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Oct 19, 2008 (Updated Oct 19, 2008)
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Pros:Free Dividen Reinvestments, No Minimum Balance Required, No Minimum Openings Balance

Cons:High Fee to Sell, Not All Stocks Offered, $4 only lets you buy on Tuesdays

The Bottom Line:

Designed for the long term investor. $4 buy fee makes it easy to buy. $15.95 selling fee makes it expensive to sell. Free account doesn't allow all website functions.

The Pitch is touted as a cheap way to buy and sell stocks. When you compare sharebuilder versus other online brokerage companies, it appears to be true. The $4 fee to purchase stocks is the lowest around. There must be a catch right? What does that small print say? $4 purchase orders are only valid on Tuesdays? I knew there was a catch. That is okay though, I can live with making purchases only on Tuesdays. Congradulations, you just got suckered!

The Catch

While it is true that offers $4 trades, you have to be pretty savy to negociate and keep it affordable. Sharebuilder is designed more for a buy and hold investor than an active trader. While the $4 purchases look enticing, look a little closer and you will see it is $15.95 to sell. So if you buy and sell a stock, you wind up paying $19.95. This is much more expensive than some other online brokerages, and you are still restricted to buying on Tuesdays.

When sharebuilder executes your buy and sell orders, you get the absolute worst price of the day. If you are buying, you pay the highest price the stock was trading at that day. If you are selling, you get the lowest price the stock sold for that day. If you want an instant sell at the current price, well it's $19.95 instead of $15.95.

The Rest of the Details

Sharebuilder is a very easy site to get started investing. You do not have to show any ID. You can create and fund your account right from your computer. There is no minimum deposit, and no "maintence" fees. At least that is what they advertise. And it is true untill you decide to open up an IRA. If you want to keep an IRA it will cost you $25 in maintence fees a year, unless you pay more and upgrade your regular account.

The account advertised as having no monthly fees, or maintence fees, is a very limited account. Sharebuilder restricts access from their stock researching software. If you want to use the researching software, you will need to upgrade your account and pay a monthly fee. Again there are sites on the net where you can research stocks for free, you just can't do it with Sharebuilder.

Sharebuilder does offer free dividen reinvestment, which is an easy way to make your stocks grow. You can buy Exchange Traded Funds (ETF's), Initial Private Offerings (IPO's), and most stocks. However, I did notice that Sharebuilder would not allow me to purchase some specific stocks. Most notabily I wanted to purchase GLRE (Green Light ReInsurance), and sharebuilder would not allow me to purchase it.

The other item you should be aware of is the delay in deposits and withdrawls. It usually takes sharebuilder about 3 days to fund or withdraw from your banking account.

The Truth

Sharebuilder can be a great investment firm, but you have to know how to use the website. If you plan on setting up an account, you should plan on holding your investments for many years to come. If you are looking to be an active trader, the fees will eat you alive. Take advantage of the free dividen reinvestments to help grow your account. Also do not plan on making a purchase of less than $1,000 as the buy and sell fee of $19.95 is just under 2%. Initially sharebuilder will want you to "automatically" invest on a monthly basis. Monthly deposits into the account are fine, as you will till draw intrest. Just be sure to turn your automatic investing off untill your balance reaches $1,000.

So good luck with your investments, but be sure to read all the fees before opening a account.

Recommend this product? No

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