Which brokerage account for business school?
Fellow monkeys,
I'll be joining the ranks of a reputable business school in the next months. I have been told by well intended people that it might be an excellent idea to start picking stocks, since I am interested in investment management.
My questions are:
1- Is it worth the hassle for a business school student to open a real brokerage account? Would you do it? What's the value compared with a mock portfolio (google finance and the like)
2- Would you recommend any online brokerage firm for the task at hand? Which one do you use and how satisfied are you with it? The portfolio would be around 1k, 100% stocks, 1 deal a month?
Gracias in advance
I HIGHLY recommend it. If you go for it, but only have $1k, be careful about how much you trade. The commissions will kill you unless you get a RobinHood account.
The value of a PA is experiencing the emotions of investing. A paper portfolio will never give you the same feeling of having real money on the line. Being as unemotional as possible is probably the hardest and yet most vital thing in investing.
Interactive Brokers is best for a PA, very low fees, but I'm not sure if you can start an account with only $1K.
It's such a waste to open a brokerage account with $1k to trade individual names. You are better off buying a low cost index fund with that amount. It may be worth it to buy 4 stocks if it will incentivize you to follow more closely, listen to earnings calls, understand sector peers, etc. as you start to build circles of competence. I realize it's all relative but 3 figure swings likely will not get your blood pumping.
@junkbondswap, how much money would you put?
To be honest, I am a bit cynical about the whole trading experience. All I care about right now is what I can do to appear knowledgeable and motivated during the interview process. I have kept a 20k portfolio for the last few years, trading individual names, etfs and options. While I agree with you that there is a thrill in having so much at stake, I just cannot afford to keep that much money sleeping. I will have a rent and a tuition to pay, goddamit...
InteractiveBrokers looks cheap (in the best sense of the word). Does anyone use it? How satisfied are you with it?
I have not used InteractiveBrokers, but an earlier comment-ER mentioned RobinHood. This would be my suggestion for you considering the value of the portfolio. Solely using a handheld device for monitoring stock details may take some getting used to, hoping they come out with a browser application as well.
It's the cheapest broker by far, very good execution, ability to trade virtually anything in any market from one platform. There is no reason to use any other broker unless you need hand holding. For someone going into finance, it's definitely the right platform to be on.
It's a business which is simultaneously providing customers and shareholders with a lot of value. IBKR is one of my bigger positions in my PA.
Make sure you have an emergency fund to cover living expenses, tuition, etc. You never want to have to liquidate positions at inopportune times to fund expenses. I would open a small account $5-10k and just follow a few names so that you can pitch 1 or two names convincingly. Candidly, I have been taking gains and building up cash in my PA. I do not believe in market timing but I think some of these valuations are unsustainable and want to take a wait and see approach as rates rise.
I use Interactive Brokers and it is fantastic. Cheapest commissions, great execution and all the tools you could want to use. However they have a minimum of $10,000 to open a new account so I don't think it is going to work for you.
I use Fidelity. They charge a $7.95 commission. Since you're only investing $1,000, you will need to keep your expense ratio down. The responsible thing to do in my opinion would be to buy 1 stock that doesn't pay a dividend and hold it, or you are going to get eaten alive by "frictional costs". If you buy one stock, and sell another every month, you will end up spending $190.80 in commissions in one year. That comes to an expense ratio of 19%!
honestly, robinhood is not too bad if you use limit orders.
Does this business school have any portion of the endowment that you could manage in a student-run fund? You'd be able to scale your investing ideas better and it would make for a great addition to your resume.
RobinHood is great but for two pbs: No android app (only iOs) + long waiting list. It is definitely worth a shot though.
Aren't there any current business school students who can share their experiences?
It's a double edged sword, think of it like that. Even though you will be "one cog in the wheel", you will be developing your teamwork and other soft skills that you'll eventually need for your first gig out of B school. It's all about how you sell your story.
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