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After 5 years of having an account with RBC Dain Rauscher, I have finally closed it out. I realized that at this point in time having a full service broker wasn’t right for me. I first opened the account when I was 18 because I wanted to invest in some stock. The first and only stock transaction I did with them was purchase 20 shares of Microsoft. I was pretty excited when I made the trade, but that soon changed when I found out what the trading commission for it was. It cost about $65 to make the trade. When you factor that out, you find that the stock will have to rise $6-$7 before you make any money. That made me pretty upset, but I didn’t sell because then I would have eaten $130. So I hung onto it ever since.

I got really excited when they paid their one-time $3 dividend. I was mostly excited because the dividend ($3 x 20 = $60) was almost enough to cover my commission to purchase the stock. I never really paid a whole lot of attention to the account because there was just one stock in it. A year or so later I was looking at a statement that came in the mail. When I looked at it I noticed that there was nothing in the cash account. I knew that there should have been at least $60 in there plus a smattering of small dividends plus a bit of interest from the cash account. This was a bit upsetting to say the least. The next day I called in to talk to “my broker.” Of course the broker was not available, so I end up getting passed around from secretary to secretary and finally end up with someone who sounded like they hadn’t worked there too long. I told her what happened and she said that she would look into it and give me a call back.

After about three days of playing phone tag during my lunch I finally found out what had happened. Apparently if you do not have over $100,000 in your account you are charged a $100 annual maintenance fee. When you have only ~$500 in your account that comes out to be a 20% deduction. She did seem excited to tell me though that since I only had ~$70 in cash assets in the account they only charged me that and wrote off the rest. How nice of them.

After this incident I decided to close out my account and transfer it to Fidelity. For some reason I got charged $112.98 for the transfer. I guess that is the closing fees associated with closing out an account. That seems kind of ridiculous for transferring 20 shares of stock. Between the $65 purchase price, the $112.98 close out fee and the $20 sale price, I am going to have to sell Microsoft for $9.90 more than what I bought it for to break even.

I guess there are a few lessons to be learned from this:

1. High priced full service brokers only make sense if you have a ton of money
2. If you are doing all the research to buy and sell stocks, you shouldn’t be paying a premium to do it.
3. Know the fee structure of a full service broker before you get into one. Otherwise the fees will eat you alive.

Overall I think it was a decent learning experience. Buying that first 20 shares is what really got me interested in trading. I don’t think that I would be as active into my trading today if I hadn’t started out this way. Although it may look like a wasted $270, but in the end I learned a lot about how these companies work. If you have a lot of money and just want someone to do all the work for you, a full service broker may be right for you. If you are just starting out and don’t mind doing a bit of research, then a low priced broker like Fidelity, Scottrade or Schwab would likely be the better option.

I recently went to the Fidelity home page and was welcomed by the news that they had created a new mutual fund. The name of the fund is the Fidelity Emerging Europe, Middle East and Africa (EMEA) Fund. The fund focuses on “the region of emerging economies from Russia through Eastern Europe and the Middle East and the entire African continent.”

Countries in the EMEA region could be seen to be highly risky because of the possibility of instability within the region. A major reason though that this area could potentially become profitable is because the “region is rich with natural resources which are in high demand in fast expanding economies. The region benefits from strong oil reserves, industrial metals, and precious metals.”

Countries in this region could potentially stand to have the largest percentage gains in their respective economies in comparson to the rest of the world. Traditionally, the EMEA region has “had low correlation to US and Developed (Europe, Australia and Far East) markets, as well as low inter-market correlation.”

As of 5/30/08 the fund had a NAV of $10.10 with an expense ratio of 1.42%. The average expense ratio for emerging market funds is 1.77%. This fund has been open since 5/8/09. To invest in this fund through Fidelity, one needs an initial deposit of $2500 and maintain a minimum balance of $2000. To find out more about this fund, click here. You can also find a quote for this fund from any financial website by using the symbol FEMEX.

Over the past half year or so the Dow Jones Industrial average has been steadily falling. Typically when this happens most mutual funds tend to mirror this pattern. Investors who just like to stick their money in mutual funds instead hand picking stocks may be in for a bit of a fall as well. For those mutual fund only investors you may feel like you are stuck without many options to pull your portfolio out of this downward spiral. There are a few mutual fund options out there though.

One option that I have recently discovered are Bear Market funds. These funds specialize in shorting stocks that they feel are headed in a negative price direction. By shorting stocks, they are selling shares that they do not own in hopes of buying them back later at a lower price. Funds like these tend have a pattern that is inverse of the market as a whole.

My favorite pick out of these types of funds is the Prudent Bear (BEARX) fund. Of the 39 such funds that Fidelity offered, it was the only one that had a positive return over the last 10 years. That return was 3.62%. Not incredibly impressive, but considering that the market was working against it during the majority of that time period it isn’t anything to scoff about.

The official goal of this fund per the Fidelity website is: “The investment seeks capital appreciation. The fund seeks capital appreciation primarily through short sales of equity securities when overall market valuations are high and through long positions in equity securities when overall market valuations are low. It may hold more short equity positions than long equity positions when the dividend yield for the aggregate stock market is low relative to its historic range.”

Here are the vital return statistics:

As you can clearly see, when the market has been doing poorly, this fund has excelled. To further back up this claim, the beta of the fund as of 2/29/2008 was -.68.

The funds three largest holdings as of 12/31/2007 were: Cash offset for short futures, SPDRs, and Capstone Mining Corp. The fund’s top ten holding account for 38% of it’s total holdings.

Some negatives for the fund is that it has a decent amount of fees associated with it. Here is a rundown:

• Management Fee: 1.25%
• 12b-1 Fees: .25%
• Expense Ratio: 2.33%

These types of funds may not be the greatest long-term investment given the markets traditionally upward price movement. It can provide a nice hedge against pullbacks and mini-recessions like we may be currently be facing today. I would recommend this as a solid fund for the next six months to one year, but definitely not as a long-term investment.

Credit card companies have a lot of competition for your business. Often, they market gimmicks in hopes that you will join their card. 8.9% introductory rate for 6 months they say! That works out great for the 6 months, but then they bump you up to 26% or something crazy like that. Not fun at all.

Yesterday I got a credit card offer from Fidelity that was very intriguing. They offered a 0% introductory fixed APR for cash advance checks and balance transfers until April 2009! That is 13 1/2 months away! This is a great opportunity to make a nice riskless profit. What I could do is apply for the card. Once I am approved, I can write a cash advance check to a bank and open a CD with it. For a 1 year CD the average rate is somewhere around 4% right now. For every $1000 that I am approved for I can make a free and riskless $40! That means if you are approved for $10,000 you can earn $400. This sounds great, but there is one catch though. In the offer they state that there is a 3% cash advance fee. You still stand to make a profit though. The riskless profit would be 4% - 3% = 1%. So for every $1000 you will make $10 risk free! Disappointing I know, but imagine if rates were at 6%.

Just something to think about for when rates go back up again.