I've had an ING Direct account since January 2006. It is fantastic as I'm sure most of you know. High interest, great website design, easy to use, easy to move my money around. Now you can even order check books which you used to not be able to. Yes, I'm very happy with ING Direct.
I've been debating opening a ShareBuilder account for a few years now, ever since they first offered it in fact. ShareBuilder is ING's brokerage service. From what I understand you can purchase fractional shares, they charge low commissions, and even lower commissions if you invest automatically.
I've avoided it because I've never had much money saved up, so I've never wanted to tie my meager savings up in stocks. I've definitely had the goal of building a portfolio but I've also been liquidity constrained for most of my adult life. This, in turn, is because I've been a spendypants. Since my conversion to Mustachianism I'm not as much of a spendypants though I'll still be relatively liquidity constrained because of my massive looming student loan debt.
Here is my dilemma:
I got an email from ING that if I open a ShareBuilder account before 12/23/2011 and deposit at least $100 (and have the appropriate promotion code), they will credit $75 to my account. Pretty sure I also have to make at least one trade. According to the fine print my ShareBuilder money won't be available for withdrawl until 120 days from the date it's deposited; I assume that applies to my $100 as well as their $75. If I were to deposit $100 and then wait three months and then withdraw $175, I'd feel kind of dirty since I'm deliberately cheating the system. And although that is a massive return, the securities could lose value, again assuming I need to make a trade to get the $75.
The other option is roughly equivalent to taking a $100 step in the wrong direction from paying off my student loans. Drop the $100, wait for the $175, and then buy shares of stock I'd be interested in owning anyway. Get a head start on investing. I don't like taking my eye off the prize though. $100 in the context of $31,000 doesn't seem like much, but 6% guaranteed returns (the rate on my loans) is hard to beat.
I have a similar situation involving my retirement account. I've already reduced my 401(k) contributions from 7% of my salary to 5% of my salary — the minimum I need to get all my company's matching contributions. Why not turn it down to zero? Because that would be stupid. I would be leaving a 4%-of-my-salary matching-contribution-sized pile of money on the table.
Then, is foregoing ShareBuilder leaving money on the table as well? I'm not so sure. First, I'm pretty sure there will be similar ShareBuilder promotions in the future. ShareBuilder may not be the best brokerage for me, though I'm leaning that direction at this point. Honestly, $175 isn't a lot of money to start investing with. Definitely small potatoes.
In the end I don't know that I'll be opening a ShareBuilder account this month. I need to keep throwing money at my student loans until they go away. What do you think?
I've had an ING account since 2005 and a Sharebuilder account (not a lot of $ in it) since 2008.
ReplyDeleteI like ING and Sharebuilder, but I've started to transition away from both. Capital One purchased ING Direct a few months back. No one really knows what CapOne is going to do with it, but I just don't want to be around to find out. I'm moving things to PNC and it does most of what I need it to do from a banking point of view. As for investments - people rave about Vanguard, but I am still undecided.
As for paying down debt vs starting to invest: $31,000 is a small enough amount (in context) that you could get it knocked out in 1-2 years depending on your income and obligations. If you're that close it's probably worth just getting them killed off. Patience is a pretty tough part of getting to FI... I definitely know what you mean when you can't wait to start investing but you'll be able to invest with more confidence and impact once you have the student loan anchor gone.
Yeah I heard about the Capital One purchase. Everyone seems scared, and I am too, but I haven't seen any draconian measures materialize (yet). You're right, of course, that I need to be patient and focus first on paying off student loan debt.
ReplyDeleteSay, boringbill, how come I can't read your Wordpress blog?
Personally I don't mind feeling dirty. I would put the $100 in and make the $75 then take the whole thing out after three months and put it against your student loans. It's the least risk for the most return move you can make. I also think that it sets a certain way of thinking. Although small compared to the total even small scratches against your debt are still small scratches. If you can do these small kind of "power investments" a few times a year after 3 or 4 years they really add up.
ReplyDeleteAcolyte,
ReplyDeleteI don't have any posts on my wordpress blog. It was just a convenient account to use to post here.
I don't have a lot to add that can't already be found on MMM or ERE - at least nothing that I could post in the time I currently have available to dedicate to a blog.
For some background, I am not close to financial independence. I have always been thrifty and have avoided debt but I recently got married into 100k in student loans. I'm working hard to get those knocked out. I do have a rental property and that is my preferred investment vehicle (as opposed to stocks) because of my knowledge of the market (been working in real estate since 2006).
So I, like you, am on the road toward FI. The concept of a nontraditional (short/part time/etc) career was not something I spent a lot of time thinking about before I was married, especially as it relates to how we spend/save. My wife is not ready to adopt some of the changes I want to make. Do what you can to get your new found lifestyle out in the open with your girlfriend before you take the plunge.
Let me just echo The Kecchi One's point about not feeling bad. This is a big faceless corporation making a bet that in the long run giving you that $75 will redound to their financial benefit. There's no shame in taking that bet and proving them wrong.
ReplyDeleteSince I don't know all the ins and outs and fine print, I don't feel confident saying you should take the offer -- but if the only thing holding you back is an ethical qualm, I think you can safely put it to rest.
One thing to keep in mind about your student debt: the interest is tax deductible. So, you aren't paying down 6% debt, you are paying down 4% debt. This probably won't affect your ING decision, but may affect others.
ReplyDeleteI signed up for the Sharebuilder account back in February and I got $50 for signing up. Maybe I am not that smart, but I cannot figure out how to get that money out except to buy shares with it and then sell the shares. The problem is you have to buy the shares in whole numbers with that special money. I cannot find any shares selling for exactly $50, so instead I bought a share that was in the $44 price range. I have $6 sitting there that I cannot figure out how to use. I am wanting to buy shares with it, whereas you just want to cash out, but I can't figure out how to do it either way. I haven't researched it real hard, so it might be possible to just send it back to my bank.
ReplyDelete