Tag Archives: sharebuilder

What to do about GLD?

A few months ago when I dove into the market with idealism and ignorance, I wanted in on all this gold excitement in the market. I believe the market is tanking, a recession is inevitable (if not already happening) and gold will do well for a while. I believe, and largely still believe the hype.

However, what I didn’t realize at the time (damn me for not reading the prospectus or understanding tax law) is that GLD, being as it actually means I hold a small tiny piece of actual gold, is considered a collectible by the IRS.

Why does that matter?

Well, normal long term capital gains are apparently taxed at 15 percent, which is actually pretty nice given that you can make a lot of money in the stock market, and as long as you hold your stocks for a year you only have to pay the 15 percent tax.

However, GLD, the “collectible,” is taxed at a rate of 28 %.

Oy!

So now I’m trying to figure out what to do with the GLD stock in my Sharebuilder account.

I understand the long term capital gain tax, but I’m still unclear what the gains would be taxed at if I cashed out in less than a year. I’ll probably want to do that anyway given that gold’s price will hit the roof at some point, the dollar will recover with the new president coming in (hopefully) and I can sell off the gold.

But what rate will GLD be taxed at if I sell it within a year?

Also, I’m buying it about once a month in smallish increments. Right now I own about $470, or a little less than 5 shares of GLD. As of today, the account has a net profit of $34. To sell it, though, would cost $10. So if I sell today, I made $24. But that $24 will be taxed. What rate would it be taxed at?

When it comes to long term capital gains, is the “one year” policy based on when you bought each share? What if I bought a part of a share per month? When can I sell to get the long term capital gains tax instead of the short term tax? And would I want to wait or sell sooner for my GLD holdings?

Can someone explain this to me…?

The first Investing cut is the deepest

I’m an impulsive person, for better or worse. Sometimes I think about something for a long time trying to come with a rational conclusion, and then I make an un-wise spur-of-the-moment decision anyway. I need to stop doing that.

Well, about two months ago now I decided I wanted to start investing on Sharebuilder. It was a way for me to get to know more about the stock market, the overall economy and perhaps make some money.

My first purchase was four shares of COMV at $26 a share. This was a company I had been wanting to invest in ever since I covered it as a business journalist covering cleantech. I noted in a previous entry that I knew my experience covering them as a private company that was doing fairly well (yet not turning a profit) would not really translate to how they would perform as a public company. Regardless, I wanted in. I finally could, without any conflict-of-interest, try to nab a piece of a company that may eventually skyrocket to success.

A cleantech energy management company, they basically get contracts with utility companies to start demand response programs in place. These programs help the grid remain stable during times of high demand (like in the summer when everyone has their air conditioning on full blast). Instead of overloading the grid, the software and hardware installed by the company would reduce the amount of energy used in a building, therefore limiting the amount of demand on the grid. If this is done in a bunch of buildings, it can extremely reduce the likelihood of a blackout.

Anyway, I liked the idea, but didn’t do enough research about the financial matters of the company.

The thing is, they could still do good in the long run. They just scored a multi-million dollar contract with a utility, and maybe they can make a profit this year and the stock price will go up.

I feel bad for the folks who bought the stock at $40 and who were holding. I got in on the downward trend.

I bought four shares of COMV for $26 each.

The stock is now worth $14.

The other day it was back up to $19.50 and I figured if it got to $22 I might just sell it and put the money into one of my ETFs that are performing much, much better.

The next day it had dropped $3.20 a share. I’m not sure why it did this, after all the company seemed to put out good news the day before. Or maybe it was bad news in disguise and I just missed what the other investors saw. Or maybe the stock market just had a bad day.

Regardless, my little experiment is paying off in knowledge and not-so-much in profits. I invested in three individual stocks and three ETFs. All my ETFs are up, all my individual stocks are down. One individual stock (the one I’m talking about in this entry) is very, very down.

Lesson learned. I will not be investing in individual stocks anymore. I may or may not keep my four shares of COMV out of curiosity. And, right now I have little to gain by selling. My shares are worth a measly $50 and it will cost me $10 to sell them. I’d rather watch the money deplete itself entirely than sell at this point. I’m just glad I was lucky enough to splurge on the stock when it was at $26 and not $40!

With Sharebuilder I get six “free” investments a month (for a $12 monthly fee). I’m investing about $300 a month if my funds allow. So in the future, I’m going to move more into ETFs and on occasion put some money into the two individual stocks I own that will at the very least pay some sort of dividends (McDonalds and Whole Foods). I knew COMV was a risk from the get-go and I was right. Good to know my instincts are accurate sometimes, even when I fail to listen to them.

Risk vs Reward

I always thought that when it came to risk, I’d avoid it at all costs. Skydiving of the body or the spirit was not for me. Sure, I moved a lot and took tiny little risks like living on my own with no job, but nothing beyond riding a roller coaster known for its safety record.

Now that I’m getting into the stock market, albeit very slowly, I’m ever-so tempted by risk. Yesterday I found the blog of Timothy Skyes who is famous for turning his $12k of Bar Mitzvah money into more than $1 million. He loves the thrill of day trading and obviously it has paid off for him.

I don’t think I’ll ever be able to take my entire savings and make some educated guesses about where to place my bets on Wall Street, but I am getting more and more interested… and risky… when it comes to my relatively small stock and ETF purchases.

It surely is an addiction. A year ago, I finally took the “leap” of putting a huge chunk of my savings into a Vanguard index fund to open a ROTH IRA. But index funds, especially ones that cover multiple industries with no specific focus, have already started to bore me. Additionally, with the way the overall stock market is performing, watching my “less risky” investments tank makes me want to take more risks so I feel like the failure is, uh, much more deserved.

I started out a month ago buying a few shares of GLD, the Gold ETF. Everyone is screaming “gold” these days, as with the recession such commodities seem to thrive. GLD is the main gold ETF available for purchase. I started out buying about 4 shares of GLD and adding some more funds to that ETF. I’m not sure if I should buy more.

This purchase was followed by investing in McDonalds and Comverge (COMV). I figured why not start with one large cap, and one small cap. They ought to balance out in the middle, or something like that, right? Comverge was a company I had covered in the past as a cleantech reporter while they were still private, and I liked what I knew about them. However, I also acknowledged the fact that I had no idea whether they could turn their good idea into a profit for the company. But I always wanted to buy shares in them just because, well, I felt like it was one company I had been following from near-birth, and if anything I wanted to watch them grow (or fail) with a small amount of my money attached.

Meanwhile, McDonalds, I read, was a good buy because it offers yearly dividends to investors AND its price right now has gone down with the current recession.

After a few days it became clear that my Comverge purchase, although not the end of the world, should have been spread out over time so I could have “cost dollar averaged” and saved money. I bought a few shares of the stock for $23 each and since then they’ve gone down to $18 a piece. Now they’re at about $19.50. I’m considering waiting (hoping) they go back up to $20-something again and then I’ll sell them so my loss isn’t that huge and instead invest them in another stock or ETF that might actually perform well. Or I can keep the $100 in COMV and watch it disappear. Who knows, maybe the stock will soar one day. I’m waiting for the quarterly earnings to see how they’ve done, and see what that does to my four shares.

Meanwhile, I found that I’m now hooked on investing. I quickly signed up for Sharebuilders “$12 a month” 6 “free” trades plan and started to pour about $300 a month into a variety of stocks and ETFs. This time I did a bit more research and picked the following three stocks/ETFs to invest in:

KOL, EWZ, WFM

What do all those letters mean?

KOL: An ETF of coal. Why coal? It’s terrible for the environment. Yet with the prices of oil rising, and other cleaner alternatives far from being able to provide the energy needed in the world, I think coal has (for better or worse) a pretty strong future. I was excited to find the fairly new ETF that would allow me to get into coal with a little less risk. I plan to keep putting about $60 a month into the ETF to see if I can prove myself right. Also, a lot of the ETF is invested in Asia (coal is huge there and growing), so this gives me the Asian diversification I’ve been seeking.

EWZ: This stock symbol doesn’t give one a clue of what the stock is! It’s actually an index fund of companies in Brazil. A lot of advisers seem to be recommending it, and I want to diversify my overseas investment so it’s not all in coal and Asia. Brazil has a lot going for it and the ETF has performed quite strongly in the past. Will it perform as well in the future? Beats me. I’m investing most heavily in this index fund right now, putting in about $150 a month to EWZ.

WFM: Whole Foods. I spend enough money shopping here! This is another dividend-paying, large cap stock. Not that interesting. I doubt I’ll make a fortune on it, but it might at least grow slowly and calmly. Or I’ll lose some money but I’ll try to get out before it tanks.

One thing I’ve learned is that in order to make a stock purchase worth it, I eventually need to own a lot of that stock. Even if the stock goes up $10 from $10, a 50% increase, if I only own one share and have to pay $9 to sell it back, that amazing performance will only make me $1. So I’ve decided to try to focus on these six stocks for now, and if needed to sell one of them and replace it with another. Six seems like a good number to start with, and I’ll let my portfolio grow as needed or merited by my income and thirst for risk.

Sharebuilder – Will it Destroy Me?

I’m determined to “understand” the stock market as much as possible. Instead of “investing” in an economics class, I’m putting my hard-earned money into stocks via Sharebuilder.

It all started this week when I realized Sharebuilder and ING were now one in the same. I trust ING, so I figured it was time to make the next leap in my financial journey — ETFs and stocks. I wasn’t going to do anything crazy and spend $1000 on one stock right away, but it’s time to do some experimenting… especially since we’re in a recession and the markets are fairly weak right now. It can’t be that bad a time to buy, looking at a long-term investment.

I did a little research and with in my typical spontaneous and likely under thought fashion, I decided to quickly move on from my original $500 investment in Gold and one small cap company that I’ve liked since my reporting days (even though now that I think more about it, they’re probably not the greatest investment). Sharebuilder had a neat feature showing losses and gains that I couldn’t see unless I signed up for their monthly plan ($12 a month) which also features 6 free trades, so I gave in and spent the money. Probably a dumb idea. Potentially a very dumb idea.

But I’m young and it pays to be aggressive in my investments, supposedly. If my “safe” mutual funds are failing, then I know to expect that anything more aggressive will likely lose money too. I’m just hopeful 10-20 years down the line these purchases might pay off… maybe in time to move to a bigger place (or buy my first house) and have kids?

Regardless of how much you know or don’t know about the stock market, it really all is one big guessing game that can be sorted through with the help of statistics and a fine understanding of the economy. Still, another bomb could go off anywhere in the world and send everyone’s predictions completely out of whack. A part of me loves the excitement of the stock market. It’s a grown-up game where you can win some money (or lose all your money, eek.)

Again, I’m not being totally stupid about it. I still have a good $12k in two crappy-interest CDs (I’ll be moving those funds to one higher-interest CD as soon as they’re liquid again) and at least my gains on my CDs and occasional take-home pay equaling more than I spend in a given month have helped balance my loss of $700+ on my Vanguard accounts.

Besides, if we are in or going into a major recession, I believe (after reading a bit on the topic) that certain cheap retail establishments will do well, especially if they have foreign sales power. I’m all about the foreign investments too. Not all in one country, but I’m going to buy a small amount of an index fund in Brazil, one hot company in Spain, and another index tracker in China.

“Going to” is because I have to wait a week and a day before any of these investments post. That’s what Sharebuilder’s automatic investing is all about. I still don’t understand it completely. The “coolest” part about it (that seems to be its selling point compared to other online traders) is that you can purchase “fractional shares.” How they do this beats me, but basically you say “I want to invest $X into company Y the 1st Tuesday of every month” and if you have enough money in your account (which you can set up to automatically transfer from your bank account) it will invest exactly that much into that company on that Tuesday.

The good here is that if a stock costs $600 ala Google and you really want a piece of that action, I guess you could go and invest $30 in it. But what i don’t understand is how on earth Sharebuilder does that. Do they actually buy a full share of the stock assuming you will continue to buy the rest of it? They can’t really do that, because when they place your next order, you buy it at the market price for that Tuesday. As far as I know in my limited knowledge of stocks, you can’t just buy parts of a share. You have to take the whole thing. So how on earth does Sharebuilder do this? They don’t really explain how they do it on their site, they just say they can and basically that it’s an awesome feature for investors with a small amount of savings each month to invest. I like the idea, but please, someone explain this to me.

Anyway, I’ve set my account up to buy parts of six different stocks once a month for a total of $300. I figure I’m better off forgetting about $300 that I’ve made and investing it, and either it will make money (I am investing in a few large cap companies that seem to pay dividends, which looks to be a good thing to balance out my risk a bit) instead of looking in my bank account and spending more on food and clothing and such that I could get more cheaply. It will certainly force me to be more frugal, in a good way.

I just hate waiting for the investment window. What if Bush’s recession tax plan passes the day before my investment and all the sudden the stocks soar? I’m confident that the stock market is sucking right now, and I’ve picked stocks and ETFs that seem to have long term potential that are also sucking at the moment. I’m so nervous that it won’t be the case on Tuesday the 29th, when my bets should be posted.

Then supposedly I keep investing the same amount every month until I’ve built up a decent portfolio. I just can’t wait until I log into my Sharebuilder account and see a few different stocks and really start following them and understanding what they do and why. If anything, this will help me learn… for future reference… what kills a stock and what makes it soar. Hopefully I’ll learn more of the later.

Yeehaw, I Bought Gold — How to Get In on the Hot Commodity

…And not in the form of a pretty necklace, either.

With my limited knowledge of the stock market and this recession that’s going on, it seems that gold is one investment that works well during this sort of time. It sounds like if the rest of the economy decides to miraculously recover, gold’s value might go down, but then my other mutual fund-held stocks would go up… hopefully making my fantastical logic actually work in the long run.

I’m a bit worried about this, but in I bought a whopping 4 shares of a gold ETF for something like $320. If the price goes up because a major recession hits, awesome. If it goes down, I’ve learned my lesson.

“Ultimately, the only logical reason to invest in gold stocks is if you believe, after you have done your own due diligence and research, that the gold price is going higher. If you arrive at the conclusion that gold is heading lower, you are better off not owning any gold stocks. Gold stock investing ultimately boils down to a bet for higher gold prices.” — Zeallic.com

It’s all ING Direct’s fault. I decided to start saving my money through them. Of course they bought Sharebuilder recently, so they advertise the budget trading site on their “savings” site. I’ve been wanting to sign up to do some individual and ETF trading… without making that my entire portfolio. I don’t know if now is a good time to get into the stock market or not. I feel like most of the stock prices out there are down due to news of the recession… so either this recession will kill off some companies, or the companies I invest in will survive and prosper in the long run. Needless to say, I’m not going to be… THAT stupid. I acknowledge that I’m playing with fire here, as I really don’t know what I’m doing. Except I know that following the advice for beginning investors — “invest in Vanguard mutual funds” hasn’t been going that well. I’m not going to sell off those funds, but I’d like to diversify my portfolio a bit. Thus, I went out and bought myself some gold, baby.

Apparently there are a few different ways you can invest in gold:

Coins
The lowest risk is through buying coins of solid gold. Then you own the precious metal, but you have to figure out where to store it, and then pay insurance, and… that just seemed way too complicated and frustrating to deal with for a relatively small purchase of less than $500 that I planned to make.

ETFs
These are fairly new in the world of gold. From what I can tell, there are two different options. You’ve got streetTRACKS Gold Shares (GLD) and the iShares Comex Gold Trust (IAU). They’re a good way to get your feet wet in the gold market without going super high risk, while also not having to deal with all the trouble that comes with insuring coins. Basically, they’re both ETFs or “Exchange Traded Funds.” According to Wikipedia... Exchange-traded funds (or ETFs) are securities certificates that state legal right of ownership over part of a basket of individual stock certificates that can be traded at any time throughout the course of the day. Typically, ETFs try to duplicate a portfolio such as SPY or the Hang Seng Index, a market sector such as energy or technology, or a commodity such as gold or petroleum. Sounds like a more focused mutual fund to me… which is nice because you can invest in a commodity without the risk of investing in just one company. Or…

Individual Stocks
You can buy individual stocks in gold mining companies. This is the highest risk option because even if the gold market as a whole is soaring, one company can falter and go out of business. Or maybe they just don’t have technology that lets them keep up with the other companies. Owning an ETF mitigates this risk because you own stock in many different companies. But, of course, with the risk you also can reap great rewards.

… I ended up buying the GLD ETF, mostly because on Sharebuilder the other ETF option wasn’t available for trade and it was 6am when I decided to start trading (yea, I know, I shouldn’t try to understand investing after I’ve been up all night).

Do any of you have a better explanation of gold stocks and enlighten me if I’m being a complete idiot?