Investing Experiences at Scottrade

We started using Scottrade in 2007 and we’re really enjoying the convenience at our house. One interesting site that we have not yet tried is Zecco, which has a certain number of zero commission trades each month. In the early 90s we used Schwab for mutual funds, but we honestly liked the commissions at Scottrade and the founder did seem quite sincere in his humourous commercials. But mostly it was the low low commissions and being able to walk into their office that made our decision.

Because Scottrade is only a few miles away, we could visit their physical office quite easily. We turned in some paperwork and wrote our initial check on the first office visit. As we have become more comfortable with online investing, we will probably put money into Zecco this year. They have a $2500.00 minimum at this time. As far as I know, Zecco does not have plans to open physical offices near us, if they do that at all.

Make sure you get all the proper paperwork done and speak to the right people if you are transferring monies from one institution to another. We had put money into a Roth IRA in 2005 at our credit union and it took about a month for the money to be transferred [which was our second deposit to Scottrade].

We bought Timberland (TBL) in April and it fell nicely in a few weeks and has not fully recovered yet. It’s not fun to see your first stock fall in the 25% or more range, but we had committed to holding it for about 12 months or so. That’s part of our discipline of value investing and that will be covered in a subsequent article. Late August we started a buying binge and by late September we had 11 stocks and were fully invested. All our transactions went smoothly and within seconds we could see the total price we paid, price per share and other relevant information. We had just over 1/10th of 1% left in cash. I created a blog at http://BusinessOwnerInvestment.blogspot.com for anyone who wants to follow our progress or get more confidence before they jump into online investing. I will create links on the blog for those who want to visit my articles on Helium.

We bought PortalPlayer (PLAY) on September 5, 2006 and the company was bought by NVIDIA (NVDA). I wasn’t sure if we would receive NVIDIA shares or cash and I got the answer on January 10, 2007. We got cash and so effectively sold our shares without incurring commissions. Our return during the time we owned PortalPlayer was 9.49%. Scottrade’s back office has helpful functions like Gainskeeper(TM), which shows you how much you paid for the shares of each company including commission and how much your current value is and the profit or loss, including percentages as well as those totals for the account.

Once we entered the realm of takeovers with PortalPlayer/NVIDIA, this easy access to all information changed and I had to go to calculator.com to figure out our percentage gain as this stock simply dropped off our list of stocks purchased. There were a couple days where we simply couldn’t do anything with what had been PortalPlayer stock and I could find no obvious details from Scottrade. I knew what had happened to the company, but it would have been nice if Scottrade had been more communicative. I looked at Account History and found the date of purchase. Since September has 30 days, October 31 days, November 30 days, and December 31 days, it is not hard to add them and come up with 122. From the 5th of the month to the 10th is 5 days, so we had PortalPlayer stock for 127 days. If I divide 365 days by 127 days, I get 2.87. 2.87 times 9.49% equals 27.24% annualized rate of return. I did this with simple division and multiplication and I rounded off, but it’s possible that the Securities and Exchange commission has stricter rules about calculating return. If this comes out slightly different with their method of calculation, it’s still a very good return.

If I have missed some of the back office functions with Scottrade, maybe they should make it easier or more obvious to find things. Otherwise, they could save their clients time by making their automatic calculations and lists comprehensive all the time. Maybe they don’t think that company takeovers happen that often or that we have lots of software at our fingertips. I’m a big fan of customer service, so Scottrade, if you’re listening…

This is just a peek at our experience with Scottrade’s back office. Read more. Take the plunge when you feel comfortable. I’ll keep writing.