Michael

Charting stocks In real time

The following is a pretty good free tool that allows you to chart stocks in real time.

http://www.freestockcharts.com/

The only major disadvantage is that the real time comes only from the BATS exchange and not all the other exchanges in the US. Therefore only orders that are placed through the BATS exchange are real time and other orders are delayed (may be delayed up to an hours or more).

This normally doesn't cause any major problems for high volume stocks (most S&P500 stocks) since the BATS exchange is a high volume exchange. Since the BATS exchange monitors all other exchanges for bids and asks, its prices are normally the same as other exchanges for high volume stocks. As an example Microsoft (MSFT) trades about 58 million shares per day or about 150,000 shares per minute so it is likely that the BATS exchange will make trades very often keeping the charts very accurate during real time.

Michael

Should you purchase Verizon (VZ) or AT&T(T)?

Both are DOW stocks.

Both are a similar size (AT&T is a little larger overall and Verizon currently has a larger mobile phone base).

AT&T pays $1.72 per share (6.03% current yield) dividends and Verizon pays $1.95 per share (5.24% current yield) dividends.

AT&T expects to earn $2.36 per share during 2011 and Verizon expects to earn $2.22 per share during the same time.

AT&T pays 73% of its projected next years earnings in dividends and Verizon pays 88% of its projected earnings in dividends.

AT&T currently has a 1.88 average analysts rating (moderate buy) and Verizon has a 2.42 average analyst rating (hold).

AT&T lost momentum over the last few months but Verizon skyrocketed outperforming AT&T by about 20% since last summer.

http://moneycentral.msn.com/investor...0outperforming

Verizon has been rising quickly over the past couple of quarters due to optimism that Verizon will be able to sell the iPhone and when that occurred, it rose further. Although this should help Verizons earnings some and hurt AT&T earnings, much of gains have been driven higher by technicians and not fundamentals.

Eventually a stock price will normally be determined by fundamentals as technicians become fearful and drive Verizons stock back down. From all indications, AT&T has better fundamentals than Verizon. Also I suspect in the near future analysts will downgrade Verizon further indicating that the stock has been overbought (price too high) by investors.

Verizon will likely also have higher financing charges than AT&T since they are giving away a larger share of their profits as dividends.

If you believe that you can time the stock price to sell at its high, then Verizon may be your best bet since momentum is with that stock. If you plan to hold the stock for a period of time, than AT&T is likely a better bet.

Michael

Oops, I just noticed that Dave Ramsey is no longer on Fox. I guess he was too sensible for that channel.

The Horticulturalist

I agree with you about whole life and return of premium plans, they are never a good idea. We both have substantial term life insurance and it's pretty cheap, we didn't consider whole life.

I've read a lot of Dave Ramsey and Suze Orman to a lesser extent, both helpful and a good jumping off point for us I think.

Michael

I was confused by you earlier question then because you stated "we would plan to invest the life insurance pay out" but term life does not have any payout unless you die while being covered by the policy. So what were you referring to as a payout?

If you can get any sort of payout other than death, then I suspect you have some sort of a modified term life insurance policy that will likely cost more than a regular term life policy. If that is your case, then I suspect that part of your premium is being applied as a low return investment (similar to an annuity).

The Horticulturalist

I meant in the event of his/my death we would get the the insurance money, perhaps payout wasn't the correct term, but that's what I meant. I did also mention popping our clogs, but I can see how I was being unlcear

Michael

Remember you are talking to an American so I don't know what popping our clogs means. To me that sounds like taking off your shoes.

Also when you stated "we plan to invest" there isn't any we if one of you is dead.

The Horticulturalist

Ok, point taken.

Michael

Reinvesting Dividends and Wash Sales

Reinvesting Dividends

Most brokers allow you to set up your account to have the dividends for mutual funds reinvested. I don't believe that is possible for stocks or ETFs since they are traded (would have to find a seller) and only a whole number of shares can be purchased. I've heard of people that claimed to have reinvested dividends for stocks but I don't know how they did it.

When dividends are reinvested for mutual funds, the company will issue you a certain number of new shares including fractions of share. Example the NAV is $23 and the dividend is $27. The mutual fund will issue you 1.739 new shares if dividends are reinvested.

If you have an IRA account, reinvest dividends if desired since nothing has to be tracked but if it is not a tax free account, then I recommend that you do not reinvest dividends. That is because you have to keep track of all your purchases for tax reporting when you sell the shares. If dividends are paid quarterly and you hold a fund for 10 years, that will be forty purchases made for dividends.

Instead accumulate dividends form all sources and then purchase a significant amount of shares at one time. The stock or the fund purchased could be the same as a stock or fund that you own but it will be significantly easier to keep track of two or three purchases for a the same stock or fund than to keep track of 40 per fund.

Filing taxes for capital gains for shares that are sold is pretty easy but you need the date of purchase, cost of the shares, date of the sale, and the sale price. Fees (commissions) are added to the cost of the shares and subtracted from the sales price. The confirmation statements will have all this information. So if you have 40 purchases for a stock and sell them all at once, you will have 40 entries on your tax return.

Turbo Tax handles gains and losses very well.

Wash Sales

When you sell a stock at a loss and purchase the same stock within 30 days that is a wash sale. If it is a wash sale the losses from that sale cannot be reported as a loss during for that year unless you sale the stock again and wait for 30 days to pass before purchasing it again. That wash sale will be carried forward to future years until you break that pattern and do not repurchase that same stock within 30 days of the sale. The government is trying to keep people from selling a stock that has losses at the end of the year for the sole purpose of reducing taxes for that year.

Turbo Tax handles wash sales for you and if you import last years return, it will handle wash sales from previous years.

Therefore if you are going to trade stocks, it would be good to use something like Turbo Tax for your returns. As long as you import your previous years return (you should save each years return a on a CD and store it with your copy of your tax return and supporting documentation), Turbo tax will handle capital loss carryovers (a maximum of $3,000 capital losses can be subtracted from your earned income each year), wash sales, and any other thing that may possibly be reported that needs the previous years return.

robin1234

In general I think dividend reinvestment plans are available only to registered shareholders who hold the stock directly, i.e. not through a proxy such as a brokerage. Certainly the stocks that we hold directly through holding a certificate or book-entry all offer dividend reinvestment, allowing holding of fractional shares. (This would be very problematic to anyone who ever contemplated selling their shares, since the cost-basis would be complex.)

Michael

The only way to sell DRIPs is directly back to the company since exchanges can't handle fractional shares.

Hopefully the company will issue a statement of the dates and amounts of all dividends reinvested when you sell it back to the company. I suspect the IRS will cut you some slack when reporting sales of DRIPs allowing you to only make one entry on the tax return.

http://www.ehow.com/how_4926536_sell-drip-stocks.html

I suppose DRIPs or DPPs are the way to go if you only want to own a few shares of any company but it is so complicated and time consuming as compared to purchasing or selling shares through a discount brokerage.

http://www.wall-street.com/direct.html

When I was indicating that some people claimed they were able to reinvest dividends in stocks, they were saying that they were doing it through a broker. Maybe some brokers allow customers to setup a DRIP through the broker. But I suspect that once it is setup as a DRIP, it doesn't seem that the stock could be sold to the highest bidder at your desired date any longer and would need to be sold back to the company at the companies determined price.

anotherlimey

I own fractional shares (from a DRIP) in a brokerage here. I haven't considered what would happen when I come to sell them.

Michael

Gold and Fixed Income Investments

Gold

Gold seems to be the latest fad and you hear statements such as the dollar will become worthless, gold is a hedge against inflation, gold will double or triple in the near future, and Ron Paul saying that the US should get back on the gold standard.

Facts about gold:

• Gold is a very speculative commodity.
• Gold has been a very poor investment since it hit is high in 1981 of $850 per ounce. Currently the price of gold is about $1,400 per ounce and would need to hit about $2,200 per ounce to have kept up with the average 3.1% annual inflation rate since 1981.
• After gold hit its high of $850 in 1981, it dropped to the $350-$400 range and stayed there for the next 20 years. It wasn't until the early 2000s that gold again started to rally but still didn't get to its 1981 high until 2009.
• During the 1980s inflation was very high but gold didn't rise.
• If high inflation occurs again, fixed income investments will be returning high interest rates similar to the early 1980s when 30 year treasuries peaked at about a 16% annual interest rate.
• The US went of the gold standard in the early 1970s. Prior to that, the US would convert US currency to gold at a fixed price for countries that demanded gold for US currency.
• No country is currently on the gold standard but central banks around the world are holding about 30,000 tons of gold. Most governments no longer desire gold but are fearful of depressing the gold market if they dump gold in large quantities. In the last 30 years, 6,000 tons of gold from central banks have been dumped on the world markets reducing central bank gold holdings from 36,000 tons to to the current 30,000 tons.
• Industry uses only 1,200 tons of gold per year.
• Central banks hold enough gold to supply industry for about the next 25 years even if all gold mining operations ceased.

When Ron Paul states that the US should get back on the gold standard, what does he mean? Do he mean that back all physical currency (M0 money supply of about $1 trillion), back all currency (M3 money supply of about $10 trillion), or back the US total wealth (about $60 trillion) with gold?

Whatever he desires, this would force the price of gold upward devaluing the value of US currency due to the US trying to purchase gold on the open market (exactly the opposite of what he is trying to do). Why would any country want 100-1,000 year supply of gold sitting in their vaults any more than any country wanting 100-1,000 year supply of steel or any commodity sitting in warehouses being unused?

Some of the reasons that gold rallied during the 2000s is due to the introduction of gold ETFs making it easy for investors to purchase gold. Whenever a gold ETF is introduced, gold has to be purchased and stored in a vault to back that ETF. In the case of the worlds largest gold ETF (GLD), that equals to 3,000 tons which is over a 2 1/2 year supply for industry. The gold for the GLD ETF is stored at the Federal Reserve and is counted as part of the US gold reserves.

So if you plan to purchase gold, remember it is a very speculative commodity.

Fixed Income Investments

The most common of fixed income investments are

• Government bonds (US Treasuries, British Gilts, German Bunds, etc.)
• US Municipal Bonds (state and local government bonds)
• Corporate Bonds
• Corporate Preferred Shares

Bonds like stocks are traded but normally have a maturity date where the bond can be redeemed for its face value.

Over the past 30 years, investors have made good returns investing in US treasuries and AAA corporate bonds. Because of that, it is considered a very safe investment by many investors. Although it is extremely unlikely that the US government would default on interest payments or bond redemption and very unlikely that AAA corporate bonds would default either, that does not necessarily mean it is safe investment.

The market value of a bond varies depending on the current interest rate of bonds of a similar characteristic. If interest rates drop and you are holding a bond of similar characteristics at a higher interest rate, the market value of the bond will increase and if interest raise, the market value of your bond will decline. The following link shows the interest rate history of the 30 year treasury bond.

http://finance.yahoo.com/echarts?s=%...urce=undefined

You will notice that the interest rate for a 30 year treasury peaked in 1981 at over 15% APY. Now imagine if you would have purchased many 30 year treasury bonds at that time at the face value of $1,000 each. What do you think they would be worth on the open market during the summer of 1986 when interest rates for 30 year treasuries had fallen to about 7.5%? They would be a whole lot more than the $1,000 per bond that you paid in 1981 since anyone getting your bond would be getting 15% interest per year as compared to 7.5% if they purchased a 30 year bond from the government.

From the chart you will notice that bond rates have been in a steady decline for the past 30 years. This has given the novice bond investor the feeling of confidence that bond investment are safe since each year his bond mutual fund has returned more than the going interest rate for that year. However if interest rate climb, the market value of the bonds in their mutual fund will decline possible causing them to lose money on their holdings. After several years of losses, the investor may decide to sell his mutual fund but the market value (NAV) of the mutual fund may be less than what he paid for it. This is the possible bond bubble that some refer to.

Because of the millions of bonds currently available on the market, it is difficult for the average investor to trade bonds directly and investing in a mutual fund is the only viable option. However mutual funds typically charge a management fee of between 0.5%-0.8% per year and that is a lot of money when the interest rate from a bond fund fund may only be 1%-4%.

Bonds are rated according to their probability of not defaulting. The following link indicates the ratings of bonds.

http://en.wikipedia.org/wiki/Bond_credit_rating

AAA is the highest rated bonds and anything below BBB- are consider junk bonds. The lower the rating, the higher the interest rate that will be paid. The following link has a table that indicates the normal spreads between different rated corporate bonds and government treasuries of a similar time to maturity. The table indicates basis points (bp) which is the same as number of 1/100th of a percent. Therefore the table indicates that a 30 year corporate AAA bond will normally get 90 bp (0.90%) more than a 30 year US treasury and a 30 year corporate junk bond rated BB+ will get 275 bp (2.75%) more than a 30 year treasury.

http://www.bondsonline.com/files/Bon...s_Overview.pdf

US Treasuries:

US treasuries are exempt from state income taxes. US treasuries can be purchased directly from the government at the following site.

http://www.treasurydirect.gov/

Municipal Bonds

Municipal bonds are exempt from federal and state income taxes if you purchase bonds from the state that you reside in. If you purchase bonds from a state other than you reside in, they are only exempt from federal income taxes.

Corporate Preferred Shares

If you want fixed income investments to be part of your portfolio, I recommend preferred shares. Preferred shares act similar to both bonds and common shares. The following link lists all the preferred shares that are available to the general public. The site is free and safe but you must sign on to use the site.

http://www.quantumonline.com/

After you sign in, select "Income Tables" and click on "All Preferred Stocks" and you will get a list of preferred stocks indicating the symbol, a description of the stocks, and much more information about the stock.

Symbols given by the above link are the legitimate for brokerages and msn money but yahoo and other web sites use a different format.

The bond rating of the preferred stock is indicated. Most preferred stocks are generally rated just above or just below junk status. Don't let that concern you too much since the rating is primarily based on the fact that preferred shares are paid off after bonds in case of insolvency but ahead of common stocks and it is easier to suspend dividends for preferred stocks than bonds but more difficult than common shares. Using that concept, that would seem to indicate that all common stocks would be rated as the lowest junk bond status available.

If you want to invest in preferred shares, I'd recommend investing in stocks of large banks. As long as the bank is profitable and will likely continue to remain profitable, their preferred shares should be safe from default. Banks provide a high dividend because of the current fear of large banks but it is unlikely that there will be another banking crisis where dividends could possibly be suspended. I'd also recommend that you wait until the European debt crisis flares up again as that tends to push the bank preferred shares downward. As soon as the crisis is over, the shares tend to rise back up again.

Preferred shares are usually sold at a face value (call price) of $25, $50, $100, and $1,000. The vast majority are sold with a $25 face value.

We will examine a few different shares. At the top of the screen in the previous link type "WFC-L" and hit enter. You will notice that it is a Wells Fargo stock, a coupon rate of 7.50%, non cumulative (means that if they suspend dividends for normally the maximum 2 years that is allowed, they will not make up those dividends at a later time), and it is a convertible stock (means it can be converted to common shares but highly unlikely since the common stock would have to get very high for the conversion to be possible).

If you look further down the screen, it indicates that the face value (call price) is $1,000 and can be called 3/15/2013. However since this is a convertible stock, the only way Wells Fargo can call this stock is if conversion price gives you a profit of at least 30%. You will also notice that the dividends for this stock are qualified (maximum 15% tax rate).

Under Distribution dates, click on "Click for MW" and you will get another screen indicating the current price ($1,035) the current dividend yield (7.25%), and the ex-dividend date (2/24/11).

A more standard preferred stock would be ISF and if you look at that one, you will notice that it is an ING preferred stock with a coupon rate of 6.375% and face value (call price) of $25, and a possible call date of 6/15/2012 (company can call the stock and pay $25 per share). However if you click on "Click for MW" again, you will notice that the share price is well below the call price at $21.29 and the current dividend yield is 7.50%. Therefore if you owned that stock you would be very happy if it was called by the company since you would immediately make a profit of almost $4 per share.

A more risky preferred stock is RBS-G (Royal Bank of Scotland). It has a call price of $25 but is currently selling for $15.23 and currently yielding a dividend of 9.97%. This stock is risker than the others since RBS has yet to turn a profit while most other large banks are doing very well.

During the credit crisis, both Citigroup and RBS suspended dividends for some of their preferred stocks and their preferred stock prices dropped significantly (down to about $4 per share for some stocks). Since neither bank went bankrupt but instead were bailed out, they had to resolve the issue with the suspended dividends for some of their preferred shares. Citigroup made an offer to investors to convert their shares to common stock with a conversion value of $15 per share (well above the $4 it was trading at). About 99% of the investor accepted the offer and Citigroup common shares doubled after that so those investors got their money back as compared to original common stock holders who are still down about 90%. The ones that didn't accept their offer continue to hold the preferred shares whose value has risen back to about $25 per share. The maximum 2 years is nearly up that Citigroup can normally suspend dividends and will either have to restart paying dividends or allow the few investors that currently hold those shares to elect a board member. I suspect that Citigroup will restart paying dividends.

RBS has done something similar but I don't know the details. The problem with RBS is that it's common stock price has yet to rise due to poor earnings.

So you can see that preferred stocks do offer some protection for large banks as compared to common stocks. Holders of Citigroup preferred shares prior to the credit crisis are either even or ahead but the original holders of common stocks are down by about 90%. Holders of RBS preferred stocks before the credit crisis are down about 40% but holders of their common stocks are down about 95%.

Michael

Since DRIPs are not stocks but just a container that defines stocks, it would likely be difficult to sell a DRIP on the open market. I wonder if your brokerage system has the capability to recognize it as a DRIP and therefore handles the sale electronically when you request a sale directly to the company that issued the DRIP instead of putting the sale on the exchanges.

Maybe someone could call their broker customer service and ask them how they handle the the sale of DRIPs.

Michael

Discount Brokerages

The following are the 5 main discount brokerages.

Charles Schwab
TD Ameritrade
Scottrade
ETrade
Fidelity

https://www.schwab.com/public/schwab...p.html?src=nay
http://www.tdameritrade.com/welcome1.html
http://www.scottrade.com/lp/pc1/?sct...S|e|6700268047
https://us.etrade.com/e/t/welcome/wh...o_id=60DAY+500
https://www.fidelity.com/?imm_pid=1&...831&buf=999999

The above discount brokerages charge between $7.00-$9.99 per stock trade depending on the broker. I would recommend Charles Schwab or TD Ameritrade since each of them have a large number of branch offices throughout the US allowing you to contact a local representative if there are problems/issues or required service needs with your account. Scottrade also has a limited number of branch offices and communications with ETrade or Fidelity must be done via the telephone or electronically.

Opening an account at any of the above discount brokerages is easy and can be done online at their web site. Other than filling out an application similar to a bank account application, you will need to send a minimum deposit (either electronically or via mail) that is required to open an account. As soon as that is done, you can start trading but you will receive documents in the mail that you must sign and return to the brokerage.

The following link describes the current special for new customers of TD Ameritrade.

http://www.tdameritrade.com/specialoffer.html

The following links describe the trading commissions, pricing, and rates for TD Ameritrade.

http://www.tdameritrade.com/pricing.html
http://www.tdameritrade.com/ratesfees.html

When you open an account your money is normally deposited by default into an FDIC insured money market account (you can later change that to a SIPC insured account if desired to get a slightly higher interest rate).

Interest rates are very low in brokerage accounts so you normally don't want to keep a large amount of cash in the account.

Once you make a trade, it takes 3 days to settle the trade. Most brokerages allow you to deposit the money in your brokerage account during the settling period to pay for the trade (ask you broker about its policies).

Most brokerages only have the ability to transfer money from and to a bank checking account and not money market accounts making it difficult to transfer money from a higher paying money market account within the settlement period except by delivering a money market check in person. However I've found one higher paying savings account (Capital One Online) that allows for direct transfer to any type of account (checking, money market, savings, etc.) to or from any financial institution (banks, brokerages, credit unions, online accounts, etc.). Therefore when ever I purchase an equity, I go to my Capital One account and immediately transfer funds to my brokerage account and it has always arrived during the settlement period. My account is also a margin account at the brokerage in case I forget to do the transfer or the funds do not arrive in the desired period of time (I don't use the margin account to leverage my purchases).

IRA accounts are not marginable.

http://www.capitalone.com/directbank...i4O6tZPn79JErD

Normally there isn't any added monthly fees to maintain a brokerage account. Only if you desire stock certificates (stocks certificates are normally held by the brokerage) or some special services can there may be additional charges. Most brokerages charge a monthly fee for delivery of mailed paper statements (if your account balance including securities and cash is below a certain amount) so make sure that feature is disabled in your account. Many additional services are free (eg. money market checks, free Level II quotes, paper statements, wire transfers, etc.) if you maintain a certain balance in your brokerage account (securities plus cash).

If you look at one of the links above, you will notice that TD Ameritrade offers $0 commissions for trades made for certain ETFs. In order to get the free commissions, you must hold those ETFs for at least 30 days and if you sell the ETF before that time period, you will be charged $19.99 for that trade. The following is a list of commission free ETFs.

http://www.tdameritrade.com/trade/etflist.html

At TD Ameritrade, most mutual funds are "No-Transaction-Fee" mutual funds but some may have a trading commission of $49.99 (make sure it is a "No-Transaction-Fee" no load mutual fund before you purchase the fund). Normally TD Ameritrade expects mutual funds to be held and not traded over the near term (usually less than 6 months). If you excessively trade "No-Transaction-Fee" mutual funds, you will be charged $49.99 per trade.

I currently use TD Ameritrade but have had accounts at one time with all of the above brokerage firms. The only major issue that I have with TD Ameritrade is the account balance screen when a settlement is in process. It is difficult to figure out during the 3 day period how much is in your account. Even after over 10 years of using TD Ameritrade, I still get confused when a transaction is settling.

There are other many discount brokerages that may charge less than the above discount brokerages but I would suggest that you stay away from those brokerages until you more experience with at least one major brokerage firm.

Trading Equities

It is very easy to trade equities at a discount brokerage. I'll describe how it is done at TD Ameritrade. TD Ameritrade has what is called a "Snap Ticket" screen that overlays your other screens.

http://www.tdameritrade.com/trade/snapticket.html

From that you can get real time quotes by entering the symbol. If you want to buy or sell a stock, you just enter the symbol on the screen. By default, the order will be a limit order (purchase the stock for no more than the indicated price or don't sell my stock for less than the indicated price) and the current stock price will be placed in the price field. After that you select whether you want to buy of sell shares and the number of shares. You can then click the "Review Order" button. This will show what you will be buying or selling and the estimated cost/proceeds including commission (may be less if the buy is less than the requested price or the sell is more than the requested price). If it is to your satisfaction, you can then place the order. Usually the order will be immediately placed and will immediately show up in you positions screen if you did a buy or disappear from your positions screen if you did a sell.

If you place a buy limit order, your order will only be filled at or below the requested price (if there are asks at or below that price). Although normally your buy order will be filled if the price is the default current price, the price could rise by the time the order is placed causing your order not to be filled. Before you place your buy order, you could decrease that price to try to get a better price than the current market price. To guarantee that your order is filled, you could change the order from a limit order to a market order but this can be risky for low volume stocks.

When an order is placed, it is by default placed for the day and will be cancelled at the end of the trading day unless you change the default to another option. At any time before the order is filled, you can cancel an order.

Orders can be initially filled partially (eg. 400 shares could be initially filled with 100 shares) and as the day goes along, it could be completely filled later. All these orders incur only one $9.99 commission. If at the end of the day, your order is not completely filled the remainder will be cancelled and you pay the $9.99 for the commission for that day for a partial order (no commission for completely unfilled orders but a commission will be charged for partially filled orders). If you want to complete the order during the following day, you will be charged $9.99 again to fill the order. To avoid this from possibly occurring, you can select "All or None" which will only fill your buy order if there is a seller that has that many shares at your desired price. If your order is filled with several partial orders, you will get confirmation statements for each of those partial orders.

You should always be careful that you don't purchase stocks that you don't have enough money to pay for or to sell a stock that you don't own (short sell). All of those transactions are allowed (short sell requires a margin account) since you have 3 days to pay for that transaction. IRA accounts may restrict you from purchasing a stock unless you have the required amount of cash in your account (it should if it doesn't since normally IRA accounts cannot always have money added to the account).

http://www.tdameritrade.com/forms/AMTD086.pdf

There may be a couple of illegal practices that can cause your account to be temporaily frozen or cancelled. One may be "Free Riding" where customers that don't have margin accounts or enough buying power buy and sell a stock before it has settled and hasn't transferred money to pay for the orignial stock purchase. Most brokerages may allow that to occur if it occurs infrequently but if it is done regularly, your account may be frozen for a period of time or cancelled (check with your broker for its rules).

http://en.wikipedia.org/wiki/Free_riding

Another is "day trading" (buying and selling a stock during the same day) without the account requirements. Typically a brokerage will only allow "pattern day trading" if there is a certain amount equities/cash in the account and the account is a margin account. If an occasional day trade is done, the broker will likely allow it to occur but if it is done frequently (establish a pattern), the brokerage may freeze your account for a period of time (likely after a warning) if you don't meet the requirements for "pattern day trading".

TD Ameritrade requires you to make an initial deposit of $2,000 to to be considered for a margin and/or options account and requires $25,000 at the beginning of each day in the account (equities/cash) to be eligible for a "pattern day trading" account.

Statements

Your monthly statements and confirmation statements will be available to you online. At the end of the year, you will get a combined 1099-I, 1099-R, and list of all the trades made during the year in the mail as well as electronically.

Although the year end statement will likely be sufficient for tax purposes in the current year and future years (you may have to refer back to previous statements to calculate capital gains), I recommend that you print out your confirmation statements and save them separately and when you sell shares, you just staple the buy statements to the sell statements for a specific stock and keep it in a folder for the current year. This makes it very easy to do your taxes at the end of the year.

Trading Tools

TD Ameritrade provides many tools for its customers. Some are free (may depend on your account balance) and some may cost a monthly fee.

One that I use and is free for my account is NASDAQ Level II quotes. Level II quotes provides the customer a fairly complete snap shot of what is happening at the current moment with any stock. It displays approximately the 50 bids and asks nearest to the last trade price that are currently outstanding for a stock. I primarily use it when I am trading low volume stocks to try to determine the direction that the stock will likely move before I make a buy or a sell. For example, a low volume stock may have 3 bids totaling 2,000 shares outstanding that is near the current price but may have 20 asks totaling 100,000 shares. In this case, it is likely that the stock price will be dropping in the near future since asks will likely drop their requested price to try to get a sell before all the bids have disappeared.

NASDAQ Level II quotes are part of the Command Center tool.

http://www.tdameritrade.com/tradingt...andcenter.html

Exchanges

The following are the major exchanges in the US.

NYSE (New York Stock Exchange)
NASDAQ (National Association of Securities and Dealers Automated Quotations)
CME (Chicago Mercantile Exchange)
CBOE (Chicago Board Options Exchange)

Besides the 4 main exchanges, there are many other exchanges that feed into and report transactions to those exchanges.

When a brokerage firm makes a trade for a customer, it should search through all of the exchanges to try to get the best price for its customers. I suspect the main discount brokerages do a pretty good job at that but not sure about smaller brokerages.

Even with TD Ameritrade, I have seen NASDAQ Level II quotes miss several trades. Level II quotes showed the high price of the day for a low volume stock that I was monitoring but the price was lower than my positions screen which indicated a higher current price for the stock that I owned. It wasn't until about an hour later, that the Level II quotes showed that price as the highest price of the day. I suspect that the trade was made off the exchange and was reported to one of the major exchanges so Level II quotes didn't pick up that trade or it was made through a very small exchange that Level II quotes does not monitor and that exchange reported that trade later to the main exchange.

Purchasing CDs Through a Brokerage Account

If you want to purchase a CD, I suggest that you do not purchase it through a brokerage account. The same CD offered directly by the bank will typically pay about a 0.5% higher interest rate than the same CD from the same bank through the brokerage.