A while back ago I gave a short little mention on BuyandHold.com in the article about DRIPs and such. I think the time has come for a little lengthier piece on this great company. First off I do not hold stock in them, they have no affiliate plan that I can find (and I’m looking). I am not getting compensated for this post, I just love the site and use it myself. It makes me feel good if I can share something like this and others use it.
The main thing you do when dividend investing is you want to purchase good stable companies (no real risk taking) that provide a steady, albeit slow, growth. These companies of course need to provide a dividend as well, hopefully 3% or greater and should have a history of increasing their dividend or at least very few decreases. You buy these stocks and park them! Hence the term Buy and Hold.
When you fist land on BuyandHold.com you most likely will not be impressed. Their website is no frills and has looked the same for the past 10 years that I know of. They dont have mobile apps (the one thing I would like to see) or fancy web 2.0 gadgets everywhere and Im ok with all that. All that costs money and without it they can pass the savings on. They do still provide you with all the research tools you need. One such neat thing I like is their top 10 list where you are able to shop from a list of the top 10 holdings over all (dont use it, just fun to see what others like)
Its All in the Fees
Fees are the enemy of any healthy return so you have to be sure the brokerage you choose has low fees and any they do have you can justify. All fees will eat away at any dividend payments or growth you see. There are many brokerages out there and they will all charge you some sort of fee for purchasing dividend stocks. Some will give you some special deals as well but look at what the restrictions are.
|Brokerage||Real Time Trade||Special Trades||DRIP|
|ING Direct||$9.95||$4.00||Special Rate on Tuesdays only, Scheduled ahead of time||YES|
|Buy and Hold||$15.00||$2.99||3 Window sales a day||YES|
You can see by this chart that Buy and Hold does not have the cheapest realtime trades, but with a buy and hold/dividend strategy you do not need realtime trades. You are dollar cost averaging your stocks and shouldn’t have any worries about the minute to minute price of your stock. Being able to make your purchase in one of their 3 window trades times a day, 5 days a week is more than enough. Just place your order and it is processed at the next window so you should get close to the price you want.
With other accounts shown you have to pay about 330% more per trade or wait till Tues to have your order processed (and still pay 33% more in fees). Why do that when all that fee money can be put to use earning you more!
Can’t Afford the Whole Pie
Time is a big factor in earning money for retirement and the faster you can get your money in the game the better off you are. Most brokerages you purchase stocks by the number of shares you wish. This can difficult for some especially if you are wanting to buy a stock like Apple (AAPL) which today closed at $493.42! You may not have the $986.84 to purchase 2 shares (let alone even 1 share) so you save up earning a whopping .02% or something in savings till you have enough. Mean while Apple may be even increasing even more.
Well dont wait! With Buy and Hold when you purchase stocks they do not ask how many shares you wish, they ask how much $ do you want to put in! Yes you purchase partial shares of your stock interests. This works great so you can plan to just put in a couple hundred a month or whatever you can afford. Yes you are still earning dividends on the partial shares as well. So you are seeing growth and dividend yields right away!
You of course can also set up automatic payments to your Buy and Hold account and set up distributions as well. I currently dont use this as I like to decide each month how much I am putting in and to which stock, typically which ever one is about to pay a dividend next month. (you can see my dividend strategy in my last post).
What do I do with my Dividends?
The big thing is not to take your payments and buy more beanie babies (another post) but to sink those dividends back into your portfolio. This is why dividend investing is so much fun (and profitable). With Buy and Hold by default your dividends are automatically reinvested back into the same stock. No forms to fill out, no check boxes to remember to check off. You buy a dividend stock and its done. Thats not to say that when you reach that magic age and you want to start living off your dividends you can’t. It simple to go to ‘Reinvest Dividends’, select one of your stocks then change the yes to a no and you are done.
Yes as mentioned above you are still getting shares based on a dollar amount and not waiting till your dividend payments can buy a full share.
So What’s the Catch
Well if there is any real catch to this site it is that they do charge a $6.99 monthly ‘maintenance fee’. I see you now saying gotcha thats another fee! Wait though! Yes if you are inactive and dont do monthly investing this is another fee to weigh down upon your returns. The good thing is that with your monthly fee you do get two free window trades which is the equivalent of $5.98 so the monthly fee is $1.02 (or $12.24 a year). In the big picture I think this is just fine. If you spread that out with the 24 trades you get it makes those trades cost $3.50, still cheaper than the ING $4 Tuesday trades. Key is to use those 2 trades every month, even if you are just putting in $20 of ATT (T).
These are just the highlights that make BuyandHold.com a great place for you to invest if your strategy is one of buying dividend stocks for the long haul. It was not created for those that like to watch the market and trade shares on a daily basis.
So who do you use and why do you like it?