As many of you know, brokerage Loyal3 is closing down in May. I received a lot of responses from readers, who shared their disappointment about the close. I did receive one response, which notified me of another broker that was similar to Loyal3, and which has no account minimums. This broker is called Stockpile, and I will be sharing my observations about it today. Stockpile is an online broker which lets investors buy and sell shares in their favorite companies. It is aimed at newer investors with less experience. The appealing part for me was the fact that it offers the ability to open accounts for kids/teens. This is a feature that may be helpful to anyone who wants to buy stock for children/grandchildren or nieces/nephews, and teach them by example the powerful concepts of investing from an early age. The broker site could be accessed from this link.
The brokerage account at Stockpile is SIPC insured up to $500,000 for stock ( and $100,000 for cash).*
Opening an account is a fairly easy and straightforward process. You need to have your social security number, address, bank information etc.This is a fairly standard procedure.
“Things you can do at Stockpile:
- Buy and sell fractional shares of your favorite stocks
- Give e-gifts or physical gift cards for stock to loved ones
- More than 1,000 stocks, ETFs, and ADRs to choose from
- 99¢ trades with no monthly fees or account minimums
- Pay with your credit card, debit card, or cash in your account
- Get cash from your bank instantly using your debit card
- Reinvest your dividends for free
- Kids & teens can place trades on their own, which you approve
- Download the iOS or Android app for an awesome mobile experience
- Refer your friends or other customers and get $5 of free stock! “
It costs 99 cents/trade when you buy or sell stock with. The minimum investment amount is $1. Stockpile also lets you to buy fractional shares, and offers dividend reinvestment for free. When you buy stock, you only have to decide how much you are willing to invest, and the broker will take care of how many shares you end up with. Once you have bought stock, you go to your Profile, and enable the green “dividend reinvestment” slider. The dividend reinvestment feature is appealing for investors who like to set it and forget it. Other services such as Robinhood offer free real-time trades, but do not offer dividend reinvestment plans at this time.
When you sell shares, you make a decision on how many shares to sell. Of course, if you are a long-term investor like me, you will hold you shares for life.
You can buy stock with cash or credit/debit card. Linking your checking account to your Stockpile account took only a few minutes. When you buy shares with cash, you only pay 99 cents/trade. The stock trade will be executed at the closing price of the day, if you submitted it before 3 PM ET. For orders submitted after 3 PM ET, they will be executed on the next business day at the closing price of that day.
If you use a debit or credit card to purchase stock, you will also pay a 3% charge on the amount you invest through the card, in addition to the 99 cent brokerage commission. This is a steep charge, which is why I would advise against buying shares with a credit card. The only situation it may make sense to buy shares using a credit card is if you earn a 4% credit card rebate on credit card purchases or if you receive an account opening bonus that exceeds the charge.
Stockpile also offers a much broader selection of companies to purchase than Loyal3 did.
For example, I can buy shares in any of the dividend aristocrats for 2017 that I find to be attractively valued today. I can also buy shares in most of the popular blue chip names like Berkshire Hathaway, Google, Amazon, Tesla, if that is what you are after. In addition to that, the company also offers the opportunity to buy exchange traded funds on the S&P 500, the Total US Market and the Total International Market. It also offers dividend etfs on the Dividend Aristocrats (NOBL), Vanguard Dividend Income (VYM), Schwab Dividend ETF (SCHD), Vanguard Dividend Appreciation (VIG) etc.
Just like with Loyal3, trades are not executed in real time. I am fine with this requirement, because it imposes discipline that would prevent you from actively trading. Active trading is dangerous, and costly, and should be avoided at all costs by most investors. Instead, the slow pace encourages long-term thinking and buy and hold investing. If you place an order by 3 pm ET on a day the stock market is open, the order will execute at the stock’s closing market price that day. Otherwise, the order will execute at the closing market price the next day the market is open.
As I mentioned above, Stockpile offers individual and custodial accounts. You have to over 18 years old to open an individual account. You need to open a custodial account for those investors under the age of 18. The custodial account needs an adult on the account until the magic age of 18. After that point, the account turns into an individual account.
The custodial account feature is perfect for those who want to open a stock account for a youngster, and teach them investing using a real-world hands on experience. Other services such as Robinhood offer free real-time trades, but do not offer custodial plans at this time.
The kid can set up their own log-in credentials at their Stockpile account (separate from the adult’s) so they can see how their stocks are doing anytime they want. Placing stock trades does require the adult’s consent however.
For example, if your kid wants to buy $20 worth of Disney (DIS) stock, they sets up the transaction, which is routed by email to the adult for approval. If the adult approves the transaction, the trade goes to market and executes at the close.
On a side note, you can also buy physical or electronic gift cards to give the gift of stock to others. I would not recommend using those, because they carry steep fees to purchase.
For example, if you purchase a physical gift card for $100, you will end up paying $107.95 for it. The fee covers credit/debit card fees, trading commission, and the cost of making the plastic card so your recipient doesn’t pay anything when redeeming your gift. This is a very high mark-up for the gift of stock that is simply not worth it. If I were to buy stock for a minor, I would transfer money using a bank account, rather than using a gift card.
Finally, I just wanted to share that Stockpile is still a relatively new brokerage. If there is anything to learn from Loyal3’s closure, new brokers have a high