Course Project Combine all the research and data you have completed for the Course Project assignments from Weeks 1–4. Do not just copy and paste previous assignments. Rather, analyze and present your

Running Head: ONLINE TRADING SITES 0

Online Trading Sites

Jessica Arroyo

South University

Course Project Summary

There are several concepts covered in the course which have enabled better understanding of the main concept. By analyzing Nike Inc., I better understand Economic Value Added (EVA) analysis. The analysis is basically used to measure the value a company generates from invested funds. The financial performance is measured by deducting the cost of capital from operating profit. Also covered in the course are mortgage and auto loans which are huge loans offered based on the credit score of a person. The lender also compares the monthly debt to income ration to assess whether one qualifies for the loans. The course also addresses stock purchases via online brokerage accounts. The brokerage accounts allows purchase and sale of stocks online. There are also companies that offer Direct Investment Plan (DIP) or Dividend Reinvestment Plan (DRIP) to encourage public investment without necessarily involving an online stock broker.

Online Trading Sites

When choosing an online trading site, it is necessary to consider various factors. It is important to compare different prices and trading requirements for different brokers before making a decision. The three sites to compare in this paper include; Charles Schwab, TD Ameritrade and E*TRADE. The trading sites offer great value for their portfolios. The sites are preferred for their offers on price and trading tools with TD Ameritrade standing out as the best online broker in 2014. According to the industry, investors are required to invest at least $2,000 as the margin prior to purchase of stock. Upon purchase of stocks, the account should not fall below the maintenance margin usually 25% of the total stock value in the account. Online brokers, however, have the ability to alter the maintenance margin based on the house requirements.

Charles Schwab, an online broker provides comprehensive investment products and services for a sum of approximately 8.8 million customers. The customers have active brokerage accounts and the company looks forward to diversifying and hosting a variety of the accounts. The company provides debit cards to its customers which can be used at the company’s physical locations with no fees charged for transactions. Among the aspects that differentiate Schwab from other brokerage companies is that there are no platform fees or trade minimum. The price per trade is $8.95 with an account minimum of $1000 and no annual fees. Applications done on their website enrolls the customer to the company’s trading services. The customer is also able to access Schwab specialists, the trading community and StreetSmart trading platforms (Charles Schwab & Co. Inc., 2017). Schwab is considered to integrate banking and investing under one roof as either online or in-person services. Some of the drawbacks that may cause an investor to consider a competitor is lack of sophisticated trading platforms and lack of promotions.

TD Ameritrade stands out among other online trading sites due to its customer service and support. The company provided powerful features such as trade and market scans, live streaming media and charting package for investors. Another tool offered on the trading platform is TradeArchitect that helps investors learn about the company and the options available. There are no trade minimums for the company and investors are not required to pay platform fees. The trade stock is $9.99 and the amount is paid despite the balance in the account or trade frequency. The price per trade is in addition to 75 cents per option contract with a minimum of $500 account balance (TD Ameritrade Inc., 2017). Unlike Schwab, the company offers promotions for instance, when a customer deposits $2000 he or she gets 2 months of trade free with an addition of $600 depending on the account funding. The company is known providing strong and secure trading platform although it may not be appealing to casual investors.

The third trading company to consider is E*TRADE which has a house requirement of 25% of the total market value of the stocks. The company is not as flexible as Schwab and Ameritrade because the house requirement may be high for sticks that are in volatile and concentrated positions. In case the investor’s margin account goes below the 25% which is the minimum, the company requires the investor to top up the account by issuing a margin call. If by any chance the investor fails to top up the account or rather respond to the margin call in time, the company may liquidate the position or securities available in the investor’s account without his or her permission. For the first 149 stocks or option trades, the price per trade is $9.99for stocks above 500, the price is $7.99 with an addition of 75 cents per options contract (E*TRADE Financial Services, 2017). The company does not charge annual fees and requires an account minimum of $500. The company also offers promotions for instance, customers get 2 months of free trade and up to $500 upon making an initial investment of $10,000. The promotions is appropriate for investors who wish to set up funds with a low frequency of trading in the subsequent years. Among the feature offered on the trading platform include full time service, real time data and free research which are premium features. For customers willing ramp up their trade by making at least 10 trades in a month, E*TRADE is the place to sign up for. The company is known for all round minimum fees.

Companies Offering DIPs or DRIPs

A Direct Investment Plan or Dividend Reinvestment Plan refers to plans offered to individual investors to encourage public investment without having to use a stock broker. Examples of companies offering these plans include; Allstate Corp., Wells Fargo & Company and Capital One Financial Corp.

Allstate Corp. have no minimum number of shares to enroll. However, there is an option to make a direct purchase of $500 or start an auto purchase of $10 for 5 consecutive months. The corporation has no reinvestment commission but customers are required to pay a dividend reinvestment fee of 5% per $3 share for reinvestment (Drip Investing, 2021). Reinvestment can also be done partially. The maximum and minimum annual purchase is $150,000 and $25 respectively.

Wells Fargo & Company has a minimum requirement of one share for enrolment which is offered as a direct purchase. The initial purchase can either be a onetime purchase of $250 or $25 auto renew purchases for 10 months. The reinvestment commission is $1 and the dividend yield is 4%. The maximum purchase in a month is $10,000 and $25 is the minimum (Drip Investing, 2021). For cash purchases, it is possible to add on shares from the company to the existing shares with reinvestment. For additional purchase or reinvestment there is a 4% fee for $4 share.

Capital One Financial Corp. has a minimum stock of $47.92 for enrollment. Unlike the other two, Capital One Financial do not offer direct purchase option. The dividend yield is 3.1% (Drip Investing, 2021). The reinvestment commission is $1 and the maximum purchase allowance is $10,000 per month.

References

Charles Schwab & Co. Inc. (2017) Bring Your Trading Inspiration to Schwab| Retrieved 12 March 2021, from http://activetrader.schwab.com/trading-services/get-started/#

DRIP Investing - Direct Investment Plans & Dividend Reinvestment DRIPs | Invest Directly in Wells Fargo & Company. (2021). Retrieved 12 April 2021, from https://www.directinvesting.com/company_prospectus.cfm?c_id=61

DRIP Investing - Direct Investment Plans & Dividend Reinvestment DRIPs | Invest Directly in Allstate Corp. (2021). Retrieved 12 April 2021, from https://www.directinvesting.com/company_prospectus.cfm?c_id=675&s=drp

DRIP Investing - Direct Investment Plans & Dividend Reinvestment DRIPs | Invest Directly in Capital One Financial Corp. (2021). Retrieved 12 April 2021, from https://www.directinvesting.com/company_prospectus.cfm?c_id=916

E*TRADE Financial Services (2017) Margin Trading at E*TRADE Increase Your Buying Power| Retrieved 12 March 2021, from https://us.etrade.com/active-trading/margin-trading

TD Ameritrade Inc. (2017) Manage Your Options Strategy With a Leader in Options Trading| Retrieved 12 March 2021, from https://www.tdameritrade.com/investmentproducts/options-trading.page