Zecco Roth IRA Review
Zecco.com first set the online brokerage world abuzz when it introduced zero commission stock trades, and to this day, that remains the most readily identifiable feature which differentiates it from other online brokers.
But what's the catch? How does Zecco offer zero commission trades?
Well, it isn't exactly an offer of unlimited free trades all the time for any purpose... Zecco offers 10 free trades per month if you maintain a balance of $25,000 or more or if you make 25 trades or more per month.
Of course, they also charge a $30 annual fee for a Roth IRA.
But, as you'll see, under the right circumstances, Zecco provides the lowest cost broker option for hosting your Roth IRA.
Zecco Fees and Costs
One of the best methods for supercharging your Roth IRA returns is to maintain vigilant control over your trading costs and maintenance fees. At first glance, Zecco doesn't appear to be a low cost Roth IRA broker given its $30 annual Roth IRA fee. But a closer examination reveals what could be the low-cost provider for a number individuals if they meet certain criteria.
For instance, let's say you currently have $30,000 in your Roth IRA, and you make one buy order per month of your favorite ETF, dollar cost averaging your annual contributions. With a typical discount broker, you might pay $7 per trade, which adds up to $84 per year.
But if you host your Roth IRA with Zecco, the same dollar cost averaging plan only cost you $30 per year. That's $54 extra dollars per year for your retirement savings... And if you were to invest that $54 in annual savings at an 8% rate, over the course of 25 years, you would earn $4,633.35! Do you see now why saving money on transaction costs is so important?
Additionally, let's say you're a frequent trader, moving in and out of stocks and ETFs in your Roth IRA. Regardless of the balance you maintain, you might save a lot of money by moving to Zecco if you make 25 or more trades per month.
Because the first 10 trades are free, while the rest are only $4.50.
So if you make 25 trades per month with another discount broker at $7 per trade, that's $2,100 per year. But with Zecco, those same 25 trades cost you $840 per year (15 trades x $4.50 x 12 months + $30 annual Roth IRA fee = $840). That's an annual savings of $1,260!
Learn more about Zecco by visiting the official site...
So what sort of investment options are available with Zecco?
With Zecco, you can buy or sell the following:
Keep in mind that if you qualify for Zecco's 10 free trades per month, this offer does NOT include options. Option trades are priced separately.
With Zecco, you can NOT buy or sell the following:
Dividend Reinvestment Plan
For a long-term investing vehicle such as your Roth IRA, commission free dividend reinvestment can really give a boost to your performance. So one of the first things to look for when investing online discount brokers is the dividend reinvestment option.
So does Zecco offer free dividend reinvestment?
Yes. However, keep in mind that while Zecco offers free dividend reinvestment, it only buys whole shares. The remainder is paid out to you in cash and added to your money market account.
Depending on your investment strategy, this may or may not matter to you. Just take note that some of Zecco's competitors, such as Firstrade, DO offer free dividend reinvestment in fractional shares.
So what is Zecco's reputation? How do their tools stack up against the competition? How about customer support and investor protection?
Scouring the web for comments, you'll find that Zecco's trading platform measures up to its peers. Complaints are few and far between, and the speed and ease of trade execution seems to measure up to day trading standards, meaning it's probably beyond what most investors need or want.
The website layout is easy to follow, and the help section is easy to navigate.
Zecco offers a customer service phone line that's open from 8am-7pm (EST) Monday through Friday. Chat and email representatives are also available 10:30am-7:00pm (EST) Sunday through Friday.
The Help section is easy to navigate with a host of Frequently Asked Questions which can help you in resolving most issues you'll face.
What Happens If Zecco Goes Out of Business?
Zecco's clearing firm, Penson Financial Services, Inc. is a member of the Securities Investor Protection Corporation (SIPC), which protects securities customers of its members up to $500,000 (including $100,000 for claims for cash).
Penson Financial Services, Inc. has also acquired "Excess SIPC" insurance from a third party insurer (Lloyd's of London) to protect client accounts up to their net equity for loss of securities and cash held at Penson Financial Services, Inc., up to an overall firm aggregate of US $200,000,000 over all customer accounts.
This "Excess SIPC" protection is in addition to the protection provided by the Securities and Investors Protection Act, which is administered by SIPC and is subject to certain conditions and limitations, details of which are available upon request. Please note SIPC and "Excess SIPC" provide coverage against loss of securities and cash, NOT against market depreciation, fluctuation in market value of your securities, or a trading loss.
My Zecco Roth IRA Review
Zecco offers its customers all the essentials:
Nevertheless, Zecco isn't always going to be the best option for hosting your Roth IRA.
Who is Zecco for?
Anyone with a Roth IRA balance of $25,000 or more who makes at least 5 buy or sell orders during the course of the year, or...
Anyone who makes 25 or more trades per month.
Who is Zecco NOT for?
People who fall somewhere in between...
If you have a balance in excess of $25,000, but you only make three or four buy orders per year, then the zero commission Zecco trades are negated by the $30 annual fee you pay.
In contrast, if you trade more frequently, you'll have to do the math to figure out if Zecco's your best bet. $4.50 per trade is still a great price, even if you don't qualify for the 10 free trades per month.
For instance, let's say you make 8 trades per month. If you host your Roth IRA with another broker who charges $7 per trade, you'll spend $672 per year. But with Zecco, you'll spend $462 (8 trades x $4.50 x 12 months + $30 annual Roth IRA fee = $462). So you still come out ahead by $210 with Zecco.
In the end, you'll really have to compare your expected trading costs with a competing broker to find out which one's the least expensive.
Of course, all this assumes you're trading basic stocks and ETFs. Options trading is priced differently and might be cheaper elsewhere. So, it all depends on your individual circumstances. In the end, though, you'll be hard pressed to find a better online discount broker for your Roth IRA.
So what are you waiting for?
And start down the road to retirement saving success with your own Zecco Roth IRA.
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