Name: Mint.com Investing Blog
url: http://www.mint.com/blog/category/investing/
Description:
The investing section of Mint.com’s blog is a great source for educational articles on the stock market or investing. Most of the articles are aimed at general or beginner American audiences so they are good ‘starter’ sources. The content itself comes from a number of different sources and appears to update information weekly.
While wading through the internet today, I came across this post on mint.com. It is the first of a two part series authored by Minyanville.com, an investor information site, and it describes 10 questions that investors might feel a bit sheepish about asking. The questions that are brought up could take up entire chapters or even books to fully answer, so these brief answers are a good starting point to exploring these questions. The questions the article covers are provided below.
An ongoing debate for investors is whether or not the strategy of “buy and hold” is better or worse than trying to time the market. The advocates for each side of this debate are fairly passionate about their positions which makes it difficult for retail investors to sift through the numbers that “support” each side. Even so, there are some interesting points to reflect on in the following infographic (originally found here) that attempts to explain the decision making tendencies of retail investors.
The crux of the infographic is that most investors are far too emotional when it comes to making investment choices, falling victim to their own mental trappings. Biases such as loss aversion, mental accounting, overconfidence, anchoring and sunk cost fallacies can all interfere with the ability to stick to a defined strategy.
Even though the ‘solution’ offered is to stick to a long-term investment plan, doing so is much easier said than done. Plans are only as good as the discipline to implement them, which is something short-term traders, market timers and buy-and-hold investors could all agree on.
Source: visualnews.com via SFO on Pinterest
Today I came across a great educational tool for individual investors curious about online investing. The investing online resource center (IORC) was designed to to be a source of noncommercial information about investing online and was created by the North American Securities Administrators Association (NASAA). While it is still online, the IORC does not seem to be updated anymore. Even so, there is a useful section for beginner investors to check out called the “investing simulation center” which contains three interactive modules:
Overall the modules are both interactive and informative. My biggest recommendation is to turn down the volume when going through the modules as there is a constant strange techno “music” playing in the background (and there is no way I found to turn it off). Also, the modules are flash based (mac users take note).
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About the Daily Stumble
This section provides links to interesting websites or resources that we uncover as we scour the internet and beyond for the best stock market education resources for investors.
Discount Brokerage Weekly Roundup
This week, the Canadian discount brokerage industry saw another member announce that it will move its clearing and settlement services in-house. Virtual Brokers, a division of BBS Securities, announced that they will no longer be using Penson Financial Services Canada to take care of “back office” operations, such as trade clearing and settlement. The announcement from Virtual Brokers follows the official statement from Penson that they are closing down of Canadian operations. Two weeks ago, Questrade also announced that they too will begin to clear/settle trades in house.
While one company was exiting, another one was letting customers back in. Thinkorswim Canada, a division of TD Waterhouse, is once again accepting Canadian accounts. The thinkorswim platform will only be able to trade US listed stocks and options and is only available to holders of TD Waterhouse Discount Brokerage US margin accounts.
Best Canadian Discount Brokerage Tweet of the Week
This week’s top tweet goes to @Questrade for sharing a great technical analysis article on moving averages. Check out their tweet here.
Event Horizon
The World Moneyshow is coming back to Toronto again from October 18th through the 20th. For more details click here.
The People Have Spoken
This week, we took a peek into the Canadian Money Forum for a common question for beginner DIY investors – where to get started. Here’s what one group of responses had to say to a young and debt-free family about getting into investing.
For most Canadian investors and traders who place their trades online, the details of what happens after they press ‘buy’ or ‘sell’ on their stock trades is largely a trivial matter. Should one start to think about it, however, the process of matching up millions of orders, confirming trades and documenting what went to whom and where can get fairly complicated very quickly. Penson Financial Services Canada, a company that specialized in tackling that complexity by tracking those orders for a number of Canadian discount brokerages (such as Questrade and Virtual Brokers), has decided to wind down its Canadian operations. The decision appears to primarily impact the back office operations of Questrade, Virtual Brokers and Disnat.
According to the release on their website, Penson Financial Services Canada has estimated that the wind-down will take approximately six months commencing October 1st, 2012. During this transition phase, client accounts will be referred along to new “carrying brokers” or “custodians”, with many of those clients being handed off to Fidelity Clearing Canada ULC in a deal struck between the two organizations. It was on the heels of this announcement by Penson Financial Services Canada that both Questrade and Virtual Brokers announced their intentions to form their own in-house clearing arms (you can read the official news releases for Questrade here and for Virtual Brokers here). Although not formally announced, it appears Disnat too will be moving clearing and settlement operations in-house.
For Questrade and Virtual Brokers, both these companies felt that the move to clear trades in-house was a natural progression in their evolution as businesses, with the timing of Penson’s closing provided a natural window for them to make the transition. Most of the major Canadian bank-owned discount brokerages already do the clearing and settlement activities in-house, with only a handful of Canadian discount brokerages, such as Jitneytrade and HSBC Investdirect outsourcing this back office activity to third parties.
For the clients of Questrade and Virtual Brokers, the respective brokerages have promised the transition to be seamless. In the case of Virtual Brokers, for example, their systems have been running in parallel with Penson’s for three years, so there has been ample time to ensure when the time to go it alone came, they would be ready. In addition to technical requirements, rigorous audits, planning and monitoring protocols have also been developed to support this transition. Ultimately, depending on how efficient the back office functions are, the savings from not having a third-party clear and settle trades, maintain records and prepare and distribute client statements and trade confirmations, could result in more competitive pricing than is already being offered. Like all things of this complexity though, it will be easier said than done.
While the impact of the closure of Penson Financial Services Canada on retail investors will likely (and hopefully) go unnoticed, one of the most interesting aspects of this turn of events is that it points out that even the ‘middleman’ can get squeezed out, a lesson full-service discount brokerages have learned all too well.
It’s official – Thinkorswim Canada (part of TD Waterhouse Discount Brokerage) is now accepting new Canadian accounts. For the moment, this service will allow TD Waterhouse discount brokerage clients to trade US equities and options and only through a US Dollar margin account.
Several discount brokerages have been rolling out new platforms recently including Scotia iTrade’s FlightDesk, and Questrade’s IQ, but from a features perspective, the Thinkorswim platform will be a genuine challenge for other Canadian discount brokerages 
to compete with. Aside from being incredibly well-reviewed and designed, one of the biggest features that Thinkorswim will offer is the robust order type support for both stocks and options. In addition to stop orders, Thinkorswim also supports conditional orders (also known as bracket orders), ladder orders and multi-leg orders. The image (right) was taken from the Thinkorswim Canada section of the TD Waterhouse Discount Brokerage page (click here to see the full page) in reference to the order types available on the platform.
There are three versions of the software platform – mobile, web-based and desktop. The web-based platform uses Flash (take note Mac/iPad users) and the desktop version uses Java 2, so while the web-based version might be a bit of a pain for Mac users, the desktop version should be compatible with PC’s & Mac’s.
The data fees associated with the platform appear to be waived until April of 2013 for all users, and starting in April of 2013 if you make 10 of fewer trades per quarter you will be billed $29/month. Thinkorswim customer support provided the following info on commission rates:
Commission is $9.99 flat fee for stock trading and $9.99 base fee plus $1.25 per contract for option trading. Exercise and assignment of options is $15 flat fee. We also allow the buyback of short option positions that are valued at 5 cents or less free of charge...Please note we do have a minimum equity and trade requirement of $10,000 and 30 trades per quarter.
The commission rates quoted are in line with TD Waterhouse discount brokerage’s fees for active traders, and it is important to note the minimum equity and trade requirements associated with the account. If you fall below the stated minimums there might be some flexibility on keeping you on the thinkorswim platform but there is also the risk you will get “downgraded” to the WebBroker platform.
For more information on thinkorswim Canada, you can check out their webpage here.
As we roll into October, the Canadian discount brokerage industry continues to show signs of competitive evolution. First, the huge news released earlier this week that Questrade will transition into clearing its own trades via an in-house clearing division (currently pending regulatory approval). By replacing their current clearing agent (Penson Financial Services Canada), Questrade believes they will be able to offer more timely settlement and record-keeping services to its clients – something that they had struggled with earlier this year around tax season. While potentially helping to smooth things out on one side of their business, another reason why this move could prove to be important competitively for Questrade is that they will no longer be paying a clearing agent to deal with clearing and settlement. So what could they do with those extra dollars per trade they’ve been paying to their clearing agent? Depending on how much it costs Questrade to clear and settle their own trades (staff, technology, compliance etc), they might be in a position to lower their already low commission fees (i.e. pass along the savings instead of charging inactivity fees). This is a model that has proven to work well for Interactive Brokers. Alternatively, they might redeploy the extra cash into strengthening other aspects of their business as the competition amongst Canadian discount brokerages continues to heat up. Either way, this should be an interesting turn of events to watch unfold.
The second big piece of Canadian discount brokerage news is from Jitneytrade. In addition to announcing a move into their new offices (coincidentally Jitneytrade and Penson Financial Services Canada are located in the same building), Jitneytrade also announced their move into currency exchange . The new foreign-exchange component is a service aimed at institutional clients, and is another bold move for Jitneytrade into the institutional arena.
Best Canadian Discount Brokerage Tweet of the Week:
This week’s favourite tweet comes from @Scotia_iTrade:What’s the #KISS Principle? Watch The Market Guys and avoid some of the most common investing/trading mistakes [vid], http://ow.ly/8h4dt – great video!
Event Horizon:
The Small Cap Conference is rolling into Calgary next week (October 9th) and should offer investors interested in some small cap companies the chance to mingle with management, get some market analysis and maybe win a cool door prize. For more details click here.
The People Have Spoken:
When it comes to taking a shot or passing up the stock market, the Great One Wayne Gretzky would rather pass. This prudent strategy seems to have served him well in real life however it is an interesting position for brand ambassador to TD Waterhouse to play. In any case, there were quite a few interesting responses to Wayne Gretzky’s personal finance tips from his interview earlier in the week.
Halloween isn’t the only scary event to come along this October. Beginning this month, Canadian discount broker Questrade officially starts charging for inactivity fees – $19.95 per quarter to be exact. Once billed as the “no fee” discount brokerage, Questrade faced a strong backlash from its client base on Canadian deal site RedFlagDeals.com back in May of this year when Questrade departed from their long held stance against inactivity fees and announced the introduction of these fees. Not long after this announcement, however, it became apparent Questrade’s clients were more than unhappy at the news. In a highly responsive move, Questrade’s Director of Communications Lynn Suderman responded to their customers on the forum with the following statement:
Thank you everyone for your feedback here in RedFlagDeals. We’ve read each of your comments, which led to a passionate discussion among our staff. Our CEO said it best: the real value of Questrade is our clients. Yes, we have to implement pricing changes to reflect the changing nature of this industry. But we have to do it without compromising our promise to you: provide all Canadians with cost-effective brokerage services.
I’d like to address the changing industry first. The costs of maintaining a brokerage account, active or not, are going up. Until now, and unlike the majority of brokerages, we’ve avoided inactivity or maintenance fees to pass on those costs. But this is no longer prudent. We are at the point where our more active clients will be subsidizing inactive clients. (You can find the full statement here)
As a consequence of the client feedback, Questrade moved its original implementation date back to October from July 2012. In addition, Questrade offered a number of exceptions to the inactivity fee. Account holders under the age of 25 and charitable organizations are exempt from getting charged the inactivity fees as are Questrade clients with $5000 or more in combined equity across their accounts as well as those clients who place at least one “commissionable” trade per quarter. Basically, the client that this fee impacts the most is the 25+ year old who does not make any trades in a quarter AND who has less than $5000 in combined equity across all of their Questrade accounts. So what options does that person have to avoid the dreaded inactivity fee?
The first option is to top up their account with a deposit so that the total balance (across all accounts combined) equals $5000 or more. If making a deposit isn’t an option, they could place 1 trade per quarter for a year racking up a total bill of anywhere between $19.80 to $39.80 per year in commission costs (plus what the trade itself costs). If, however, they are bent on not making any trades whatsoever, that person could choose to pay $79.80 per year ($19.95 x 4) and remain inactive. Of course, as a last resort, they could close their account with Questrade altogether which is free to do. With an inactivity fee of anywhere between $19.80 and $79.80 per year, however, Questrade could be the cheapest account of inactivity-fee charging brokerages to maintain or if not the cheapest, then certainly not the most expensive.
One silver lining of the Questrade approach to inactivity fees is that if you do happen to incur an inactivity fee in one quarter, Questrade will apply that $19.95 fee as a credit against any trades you make the following quarter. From a strategic perspective, if you have an investment account and you can’t find a trading opportunity (either a reason to buy anything, sell anything or re-balance your portfolio) within 3-6 months and your combined equity across comes in at less than $5000 you still might not be ready to take on investing quite yet.
For those consumers who absolutely must have a no inactivity option, however, there are still three Canadian discount brokerages: Virtual Brokers, Credential Direct and Qtrade who offer no inactivity fee accounts to their customers (optionsXpress is currently not accepting new Canadian accounts otherwise there would be four) , with Virtual Brokers having the cheapest commissions among the three.
While the move on Questrade’s part is a departure from their historical position as the “no fee” brokerage, their move into charging fees is certainly a measured one and they appear to be working hard to preserve the relationship with their customers. As the Canadian discount brokerage landscape continues to get more competitive, only time will tell if other discount brokerages will lower or eliminate activity fees to grab market share or if other low-cost discount brokerages will start to implement activity fees to keep up.
For the month of October, most of the discount brokerages who are offering deals and promotions are fighting hard to win the business of Canadian retail investors. We’ve made a few changes to the deals section so that information is a little bit easier to find. We’ve put the discount brokerage promotions that include commission credits, free trades and any other promos in one table. In a separate table (below) we’ve also listed the Canadian discount brokerages that are offering deals or promos on transfer fees.
First, the big news – Scotia iTrade is offering 100 days of commission free trading (no caps) with a deposit of $50,000 for new account holders and 100 days of FlightDesk™ for free. As far as throwing down the deal gauntlet, Scotia iTrade has certainly sent a message to other Canadian discount brokerages that is going to be hard to beat. Of course if you don’t have $50,000 burning a hole in your pocket or if 100 days of commission-free unlimited trades isn’t your thing, Scotia iTrade is still offering their 100 free trades + 60 days of free FlightDesk™.
*Update (Oct.10/12)* Disnat has also launched a deal this month celebrating their 30th anniversary. For a deposit of $50,000, Disnat is offering $300 in commission credits which are good for up to 6 months. This offer is open to new clients and existing clients.
For more modest deposit sizes, Virtual Brokers has extended (again) its 150 free trades offer with a deposit of $25,000, and Questrade has two 100 free trade offers to choose from with a qualifying balance of $10,000. National Bank Direct Brokerage is still running its “commission holiday” and refer-a-friend promos. A much, much more modest promotion is being offered by Credential Direct for clients of North Shore Credit Union – 5 free trades and a credit ($125)for transfer-out fees. If you have $150,000 or more to open an account with, BMO Investorline is still running its 150/150 promotion where you get cash and trade credits, as well as their Refer-a-Friend promotion.
For the active traders, we are still running the exclusive Sparx Trading deal with Jitneytrade which gives you discounted commission pricing and discounts on the Realtick trading platform. For more info on the Jitneytrade promotion you can click here
| Company | Brief Description | Minimum Deposit Amount | Commission/Cash Offer Type | Time Limit to Use Commission/Cash Offer | Details Link | Deadline |
|---|---|---|---|---|---|---|
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A Sparx Trading exclusive offer! Use the promo code “Sparx Trading” when signing up for a new account with Jitney and receive access to their preferred pricing package and a massive 45% discount on the Real Tick trading platform. | n/a | Discounted Commission Rates | none | For more details click here | none |
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Open a new account (TFSA, Margin or RRSP) and receive $50 commission credit . Use promo code: kdkfnbbc | $1,000 | $50 commission credit | none | none | none |
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Refer a friend to Questrade and when they open an account you receive $100 and they receive $50. To receive this deal you must be an existing client with an equity account and refer a person that does not reside with you and who has not previously opened a Questrade account. | $1,000 | $50 commission credit (friend) $100 commission credit (referrer bonus) | 60 days | Refer a friend | none |
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If you are a client of North Shore Credit Union, you can qualify for 5 free trades as well as a $125 transfer fee credit to cover transfer fees from another discount brokerage ($10,000 minimum transfer in value). To qualify, you must enter NSCU-05Trades on your application. | $10,000 | 5 free trades | must use trades by Feb. 28/2013 | North Shore Credit Union Promo | December 31, 2012 |
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Get up to 100 free trades when you fund an account with a minimum of $10,000. You must open this account by October 30, 2012 and fund it with $10 000 within 30 days of account activation to qualify. You must enter promo code “100FREEQ”. There are quite a few other details, including a minimum balance requirement, so be sure to check the details link. | $10,000 | 100 free trades ($495 value @ cheapest commission rate) | 60 days | 100 Free Trades | October 30, 2012 |
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As part of the Questrade Advantage program, deposit $10,000 into a new account by October 30th, 2012 and you can get 100 free trades. Enter the promo code “100ADVL” in the application online. Note that the advantage program requires you to sign up for a data package (currently $89.95/month) the fees for which vary according to trading activity. See details link for terms and conditions on pricing. | $10,000 | 100 free trades ($495 value @ cheapest commission rate) | 60 days | Questrade Advantage Promo | October 30, 2012 |
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Open an account with $25,000 or more and receive 10 free trades. This offer is only valid at the downtown Vancouver TD Waterhouse Investor Centre. 10 trades must be completed within 6 months of account opening; reimbursement based on $9.99 commission rate. | $25,000 | 10 free trades | 6 months | scanned photo of flyer | none |
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Open and fund a new Scotia iTRADE account with at least $25,000 before December 31, 2012 and the commissions associated with your first 100 trades placed within 60 days of the date the account is activated and funded. Also, the new FlightDesk platform is being offered for free for 60 days. See details link for further terms and conditions. | $25,000 | 100 free trades ($999 value @ $9.99 commission rate) | 60 days | Scotia iTrade 100 free trades + FlightDesk | December 31, 2012 |
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Open a new account with $25,000 before December 31, 2012 and receive 150 trades free. (Applies to the first 150 trades placed within 60 days of account opening at a maximum of $6.49 per trade with a total maximum value of $973) | $25,000 | 150 free trades ($973 value @ $6.49 commission rate) | 60 days | New Account Promo | December 31, 2012 |
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Open and fund a new account with National Bank Direct Brokerage with $25 000 or more, and you can receive up to $750 in commission reimbursements. To qualify you must use the promo code “REGISTERED2012” in the general information section of the application form. Reimbursements will be paid in either January or April 2013 depending on date account is opened. See the terms & conditions link for more information. | $25,000 | $750 commission credit | 90 days | Commission Holiday Promo | October 31, 2012 |
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If you are an existing National Bank Direct Brokerage client and you refer someone to join, you each get $100. To qualify, the referred account must transfer at least $25,000 from another financial institution. If at least $25,000 is transferred, up to $135 of the transfer fee is covered. Use the promo code “FRIEND” when opening the account | $25,000 | $100 (friend) $100 (referrer bonus) | n/a | Refer a Friend | October 31, 2012 |
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Open an account with either: A) $25,000 or more and receive a $100 cash credit and 25 free equity trades. or B) $50,000 or more to receive $200 cash back and 50 free equity trades. | A) $25,000 B) $50,000+ | A) $100 cash credit + 25 free equity trades ($823.75 (min)total value @ standard equity rate $28.95) B) $200 Cash credit +50 free equity trades ($697.50 total value @ active trader rate $9.95) | 60 days | Cash back offer | December 31, 2012 |
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Existing BMO Investorline clients who refer a ‘friend’ who then opens an account, (and the “friend” too) can qualify for a cash bonus, depending on the deposit amount. For deposits of between $50,000 and $249,999, the referral bonus is $200 and the “friend” receives $50; for deposits of over $250,000 the referral bonus is $300 the “friend” receives $100. To qualify for the deal, the referral reference code needs to be included in the application – see the details link for terms and conditions. | $50,000 | $50 cash (friend) $200 cash (referrer bonus) | 60 days (see details) | Refer a Friend Promo | December 31, 2012 |
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Open one or more new Scotia iTrade account(s) by November 16, 2012 with at least $50,000 in cash or net equity and receive 100 days of commission free trades. Also, you get to try FlightDesk free for100 days. To qualify you must enter promo code ” F’12 OFFER” when submitting new account application. See details link for more information. | $50,000 | unlimited free trades | 100 days | 100 Days Commission-Free | November 16, 2012 |
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Disnat is celebrating its 30th anniversary by offering new & existing clients $300 in commission credits which can be used for up to 6 months. To be eligible, new/existing clients need to deposit $50,000 into a Disnat account. You’ll have to call 1 800 268-8471 and mention promo code Disnat30. See details link for more info. | $50,000 | $300 commission credit | 6 months | Disnat 30th Anniversary Promo | December 31, 2012 |
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Open a new account with $150,000 or more (or for existing clients make a deposit of $150,000 or more) and get $150 cash back and 150 free trades. Use the promo code BONUS when opening a new account (or when making a new deposit of $150,000 or more). See the details link for qualifying account types and conditions. | $150,000 | $150 cash 150 free trades ($1492.50 value | 60 days | 150/150 Promotion | October 31, 2012 |
Below are the discount brokerages that are offering deals that cover transfer out fees from other discount brokerages.
| Company | Brief Description | Maximum Transfer Fee Coverage Amount | Deposit Amount for Transfer Fee Eligibility | Details Link | Deadline |
|---|---|---|---|---|---|
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Move your brokerage account to Questrade and they’ll cover the transfer-out fee up to $150. | $150 | $25,000 | Transfer Fee Promo | none |
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Transfer $25,000 or more to a National Bank Direct Brokerage account and they will pay up to $135 plus taxes in transfer fees | $135 | $25,000 | Transfer Fee Rebate | none |
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Virtual Brokers will cover transfer fees from your transferring institution to a maximum of $150 per account. This offer is only applicable to accounts opened with at least $25,000 in equity before December 31, 2012. | $150 | $25,000 | Transfer Fee Promo | December 31, 2012 |
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Qtrade Investor will reimburse your transfer fee up to $125 when transferring a balance of $25,000 or more. For reimbursement, please mail or fax a copy of your statement from the transferring institution that shows the transfer charge to Qtrade Investor at 604.484.2627 and indicate your Qtrade Investor account number. | $125 | $25,000 | Transfer Fee Promo | none |
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Disnat is celebrating its 30th anniversary by offering up to $150 to cover the cost of transfer fees from another institution. To be eligible, new/existing clients need to deposit $50,000 into a Disnat account. You’ll have to call 1 800 268-8471 and mention promo code Disnat30. See details link for more info. | $150 | $50,000 | Disnat 30th Anniversary Promo | December 31, 2012 |
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If you are a client of North Shore Credit Union, you can qualify for a $125 transfer fee credit to cover transfer fees from another discount brokerage ($10,000 minimum transfer in value). To qualify, you must enter NSCU-05Trades on your application. | $125 | $10,000 | North Shore Credit Union Promo | December 31, 2012 |