COMPANY OVERVIEW
Sharebuilder exists purely in cyberspace and they have no brick and mortar outlets. They've been around since 1996, but back then they were known as Netstock Direct. Netstock eventually morphed into the current incarnation of Sharebuilder. Since that time, they've managed to build a solid user base among buy-and-hold investors. Currently they claim to have more than 1 million user accounts.


WHY SHAREBUILDER?
I had been with E*Trade for a long time. I wasn't particularly happy with them due to high fees and poor customer service. About four months ago, I decided to give Sharebuilder a try. Sharebuilder has no investment minimum, so this broker can be trialed with virtually no cost. Moreover, Sharebuilder regularly runs cash bonus promotions for opening a new account.

Signing up was very straightforward. It's the standard procedure -- provide your personal information and fund the account via ACH transfer from a checking account. During the sign up process, there is a choice of account type -- basic, standard, and advantage. In my never-ending quest to avoid all recurring fees, I chose the basic account and funded the account with $150.

In order to place a trade for $4, I had to set up my automatic investment plan. The interface is fairly intuitive. Provide the ticker symbol and dollar amount and Sharebuilder does the rest. Under the automatic investment plan, the trades occur on Tuesdays and the user has no control when the purchase is executed. I bought 1.045 shares of a Vanguard ETF with rock-bottom expense ratios (VTI).


HOW SHAREBUILDER STACKS UP VERSUS THE COMPETITION
Pros
For the basic account, purchase trades cost only $4. Four bucks is a lot less than the average online broker such as Ameritrade, E*Trade, or Fidelity. Sharebuilder costs more than free (or nearly no cost) brokerages such as BofA, Wells Fargo, or Zecco.

The company offers fractional shares and free dividend reinvestment. This system is comparable to the evil E*Trade which also has a nice DRIP system. In contrast, Ameritrade doesn't offer fractional shares at all and really sucks on DRIPs.

What is particularly notable about Sharebuilder is that the corporation allows fractional share purchases. This feature allows the user to buy a partial share of some interesting equities. For instance, Warren Buffet's legendary Berkshire-Hathaway (BRK-B -- class B) trades at a nosebleed dollar level. Personally, I can't afford to buy much more than a single share of BRK-B since it trades at over $3,500. But with Sharebuilder's partial share purchase system, I can buy any dollar amount I desire. Among all the stock brokers I've used, Sharebuilder is unique in this aspect by allowing fractional shares to be purchased.

The cash bonus payment for new accounts is very reliable. I was paid without any issues or needing to contact customer service. It's pretty easy to find a $50 promotion through any search engine. In my case, I used "50DOW" although I don't know if that code is still valid. It's possible to open more than one account and receive multiple bonuses, although that's a different story.

Cons
The standard and advantage account types cost $12 and $20 per month, respectively. I consider those prices quite high considering that the research tools are very poor. The fee schedule details this information here: http://www.sharebuilder.com/sharebuilder/Fees/Default.aspx

Sell trades and real-time orders under the basic program cost an exorbitant $15.95. This is one of the highest rates in the industry, so it's obvious the company prefers buy-and-hold investors. This high trading cost is a major deterrent for anybody who is a regular trader.

Sharebuilder's research tools, as I noted before, are practically non-existent. I think you'll find better tools at yahoo, google, CNBC, E*Trade, or Motley Fool. You won't find much more than an annual chart at Sharebuilder.

Under the basic program, the investor has no ability to time a trade. All trades under the automatic investment occur on Tuesdays. For me, this isn't a big problem, but I could see some traders who would consider the inability to time a trade as totally unacceptable.

Unlike competitors like BofA, Wells Fargo, Ameritrade, Scottrade, and E*Trade, this corporation has no brick and mortar stores. If you have a serious problem, then it's telephone and email only for contact purposes.

I contacted customer service for the first time a few days ago to ask a quick question. Sharebuilder's phone number is 1-866-747-2537. After going through a quick phone maze, I was connected to a live person. No hold times, although I might have been lucky.


CONCLUSION
In all, I am very happy using Sharebuilder. Despite the downsides, this company has a terrific low cost automatic investment program. Sharebuilder is ideal for buy-and-hold investors, as well as dollar cost averaging. The cost associated with real-time orders is excessive, but that's fine so long as you are investing for the long haul.

You may be interested in reading my other financial product reviews:
E*Trade
Ameritrade
Apple Bank
Wells Fargo
Netbank
Capital One
Emigrant Savings


Recommended: Yes