Generations Y and Z (those under 35) are the most optimistic about future portfolio gains, and increasingly have been turning to trading to make money.PIKSEL/Getty Images/iStockphoto
One of the big boys in the online brokerage business has made a direct play for an obvious but overlooked block of potential clients – web-savvy young adults.
BMO InvestorLine has a promotion on until Aug. 31 that offers investors between the ages of 18 and 35 a total of 35 free stock trades and a conditional waiver of applicable account fees until the account holder turns 36. The condition that triggers the fee waiver: clients much make two stock or option trades every six months.
It would have been far more investor-friendly for BMO to have just waived the fees, rather than requiring clients to trade. But four trades a year seems reasonable for a young investor building a portfolio with exchange-traded funds. Basically, it's buy a transaction every quarter. The fees you'd avoid by making those trades: $100 per year for registered retirement savings plan accounts under $25,000 and $25 per quarter for non-registered accounts with less than $10,000 in assets. There is no minimum deposit to qualify for BMO's deal.
Clients get a whack of free trades if they sign up for the deal, but they have to be used in 90 days. Don't rush your investing decisions to take advantage of this offer because the usual cost of trading a stock isn't that expensive any more. InvestorLine has joined firms such as RBC Direct Investing, TD Waterhouse, National Bank Direct Investing, Disnat in charging a flat $10 or so for trading a stock or ETF. Even for small accounts, a $10 trade isn't a big deal for investors who are best served with a portfolio based on a few ETFs.
RBCDI started the $10-trade trend several months ago – the old price for small accounts was $29 – with an eye on Generation Y investors. But BMO has taken things a little further by offering to waive account fees for young clients.
An independent firm with an offer for young investors is Virtual Brokers, where the Kick Start Investment Program allows clients to set up an automated purchase plan using ETFs or individual stocks in the S&P/TSX 60 and S&P 500 indexes with zero commission costs. The minimum monthly contribution is $100 and you can invest in as many as five stocks or ETFs. VB also has stock-trading commissions as low as a penny a share, and it waives commissions on ETF purchases.
Rob Carrick