mail in some paperwork to open the account (I believe the forms are all available online). An S&P 500 index fund is generally better for a beginning investor than a Dow index fund, mainly due to the broader diversification (500 large stocks vs. 30 large stocks).
Also, congratulations on your investing fortitude. Provided you are not investing money you need within the next five years, now is the time to buy.