I have had a non-retirement account with Zecco and a Traditional IRA and Roth IRA with TradeKing for a few years, ironically, and have frequently mentioned both here.

At first I was surprised at the news, but I really shouldn’t have been surprised at all. The merger makes a lot of sense for the two companies – they offered identical prices for trades – $4.95 per stock or options trade and $9.95/$10 for mutual funds, both were strictly online brokers, and they are up against larger, well-funded, formidable competitors. Heck, the CEO’s of each respective company first met in middle school and then worked together at a prior employer, so perhaps it was destiny that they join forces again.

I don’t see any downsides to the merger just yet. Online discount brokers compete on price, service, features, and offerings. In this case, they have the same trading prices (and have confirmed they won’t change), both have good service and features, and the investment offerings should only expand with a merger.

I do have three questions that have not yet been answered through their merger FAQ’s yet:

1. Will the merged company adopt Zecco or TradeKing’s annual IRA fee? My IRA is with TradeKing because they don’t charge a fee, while Zecco charges a $30 fee. I hope they opt for TradeKing’s fee structure.
2. Which interface will they adopt? Both are good, but I prefer Zecco’s a bit more and the Zaptrade tool is pretty awesome.
3. Which customer service team do they model? TradeKing has been ranked #1 in customer service for three years in a row in SmartMoney magazine’s broker rankings (2010, 2011, 2012). My experiences with Zecco customer service have been great, but with TradeKing’s service reputation, it seems natural that they might adopt the TradeKing model.

Even though the merger has not been officially approved by regulators yet, it seems likely to go through as the combined company won’t have a new-found dominant market share in the brokerage industry. Assuming approval, I have a short wish list for the new company, which would benefit all users:

1. It would be great to see Zecco/TradeKing start to offer free ETF trading as Fidelity, Schwab, Vanguard, and others have started doing. Adding to ETF positions at $4.95 per trade is simply not cost effective. If you want to be a one-stop shop for investors, you really don’t have a choice.
2. Adopt the TradeKing $0 IRA fee and don’t institute inactivity fees.
3. Get rid of any account closing fees.

Can you tell I don’t like fees?

For the time being, it is business as usual for both companies.

What do you think about the Zecco and TradeKing merger, and what would you like to see from the new company in fees, features, service, etc.?

Related Posts:

• Zecco Review
• TradeKing Review

Zecco & TradeKing are Merging is copyrighted by 20somethingfinance.com without consent to republish.

The discussion prompted reader, Bill, to write in with a great question,

“I assume that you invest a lot of that savings, but isn’t an investment in a company essentially just a vote of confidence that they will continue to produce products or services and continue to be profitable doing so? The money you earn isn’t going anywhere unless you burn it, so won’t it all just be turned back into stuff eventually one way or another?”

My response to Bill was:

“Great question with a complicated answer that I could literally write for hours about, so I’ll try to keep it simple:
1. I am not against business or capitalism. My environmental stance does not = no investing, because:
2. There are a lot of businesses that do things ethically and/or make the world a better place. You WON’T find me investing in BP, but you might find me investing in solar.
3. There’s also something to be said for me to invest, grow my wealth, so that I may donate it or reapply myself in areas where I am making the world a better place.

I think socially responsible investing (SRI) is a great thing. You may have just prompted an entire post…”

Here is that post!

What is Social Responsible Investing?

The sentiment raised by Bill has prompted an entire category of investment focus called socially responsible investing, or SRI.

While it may be tempting for those with an environmental, social, political, or other aversion to investing to dig a hole in the ground and bury their cash, to do so over the long run would be suicide.

A fear of investing can lead to an erosion of your cash value as inflation eats at your savings over time.

You HAVE to invest in order to grow your net worth and reach and maintain any sort of financial independence.

So how do you ensure your financial future through investing while at the same time not wanting to jump off a ledge out of self-conscious guilt for contributing to the destruction of the entire world from capatalistic greed? Socially responsible investing.

The Origins of Socially Responsible Investing

The first counts of socially responsible investing dates back to religious influences in the 1700′s. The Religious Society of Friends (the Quakers) prohibited members from participating in the slave trade.

One of the first written accounts comes from Methodist founder John Wesley (1703–1791), as he gave a sermon on “The Use of Money” where he outlined his basic tenets of social investing such as not harming your neighbor through your business practices and to avoid industries like tanning and chemical production.

Later, religious leaders encouraged members to avoid sinful companies, such as those that produced products like firearms, alcohol, and tobacco.

Social investing then made a move to political territory with the use of labor union pension funds and even helping to end apartheid in South Africa.

SRI Today

Socially responsible investing today still has a focus on avoiding firearms, alcohol, gambling, defense industry, and tobacco, but there is an increasingly larger focus on human rights issues and community investing (putting money into under-served communities as an investment strategy) as well.

You can buy SRI focused mutual funds, index funds, ETF’s, or even implement your own socially responsible investment strategy.

SRI has been turned to by many for its focus on environmental issues as global warming and other environmental threats compound with economic growth. Institutional and individual investors have been doing this in a number of ways:

• by screening out oil, coal, gas, and other fossil fuels
• by screening out companies that don’t have a strong environmental track record
• by favoring companies that use more alternative and renewable energy versus their peers
• by favoring companies that manufacture alternative and renewable energy solutions

Not Just for Charity

Whatever the purpose, SRI has become EXTREMELY big business. According to the Forum for Sustainable and Responsible Investment, $3.07 trillion out of $25.2 trillion in the U.S. Assets are growing much faster than non-SRI focused assets.

According to Kiplinger Magazine, there are now 493 mutual funds with assets of $569 billion versus 55 funds and $12 billion in assets 20 years ago.

When I first learned about socially responsible investing 8 or so years ago, the performance was not there versus the broader market. Today, however, that’s no longer the case. It is possible to have a social investing conscious without having to pay a tax or fee in the form of poor performance. For example, one of the SRI giants, the Calvert Equity Fund (CSIEX), has gained 6.9% annually over the past 15 years, vs. 5.5% for the S&P.

It is quite possible to build for your future while not hating yourself, after all.

On the flip side, SRI is not the only way to do this. Every time you make a purchase or give a company money, you are directly influencing their business. As a consumer, you wield a lot of power (i.e. don’t like big oil or gas guzzlers, switch to a more fuel efficient car or bike).

Others make the argument that you should invest where you get the highest return on investment and then use your proceeds in responsible ways to have an even bigger impact.

Why not practice all three?

SRI Discussion:

• Have you invested in socially responsible investment strategies yet? Why or why not?
• Have you avoided investing altogether for ethical reasons?
• If you are using SRI, what have you invested in?

Related Posts:

• Consumers Need 12-Step Programs Too
• How to Start an Online Investing Account

What is SRI? An Intro to Socially Responsible Investing is copyrighted by 20somethingfinance.com without consent to republish.

How much international stock exposure should you have?

It’s a great question. And I’ve been looking into my own foreign stock allocation lately.

In my research, I found Vanguard’s “Considerations for investing in non-U.S. equities” – an annual research report that looks in to the topic.

The report states that,

“Common advice recommended by most financial institutions is to allocate 80% into U.S. (domestic) stocks versus 20% into foreign stocks.”

Where did this “common advice” come from?

The reason often given is the “diversification benefit”, or the point at which any further allocation increase in foreign investments would not increase the diversification value.

Having 80% of all your assets in one country’s stocks is the peak of diversification?

I thought I’d take a common sense approach to the issue by looking at two key data points:

1. U.S. GDP as a percent of the world’s GDP
2. U.S. equity market cap as a percent of the world’s equity market cap.

I can’t see two more relevant data points than this as it pertains to stock allocation, but I am just a naive amateur. Here’s what I found…

Percentage of the World’s GDP from the U.S.

If you’re not sure what GDP is, it is the market value of all officially recognized final goods and services produced within a country in a given period. In other words, what the economy of a given country actually produced.

Why consider this? Stock values can go up and down. They can be overvalued and undervalued. But what a country actually produces is much less subjective.

If we’re going to truly diversify based on actual economic activity, it may make sense to base your domestic versus foreign investment on actual GDP data.

Given the 80/20 recommendation, we will go in to this assuming that the U.S. GDP is roughly 80% of the world’s GDP.

How do the ACTUAL #’s shake out?

The total annual GDP of the world is approximately $63 trillion.

Back of the napkin math here: 80% of $63 trillion = $50.4 trillion.

So the U.S. has a $50.4 trillion GDP, right?

Not so fast! Try $14.58 trillion, or about 29% of what one might expect, given the 80/20 recommendation.

It turns out that U.S. GDP as a percentage of world GDP is approximately only 23%. This number would indicate that perhaps the reverse allocation 20% U.S./80% international would be more appropriate than the opposite.

On top of that, the percentage of U.S. GDP versus the world GDP is only declining every year.

Check out this graph from Google Public data that shows U.S. versus world GDP numbers over the last 50 years:

The world has seen almost exponential GDP growth, while the U.S. has seen slower flat-line growth.

Curious.

How About U.S. Versus International Market Cap?

GDP is one thing. What about actual market cap value?

Market cap value is how much the total value of equities is actually worth. So this is a comparison of the share price value the publicly traded companies of the U.S. have produced as a percentage of total world share price value.

Let’s see what we come up with…

In the aforementioned Vanguard report, I found the following data point – “as of December 31, 2010, U.S. equities accounted for 42% of the global equity market”.

In other words, foreign equities accounted for a full 58% of the global equity market.

42% for the U.S. is certainly better than the 23% GDP number, but it’s still a far cry from the recommended 80% allocation. Heck, even the Vanguard Total World Stock Index fund has a 50% allocation in foreign stocks (vs. 45% U.S.).

It used to be as high as 70% as recently as the 1970′s (probably when the 80/20 meme was created), but it has dipped quite a bit. Here is the graphic breakdown (U.S. in blue, world in brown, black line = 50%):

Yet the 80/20 Rule Persists

At the end of the Vanguard study, despite looking at significant data that proved otherwise, Vanguard fell back on the 80% domestic (U.S.) to 20% foreign recommendation. Why? The “diversification benefit”.

The odd thing is, that they actually have a graph (figure 2b in their study) that shows the global market is actually less volatile than than the U.S. market alone. So investing more towards the 42/58 breakdown is less volatile, not more, as one may be led to believe.

Intuitively, this makes sense. Think of it this way. If you had a ton of stock in your company, would you want 80% of your net worth tied up in that stock? No, you’d be crazy! What if the company tanked, went under, or severely declined in value? You would probably realize that you needed to overcome your “homer” bias for your company’s stock because you know the company so well.

So why would you tie 80% of your net worth in to the U.S. economy by having a “homer” bias for U.S. stocks?

Why not get out and diversify?

What about Foreign Vs. U.S. Stock Performance?

According to a study done by Ibbotson Associates, a global allocation beats a U.S. focused allocation over the long-term. $10,000 investment in a global portfolio in 1970 would have grown to about $500,000 in 2009 compared to about $410,000 only if invested in an U.S. S&P 500 portfolio.

That’s right, a global portfolio has historically beaten a U.S. focused portfolio, even over a period when the U.S. experienced vast economic growth.

OK, that’s past results, which we know doesn’t necessarily mean anything for the future. So how do current valuations look?

At the present moment, foreign stocks have a P/E ratio of 8.6 vs. 13 for the S&P 500. This would indicate that either U.S. stocks are relatively over-priced, or foreign stocks are relatively under-priced. Higher growth rates tend to result in higher P/E ratios (and we’ve already shown foreign growth rates vs. the U.S.). Yet, we see the opposite in prices.

My Conspiracy Theory View of the 80/20 Rule

My guess is that the 80/20 rule first became an investment meme at a time (most likely the 1970′s), when it might have actually made sense to have an 80/20 allocation based on total market cap and U.S. GDP vs. world levels. At that time, it was also expensive and difficult to find, research, and purchase international stocks. Today, that’s not even close to being representative of reality. So why has it persisted?

The U.S. financial sector needs it to persist. So they continue to tell us year after year “80/20, 80/2o”. And it’s worked!

At some point, it may have transitioned to a planned conspiracy. Think about it for a moment…

How do the large U.S. financial institutions make their money? Mostly by charging a percentage of total assets fee.

If U.S. investors were to realize that the 80/20 rule was outdated and move significantly more assets to foreign stocks it would mean the financial institutions would:

1. see investors flee from U.S. stocks, driving the U.S. market cap down and many amateur investors out of the market entirely (which results in lower revenues/profits for them due to lower assets being managed).
2. see their own share prices and net worth decline as a result of investors fleeing their own stocks and the market altogether and also as a result of lower revenues/profits.
3. be forced to increase their operating costs as they would have to significantly boost their presence globally with analysts, research, etc., in order to stay competitive with their peers.

The 80/20 rule is safe for them.

I’m just not so sure it is safe for us.

Disclaimer: I am not a financial adviser, just a contrarian and a bit of a conspiracy theorist. You can draw your own conclusions on how much to allocate in international stocks.

Related Posts:

• 7 Online Brokers with Commission-Free ETF’s
• What is Passive Index Investing?
• How to Start an Online Broker Account

Is the U.S. Vs. International Stock Allocation 80/20 Rule a Conspiracy? is copyrighted by 20somethingfinance.com without consent to republish.

I’ve also seen a number of other personal finance bloggers jump on the Betterment fan club pretty early on.

Their claims to fandom have typically revolved around:

1. Betterment makes investing for common folk easy. Just add your funds, choose your risk level, and voila!
2. You don’t have to re-balance, they do it for you. This is a good benefit – how many of us strictly re-balance our portfolios?
3. There are no additional trading fees for re-balancing or adding or subtracting from your balance.
4. It has a very easy to use interface, much easier than traditional brokers.

So, I decided to take a look.

What is Betterment?

Before I go on, I should first explain what Betterment is. Betterment is an investment broker and registered investment adviser.

Much like other investment firms, Betterment has a $500,000 SIPC insurance guarantee on each individual’s balance (in the event of fraud or their business going under, not on investment returns).

Betterment differentiates itself from other online brokers in the following ways:

1. They have an easy to use interface where you choose your risk level and they allocate the funds for you.
2. The have no trading fees and re-allocate (re-balance) your investments for you.
3. They only invest in low-cost ETF’s.

I wasn’t Feeling the Betterment Love

To be honest though, I just wasn’t feeling it. Betterment was not appealing to me for three big reasons:

#1: You couldn’t open an IRA with them as a new investor.

A lot of my savings funds are in retirement accounts and I like to to focus on high dividend investments in my taxable accounts.

Without IRA’s, I didn’t have much reason to start an account with Betterment.

#2: Their fees were high.

Fees ranged from 0.3% to 0.9% depending on investment level. Not bad if you compare that to expense ratios of mutual fund alternatives.

What my friends and I think a lot of the fans failed to see was that these expenses were on top of the expense ratios of the ETF’s (which are low with an average under 0.2%) that Betterment invests in as part of their portfolios.

Betterment’s fee structure was:

• Balances under $25,000 = 0.9% annually
• Balances over $25,000 = 0.7% annually
• Balances over $100,000 = 0.5% annually
• Balances over $500,000 = 0.3% annually

Those ETF’s could be traded in and out of for free with a commission-free ETF online broker. For an experienced and disciplined investor, most folks were paying 0.9% extra on top of something you could do for free with a decent amount of effort and determination.

#3: Their foreign stock allocation was ZERO.

100% of the ETF’s Betterment chose to invest in were domestic stock ETF’s. There was ZERO international exposure. This mean’s you had no choice but to put all of your eggs in the U.S. basket. If you’ve paid any attention to our economy over the last four years, you’d probably be a little concerned about this lack of diversification.

How Betterment has Improved & Can Improve Further

Each of the above three complaints were a deal killer for me. But all three paired together? I ripped in to my friends for even suggesting it.

Betterment has since gone on to address each of their biggest downsides:

#1: They now offer IRA’s for new customers.

New Betterment customers can sign up immediately for IRA’s now. I have a few IRA accounts just sitting around with low balances that I don’t actively manage and re-balance that I could easily move over.

Feedback to Betterment: A number of online brokers offer to cover the account transfer fees if you close out of another account and move your funds over to them. I would love to see Betterment do this as well. If I were to move my TradeKing balance over, for example, it would cost me $100 to do so. Props to you for not having your own account closing fee (keep it that way!). Since you target low balance users, perhaps this could be offered to higher balance users (i.e. those in your new “better” and “best” categories).

Note: Betterment is offering $25 to new customers.

#2: Betterment SIGNIFICANTLY lowered their fees.

Whereas the Betterment fee structure use to be:

• Balances under $25,000 = 0.9% annually
• Balances over $25,000 = 0.7% annually
• Balances over $100,000 = 0.5% annually
• Balances over $500,000 = 0.3% annually

They have now lowered their fees from 0.15% to 0.35% maximum with three different fee classes:

So, if I hypothetically invested $15,000 with Betterment in a year:

• Previously, my annual expense would have been $135.
• Presently, my annual expense would be $37.50, which is comparable to about 4-5 trades at most online brokers.

For automatic re-balancing and new buys/sells with no trading fees? I can stomach that. This is cheaper than target date mutual funds that do something similar without you having to add funds.

Feedback to Betterment: How does the new “customized” plan work? I don’t see anything on your site around details.

#3: Their foreign stock allocation is up to 35%.

I give credit to Betterment for increasing their foreign stock allocation from 0% to 35% (almost twice the stodgy old financial institution 20% recommendation)!

Here is the breakdown of Betterment investment allocations:

• 25% VTI: Vanguard Total Stock Market
• 25% IVE: iShares S&P 500 Value Index
• 25% VEA: Vanguard Europe Pacific
• 10% VWO: Vanguard Emerging Markets
• 8% IWS: iShares Russell Midcap Value Index
• 7% IWN: iShares Russell 2000 Value Index

Feedback to Betterment: I think this is actually a pretty darn good breakdown of ETF’s, however, I’d love to see a real-estate option (VNQ has a 0.12% expense ratio) and possibly even a metals (gold/silver) ETF to add further diversification. Much like with your stock vs. bonds sliding scale, I’d also love to see a international vs. domestic sliding scale on stocks.

With your bond offerings, I’d like to see some higher yield junk bonds mixed in.

Betterment Review Discussion:

Given these changes, I am going to pull the trigger on giving Betterment a try with one of my lower value IRA’s. If I’m impressed with the service, I may potentially move more over. Look for more on my experiences in an upcoming post.

• What do you love about Betterment?
• What is your Betterment wish list?

Betterment Significantly Lowers Fees & Adds IRA’s: Are you a Believer? is copyrighted by 20somethingfinance.com without consent to republish.

If you’re not, ETF’s have a legion of supporters due to their extremely low management expense ratios. In comparison to similar mutual funds, ETF’s often have significantly lower management fees.

This means that you get to keep more of your investment, vs. giving it away to an investment house. These savings can really add up over time.

The Downside to ETF’s

ETF’s, unlike mutual funds, are traded on the stock market. This means that any time you add or subtract from your position in an ETF, you have to pay your broker’s trading fee.

This isn’t the case with mutual funds. With mutual funds, you pay a one-time charge to buy in to the fund. Any subsequent addition or subtraction of shares does not result in trading costs.

The downside to ETF’s vs. mutual funds is that if you want to start small and add to your position over time as your savings grow, you will incur trading costs EVERY time you purchase additional shares. Those fees can quickly add up over time, offsetting the savings you enjoyed from the lower expense ratios.

Bummer!

There is, however, a way to avoid these fees.

Free ETF Trading

Fortunately, there are a number of investment brokers that offer free ETF trading.

Why would they do this, you may ask?

1. To attract new customers who are interested in ETF’s who don’t want to pay lofty trading fees every time they move in or out of an ETF or simply increase or lower their position in that ETF.
2. To encourage purchase of their own branded ETF’s (if they create and manage them) so that they can profit from the management fees.

Brilliant strategy, no?

Which online brokers offer free trading in and out of ETF’s?

Online Brokers with Commission-Free ETF Trades

I found 7 online brokers at the moment that offer commission-free ETF’s. This has become a very competitive offering as only a few of these brokers were offering this a year ago. Here is a list of the 7 brokers that includes how many commission free ETF’s they offer, which company they offer them from, and normal trading costs.

Vanguard

• # of commission-free ETF’s provided: 64
• ETF provider: Vanguard
• Normal trading costs (outside of commission free ETF’s): varies based on account balance

Schwab

• # of commission-free ETF’s provided: 15
• ETF provider: Schwab
• Normal trading costs (outside of commission free ETF’s): $8.95

TD Ameritrade

• # of commission-free ETF’s provided: Over 100
• ETF provider: iShares, SPDR, Vanguard
• Normal trading costs (outside of commission free ETF’s): $9.99

Fidelity

• # of commission-free ETF’s provided: 30
• ETF provider: iShares
• Normal trading costs (outside of commission free ETF’s): $7.95

Scottrade

• # of commission-free ETF’s provided: 15
• ETF provider: Morningstar
• Normal trading costs (outside of commission free ETF’s): $7

ETrade

• # of commission-free ETF’s provided: 80
• ETF provider: DBX, Wisdom Tree, Global X
• Normal trading costs (outside of commission free ETF’s): $9.99

Firstrade

• # of commission-free ETF’s provided: 10
• ETF provider: iShares, PowerShares, Vanguard
• Normal trading costs (outside of commission free ETF’s): $6.95

Vanguard typically offers the lowest management fees on their ETF’s (not always, but quite often). Looking at this list, Vanguard and TD Ameritrade would seemingly be the two best brokers to house your ETF trading with.

ETF Investing Discussion:

• Where do you trade ETF’s and why?
• Have you created an account with a broker just for the benefit of commission-free ETF investing?

Related Posts:

• Zecco Review
• TradeKing Review
• ETFs Versus Index Funds

7 Online Brokers with Commission-Free ETF Trades is copyrighted by 20somethingfinance.com without consent to republish.

It’s been speculated that Facebook is looking to raise $10 billion from the stock IPO, and achieve a measly market valuation of $100 billion (for comparison, Ford is valued at $38 billion and Yahoo is valued at $19 billion).

If you’re not sure what an IPO is – it’s an acronym for “initial public offering”. It basically means that Facebook would be raising significant capital to run its business through selling and opening up its stock to the public for the first, or initial time.

And if you’re not sure what an IPO is, that also is a telltale warning sign that you probably should not be buying the stock.

Familiarity Does Not = Good Investment

Why not buy the stock of a company you know and love? Everyone knows Facebook and what it is. We have all likely used it at some point or another. Many of us every day. And many of us love it, at that. But that doesn’t necessarily mean that its stock and the fundamental business behind it will be successful.

Knowing what a business is or does is a good first step. But when you frequent a business, you tend to get emotionally connected to it. It would be easy (and dangerous) to assume that just because everyone knows and most use Facebook, its stock can only go up. Let’s pull the trigger, I don’t want to miss out on it if it explodes, right?! That kind of assumption and desire to turn a blind eye to business fundamentals can result in you getting burned.

Looking at some other famous internet IPO’s of the past year:

• Groupon: now trades at $16, down almost 40% from its end of first day trading price of $26.
• LinkedIn: now trades at $59, down 37% from its end of first day trading price of $94.
• Pandora: now trades shy of $10, down 50% from its end of first day trading price of $19

I have used and like all three companies. And had I followed my emotions and bought them up right away without doing my homework, I would have lost significant money. Why? The businesses behind the stocks have failed to live up to their hype.

Now, don’t get me wrong. I’m not trying to deter you from buying Facebook stock. All I’m saying is this: do your homework beforehand & don’t just follow your emotions or the herd.

Before Buying Facebook Stock Right After its IPO, Consider These Questions…

Here are some questions that you might want to consider before jumping on the Facebook IPO, or any IPO:

1. What is the company’s business model? How does it make money?
2. How does it stack up against similar company’s in some of the key metrics (i.e. in Facebook’s case: revenue per user, revenue per 1,000 impressions).
3. Can the price of whatever the company makes money from increase?
4. How is it doing financially? Does its revenue growth rate warrant the likely price/earnings ratio it will command?
5. Is the company’s growth rate increasing? Can it continue increasing?
6. Does the company have a huge amount of debt that will be tough to overcome?
7. How much room for user-base growth is there?
8. Is there room for geographic expansion?
9. Is there significant potential to grow the amount of revenue per user? Will the company’s user-base buy into that or permit that?
10. Are there any governmental investigations that might hurt the company?
11. Are there any major lawsuits against the company?
12. Does, or will, the company have a dominant market position versus its rivals?
13. Are there significant competitive threats from startups or other giant players entering their niche?
14. Do you believe in the company’s management?
15. Would you buy the company if you weren’t a user/customer and weren’t familiar with them?
16. Would I only be buying this stock because I don’t want to miss out on it if it explodes? (this is what causes bubbles, my friends)
17. Am I only buying because everyone else is buying it?
18. Is it a good market right now for an IPO to succeed?

Oh, and when you’re done pondering those questions, don’t forget to like the 20somethingfinance Facebook page.

Facebook Stock IPO Discussion:

• Would you buy the Facebook IPO? Why or why not?
• Do you think Facebook will continue its rapid growth?
• How do you see Facebook growing revenue?
• How do you think Facebook’s stock will perform?

Related Posts:

• Should you Pay off Debt or Invest?
• Passive Index Investing
• How to Get Over the Fear of Investing
• How to Start an Online Broker Account

Facebook Stock IPO: Should you Buy it? is copyrighted by 20somethingfinance.com without consent to republish.

Bank of America, the second largest bank in the U.S., was the final to cave. They joined Chase (the largest bank), Wells Fargo, SunTrust, and Regions in abandoning their strategy to add new debit card fees on their customers.

This comes just days before “Bank Transfer Day” – a consumer advocate movement urging Americans to switch from (for-profit) banks to (non-profit) credit unions. The movement was created by a Bank of America customer who was upset with the implementation of the debit card fees and created a Facebook event. The Facebook page has since grown to over 36,000 followers.

A separate online petition was created to urge BofA to abandon the debit card fees. It received over 300,000 signatures online.

Bank of America Chief Operating Officer, David Darnell, released the following statement on their decision to drop the debit card fees:

“We have listened to our customers very closely over the last few weeks and recognize their concern with our proposed debit usage fee. As a result, we are not currently charging the fee and will not be moving forward with any additional plans to do so.”

Power in Numbers

As I stated in my post on banks with no checking account or debit card fees, you can vote by taking your business elsewhere. This is happening more and more lately, and to surprisingly effective results.

The Internet has truly powered consumers by providing a means to communicate information like new corporate fees and providing a platform for consumers to join together to create movements against unreasonable corporate actions.

Netflix’s streak of price increases and foolish move to split the company in two enraged customers to the level of millions unsubscribing, tens of thousands of negative comments on the Netflix blog, and the company stock price dropping 75% this year. Finally, the company caved, and decided to abandon splitting the company.

I find these examples absolutely exhilarating and refreshing. It gives me renewed faith in the power of the Internet, in consumer awareness and advocacy, and in our country. And it all happened without government intervention. Good stuff!

Just the Beginning

Consumers have won this battle, but I don’t think that it will stop banks from finding other crafty new fees to implement in order to drive corporate profits higher. Banks exist for one reason – to make money. And when an egotistical banking executive’s bonus or job is on the line if he/she can’t drive year over year profit growth, price increases and new fees are often bound to be passed on to customers.

Stay on your toes, stay vocal, and don’t be afraid to take your business elsewhere if you need to.

Maybe someone needs to start a “Comcast Transfer Day”… hmmm….

Big Banks Abandon Debit Card Fees: Score Another Win for Consumers! is copyrighted by 20somethingfinance.com without consent to republish.

Out of a group of 30 twenty-somethings, zero people raised their hands. ZERO!

That shocked me, and I decided that I wanted to help readers overcome some of their big objections or fears on getting started investing.

The series included:

1. Investing outside of a 401K: I polled readers on why they haven’t invested outside of a 401K.
2. Should you pay off debt or invest? I took a look at where you should focus when you have discretionary income.
3. How to start an online broker account: I discuss where to start your investment account.
4. Getting over the fear of investing: I highlight the danger of not investing.
5. Passive index investing: I discuss one of my favorite investment strategies for amateurs.

I’ve also covered some additional investing basics in the past:

• What is an ETF?
• ETF’s vs. Index Funds
• How to make a stock trade
• What is a mutual fund?
• How to buy a mutual fund
• Investing in a REIT

But one thing that I don’t think we’ve discussed enough is our confidence in the market.

Our generation has grown up watching the stock market lose money, as a whole, over the last 12 years. Before that, it was just expected that you could invest your money and pull in 10-12% annually, on average. Automatic, invest it and forget it, and retire a rich woman/man.

But those days are seemingly gone. Our stock markets have been heavily influenced by:

• the media
• war/terrorist acts
• institutional/professional investors
• energy prices
• political turmoil
• debt crises
• the global economy
• currency drama
• computerized trading

And watching all these manic fluctuations and no net gain in over a decade has really destroyed our confidence in investing in the market.

It just occurred to me as I was sitting and thinking about barriers to investing that this, possibly more than any other issue, is why our generation hasn’t jumped to be active investors.

So, I want to throw the questions out to you:

• Have you lost confidence in the stock market? (take the poll)
• Why do/don’t you have confidence in the market?
• What would it take for you to have more confidence in the market?

Have you Lost all Confidence in the Stock Market? is copyrighted by 20somethingfinance.com without consent to republish.

Bank of America ($5 monthly debit card fee) and CitiBank ($15 or $20 monthly checking account fee) started adding new fees to help replace billions of lost revenue that resulted from an amendment to the Wall Street Reform & Consumer Protection Act that cuts debit card swipe fees by the banks 44 cents to 23.9 cents on an average transaction. This change, lobbied by merchants, was intended to lower the costs for merchants and ideally consumers. The change kicked in October 1.

The other, unspoken agenda in adding these fees is that these banks are hoping that those who use their debit cards will simply switch to a credit card, which will be more profitable for the bank if these customers end up paying interest on their debt.

Is this the start of a bigger fee-happy trend? Absolutely. Banks will look to increase their fees to replace the lost revenue, estimated to be around $1.3 billion per month. They threatened Congress prior to the passage of the legislation that they would retaliate by increasing fees and they have delivered.

Did you expect anything less? These greedy banks still get 23.9 cents per swipe, ATM fees, and the needed liquidity that you allowing them to hold your cash provides. And now they want to charge you to use your own money so that their executives can maintain the same ridiculous bonuses? NO. EFFING. WAY!

So where can you take your business?

You can protest by taking your business elsewhere. In the process, you might start wondering why you haven’t done so earlier. Reader, Sandi, writes to me in response to that post:

It’s for that reason that I plan on leaving Bank of America before the end of this year. The $5/mo debit card fee is the last straw. I’m looking into alternative banking options and am strongly considering Charles Schwab. What do you know about their checking accounts and do you recommend any others. I’ve been spoiled by Bank of America’s online bill pay, and most other banks aren’t as good. I’d love your input.

Awesome to see readers standing up for themselves. Fortunately, there are still plenty of alternatives out there for free checking accounts and debit cards. Offers with credit unions can vary, but the four banks that made the list all offer:

• free debit cards
• free checking accounts
• no minimum balance to avoid fees
• free online banking & bill pay

1. EverBank

This was a late addition, but EverBank has perhaps the best offering right now with no fees, an interest bearing account, reimbursed ATM fees and they’ll even pay you $60 to switch to them!

• Monthly Account Fee: $0
• Debit Card Fee: $0
• Opening Deposit: $1,500 deposit to open
• Checks: free checks
• ATM Fees: zero ATM fees – if your balance is over $5,000 they will reimburse you the ATM fees from other banks.
• Interest: EverBank guarantees that you will earn interest that is in the top 5% of what all banks offer.
• Cashback Rewards on Debit Card: n/a

2. PerkStreet Financial

PerkStreet Financial offers a no fee MasterCard debit card and checking account. With PerkStreet, online bill pay and banking and banking are free and there is:

• Monthly Account Fee: $0 monthly account fee if you have at least one debit card transaction.
• Debit Card Fee: $0
• Opening Deposit: A$25 deposit will get you started.
• Checks: free checks
• ATM fees: 37,000 ATM’s nationally that you can withdraw from without surcharge, otherwise $2 surcharge.
• Interest: no interest earned on your balance.
• Cashback Rewards on Debit Card: Perkstreet’s biggest appeal is that at a time when other banks are beginning to charge you for debit cards, they offer you cash back! If you maintain a $5,000 balance, you get an outstanding 2% cashback. If under $5,000, you’ll get 1%. There are also 5% cash back categories throughout the year with PerkStreet.

3. Ally Bank

I’m a big fan of Ally Bank because they don’t do business like other large, national banks. They create appealing products that don’t take advantage of their customers. Ally Bank Interest Checking offers:

• Monthly Account Fee: $0
• Debit Card Fee: $0
• Opening Deposit: $0 deposit to open
• Checks: free checks
• ATM Fees: zero ATM fees – they actually pay for fees charged by other banks!
• Interest: you earn interest on your balance.
• Cashback Rewards on Debit Card: n/a

4. USAA

USAA offers financial services to active members of the military, veterans, or their family members (here is a list of parties that can become a USAA member). USAA’s free checking account offers:

• Monthly Account Fee: $0
• Debit Card Fee: $0
• Opening Deposit: $0 deposit to open
• Checks: free checks
• ATM Fees: no charge on first 10 withdrawals and they’ll refund up to $15 per month that other banks charge.
• Interest: you earn interest on your balance if over $1,000.
• Cashback Rewards on Debit Card: n/a

5. Ing Direct

One of the first online banks, Ing Direct, is still one of the best. Ing Direct’s Electric Orange checking account offers:

• Monthly Account Fee: $0
• Debit Card Fee: $0
• Opening Deposit: $1 deposit to open
• Checks: free checks
• ATM Fees: No fees at 35,000 Allpoint ATM’s.
• Interest: you earn interest on your balance if over $1,000.
• Cashback Rewards on Debit Card: n/a

Related Posts:

• 10 Free Financial Services
• Does Closing a Savings or Checking Account Hurt your Credit Score?
• New Bank Overdraft Protection Fee Rules
• Ally Bank Raise your Rate CD

5 Banks where Checking Accounts & Debit Cards are Still Free is copyrighted by 20somethingfinance.com without consent to republish.

We are all trying to figure out exactly what this movement is about, who is taking part in it, and what they want. And some of us are even joining in on the peaceful protests because they know something just ain’t right.

The movement’s greatest strength, and perhaps its biggest weakness is its ambiguity.

The Occupy Wall Street mission statement, found on the official website, lacks clarity,

Occupy Wall Street is leaderless resistance movement with people of many colors, genders and political persuasions. The one thing we all have in common is that We Are The 99% that will no longer tolerate the greed and corruption of the 1%. We are using the revolutionary Arab Spring tactic to achieve our ends and encourage the use of nonviolence to maximize the safety of all participants.

The mission appears to be the act of protest itself. But who’s decision is that in the first place? The organization claims to be leaderless… but someone is sitting behind a keyboard somewhere leading the narrative on the ‘official’ Occupy website.

As a strength, this ambiguity has allowed the movement to quickly pick up steam. We are all passionate, angry, vocal, or uncomfortable with a political or economic issue at the moment. Protesting is a unifier.

As a weakness, this ambiguity has made it difficult for many, myself included, to see what the end goal is. Getting out in the streets and protesting a wide variety of economic and political issues may seem thrilling or unifying at first, but what exactly do people want? Every revolution must have an end goal in order for it to succeed. What is the end goal of Occupy?

If I had to sum up what “Occupy” means to me in one word, it would be “change”. But again… that is an ambiguous term.

We are at a period of time in our country where we KNOW we need change – but we don’t know how to achieve it.

Politicians on both sides, who set the course of our country, have failed us. Is there any doubt that special interest and corporate money has compromised what is in the best interests of the country?

The negative attention given to Wall Street seems a little misdirected, in my judgment. It is true that the banks put us in the present economic downturn, but Wall Street greed is more of a symptom of a society gone wrong than a true cause of the discontent in this country.

The REAL problem is that the American Dream is eroding for all but the income elite. The middle class is taking blow after blow, like an underdog fighter on his last legs in the 12th round.

Let’s look at the big picture:

1. Health Care

We’ve seen health care costs increase 6X vs. a 3X cost of living increase.  In 2011, it will have increased 7.6% more. The health of entire families are beholden to one or two family member’s job prospects.

2. Education

We’ve seen educational costs increase 10X in that same period of time. The boomer generation graduated mostly debt free, but for gen x and gen y it’s more common these days to graduate six figures in debt and student debt has surpassed credit card debt.

3. Economy

Globalization has led to the U.S. losing over 5 million manufacturing jobs in the last decade and some of the very same decisions made by our politicians ensured this result. It’s a huge reason why the unemployment rate in the wealthiest country in the world is still over 9%.

We’ve also seen the rich get richer and the poor get poorer. The Occupy group likes to state the top 1% of income earners possess 40% of all assets, but the top 10% possess 80% of all financial assets. The other 90% of the country only holds the remaining 20% of the wealth.

4. Housing

Due to greed and malpractice by banks inflating property values, we’ve seen the housing market in the U.S. (once a sure bet as a wealth builder) completely ruin the financial lives of many families as they’ve had to foreclose and take losses on their homes, resulting in a destroyed credit history. Ironically, those credit histories are now being used as a job applicant screening tool.

5. Work/Life Balance

The average productivity per American worker has increased 400% since 1950. One way to look at that is that it should only take one-quarter the work hours, or 11 hours per week, to afford the same standard of living as a worker in 1950 (or our standard of living should be 4 times higher). Is that the case? Obviously not. The American family could once live comfortably on one income. Now they live very uncomfortably on two. Someone is profiting, it’s just not the average American worker.

According to the ILO, “Americans work 137 more hours per year than Japanese workers, 260 more hours per year than British workers, and 499 more hours per year than French workers.” We have less days off than any other industrialized nation. Our employers are clearly doing more with much less people in order to boost profit.

Check out my post for more on how Americans are overworked. With over 9,000 Facebook likes, it struck a nerve.

6. Environment

We’ve compromised our environment and seen CO2 emissions skyrocket. Despite the obvious fact that should this continue, our existence as a species will cease to persist, the problem has grown exponentially. And our politicians and corporations have watched (even encouraged) it to happen.

7. Money & Political Influence

Money buys ads and resources, which buys elections. If it wasn’t bad enough already (and it was bad), Citizens United Vs. the FEC, a landmark Supreme Court Case, made it legal for corporations and unions to spend from their general treasuries to finance independent expenditures. These ‘Independent Expenditure Only Committees” are unofficially dubbed “Super PAC’s” and they can raise and spend unlimited funds from individuals, corporations, unions, etc.

The Goal to Achieve All Goals

It’s not that Americans want “something for nothing”, as many critics of the Occupy movement have stated. It’s that we want to stop seeing every part of the American dream erode due to decisions that are completely out of our control. Just as our country fought for its own independence from the British empire, we are now fighting to restore and maintain the American dream as it is being ripped away from us. This is what our country was founded on. Can you blame us?

IF the Occupy group wants that to change, their one demand should be to end the influence of money in politics, as it is the one problem that influences all others. Politicians no longer fight for the citizens of this country. They fight for corporations and special interests so that they can get the advertising representation to keep their jobs. It is killing our democracy and our country and it is the most fixable problem. Start there. Three changes will achieve this result, as I called for back in August:

1. Limit political contributions to individuals only, and only $100 to level the playing field for citizens.

2. Eliminate all independent expenditure contributions and immediately overturn Citizens United.

3. Break up the two-party political system (#1 and #2 will help ensure this).

That is it. That is what we need to get change in this country.

Nothing will come from protesting Wall Street bankers. They are the leeches that have been feeding off a system gone wrong. They should be addressed, but they are not the root of the problem. The root is corruption by our elected leaders.

We should be occupying D.C. first. Wall Street’s time will come.

Let the Occupiers know.

Discussion:

What does the Occupy movement mean to you?

Forget Wall St. – Occupy Needs to Head to DC is copyrighted by 20somethingfinance.com without consent to republish.