So I figured I break the rules a little and start my brokerage account now rather than later. Technically this could be considered premature since I’m still paying down high interest credit card debt. It should be paid down by mid January so I think it should be ok. I also don’t have a complete six month emergency reserve yet. I took $2000.00 from my “reserve fund” and have it sitting in cash in a Charles Schwab One brokerage account. I keep reading everywhere about the magic of compound interest and that, “you have to start early”, or “you can’t start early enough”, so I just went and did it.

There a multitude of discount brokers out there, so someone may be asking why I went with Schwab and not Zecco, Fidelity, ShareBuilder, or E-Trade etc. I went primarily on word of mouth; their fees, minimum deposits, and references looked good too. My best friend had a brokerage account with Schwab and always had positive things to say. Whenever he got into trouble, he could always call and talk to a human being. He closed the account a few years ago to use the funds to make a major purchase. If you don’t open a checking account with Schwab, the minimum deposit to open a One account is $1000.00. Trade fees are $12.95 for the first 1000 shares and drop to $9.95 if you hold a huge balance or make more than 120 trades a year. I don’t plan on day trading so $12.95 a pop seems reasonable. I’m considering closing my Washington Mutual checking account and going all Schwab. Their checking account offers all the bells and whistles of standard big bank checking accounts plus reimbursements for other bank’s ATM fees and 4% interest on balances. No minimums. Not bad. The downside is you have to mail deposits in or have them transferred from another checking account. They don’t have ATM machines on every corner like BofA or Wamu.

There were some pains in opening the account on-line. Something went wrong and I didn’t correctly create a login ID. I called up the customer service department, was on hold for less than a minute, and a human being walked me through the account setup process. I then botched up the MoneyLink setup which links my Schwab account to my ING checking account. I happened to be near a Schwab branch, called them up, made an appointment for 30 minutes later, walked in and they explained what the problem was. I setup MoneyLink then called customer service to verify my ING account really was mine, then transferred my money. It took a day and a half to transfer the funds from ING to Schwab. Schwab has a three day hold on money transferred to them through MoneyLink. I’m used to these types of holds since ING has a similar two day hold.

I’m happy so far since I’ve been in trouble twice already and there has been a person to talk too and hold my hand. The 800 number customer service and the branch representatives were very nice and helpful. I got my welcome packet in the mail yesterday and got a call from a new accounts representative to answer any more questions I have on getting started. I have a pretty good idea of where I’m going to make my first investment allocations. I’ll make the trade January 1, 2008 and post my holdings. I still have to setup recurring deposits. I’m diverting some money I was using to build my emergency reserve to fund the brokerage account. I’ll try it for a few months and reevaluate to see if I’m spreading myself too thin.

I originally wanted to go with ShareBuilder since ING just acquired them. I thought it might be nice to use the products of the bank I’m already with. For some reason ShareBuilder didn’t rub me the right way. I liked their concept and still do, but the idea of trading only on a specific day for their advertised rate seemed odd. If you’re dollar cost averaging it should not matter though. Also, if you’re not careful with ShareBuilder their fees could wind up being a significant portion of your investment. There are ways to mitigate this. Zecco scares me since I haven’t read a positive review yet and some of the other brokers had higher minimums or more expensive trade fees.