Interview: William Yeh, President, SogoInvest
David Houle’s post on Sogo Invest and how they have cut commissions by eliminating the middle man sparked my interest, and I was fortunate enough to land an exclusive interview with Sogo Invest President, William Yeh.
My first reaction is that Mr. Yeh is very much in tune with what the every day investor wants in an online trading brokerage platform: low prices, ease of use and great service.
The following is a summarized transcript of our conversation:
Grant: Mr. Yeh, you’ve got a solid background in the brokerage industry with the development of Genesis Securities, LLC and the Laser trading platform. Tell me a little about the Laser platform.
William: My history is in trading futures, and I believe in utilizing automation and electronics to remove the human hands from trading, making the whole financial process as fluid as possible. That’s why we created the Laser system.
We developed the Laser trading platform to interact directly with the markets, and in turn we eliminated the need to buy information from a third party. We get all of our data directly from the NYSE and the NASDAQ. We also clear our own trades, eliminating yet another third party.
The Laser system was developed for the professional trader, and it has retained a Platinum rating from the NASDAQ. Other trading platforms such as E*Trade have a Silver rating.
Grant: You’ve got great technology for the professional trader, and you trade between 2-4% of the daily volume on the NASDAQ. What inspired you to develop Sogo Invest?
William: We really developed Sogo Invest for the simple, every day trader. While the Laser system is used primarily for the professional trader, we are taking that technology and putting into Sogo Invest.
Grant: How can Sogo Invest undercut the rest of the online brokerage markets in terms of commissions and fees?
William: Since we buy our own data directly from the NASDAQ and the NYSE and we clear our own trades, we’ve eliminated many of our third party costs. We pass these savings directly on to our customer. We could raise our commissions to $10, $8, or $6, and enjoy a larger profit, but we want to pass these savings on to the customer to get more people to join us, and more importantly stay with us.
The large amount of volume we clear every day also helps keep costs down, based on the economy of scale.
Our price speaks loudly, but service is also key.
Grant: Does Sogo Invest have its own dedicated customer service team, or are you relying on Genesis for that support?
William: Our customer service is well established with Genesis, but Sogo Invest does have it’s own dedicated customer service department. Our customer service staff will answer in four rings or less.
We have created online video tours of many of the processes and features, but you can always call us. During the last few days since we took Sogo Invest public, the response has been overwhelming, but we didn’t overload our phones. I think this is mostly in part to keeping everything easy and providing good online video tours and support.
Grant: What is your philosophy with Sogo Invest?
William: I asked my self, “Why do I want to be part of the crowd? There will be another William Yeh that will come along and charge less than the other guy”. It’s really all about adding value for the people, and the technology opens up frictionless trading.
I believe people should invest for the long term, taking advantage of dollar cost averaging and compounding from the markets. The ability to invest in fractional shares provides added value to the customer, making it easier to invest what you can afford.
Grant: When will IRA accounts and mutual funds be available?
William: The majority of people are still interested in mutual funds because ETF’s are so new. We’ll offer mutual funds in the next couple of months, but IRA accounts will come first, within the next month or two, if not sooner.
Grant: Can investors open a margin account?
William: You can open a margin account right now as a matter of fact.
Grant: What about trading options?
William: We’ll add the ability to trade options in a few months, but IRA accounts will come first.
Grant: Does Sogo Invest provide investors the ability to take advantage of Dividend Re-Investment Programs (DRIP’s)?
William: That option is not in place yet, but it’s not out of the question. We have the technology to make it happen, it’s just whether or not the people want it. What ever makes it easier for the people. If we get a response from the people that they want something, we have it and we’ll make it available immediately.
Grant: Does Sogo Invest have some of the higher end utilities like Level II quotes, real time charts, time and sales, etc?
William: These utilities will be included in Sogo Invest, and we will not charge for them. I like to give away things for free, and since we developed and own the software, we’ll include it for free. We want to spoil the customer and win their business. What ever the people want, we will provide it.
Grant: I understand that customers can fund their account through automatic transfer, but can they transfer funds directly from another broker into Sogo Invest?
William: Absolutely. You just fill out the form and we take care of the rest.
Grant: Will Sogo Invest users have the ability to set stops: limit stops, trailing stops, etc?
William: We have stops, but they’re more for professional traders and I’m not sure that’s something the simple trader needs or wants. However, if the people want it, we have it. It’s just whether they want it or not, but we have to keep it easy.
My mantra is that “it has to be so easy my mother can do it!”
Grant: Well that about wraps up all my questions, thank you for your time and good luck with Sogo Invest!
William: Thank you, Grant, and call or email me any time with questions.
Additional Information:
Sogo Invest Website
Genesis Securities Website
Sogo Invest Press Release (pdf)
Wall Street Journal Article (pdf)
CNN Money Article
Sogo Invest Comparison
I’ll have more thoughts on Sogo Invest and how they stand up to the rest of the online brokerage market in future posts.
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Great interview. I’ll give a Sogo Invest a closer look! Wil
He’s got a good thing going, and it definitely seems like its geared more toward the conservative investor. I noticed that there is a 5k share maximum per order, and everything over that is an additional 0.005/share.
Also, I can’t believe he’s not offering the DRIP right up front. Seems like that kind of program would be ideal for long term investors who want to just funnel dividends right back into the market. Bryan
I have made a slight correction to the transcript, I made mention that E*Trade retains a “Gold” rating from the NASDAQ, and it actually holds a “Silver” rating.
Genesis Securities is the only company with order-entry software rated as “Platinum”, and there is not a Gold rating in the scale.
To see the full listings, click here.
Thank you William for correcting me!
-Grant
Great interview! I’m not much of a trader but this gives me a different perspective on the industry. Let me check out the site!
Thanks Kay, be sure to post your thoughts on Sogo Invest (either good or bad!) after you check out the site.
-Grant
Nice interview. From my perspective, it seems that Sogo Invest is better suited for the buy and hold crowd rather than “traders”.
I’m not sure I like the 5,000 share cap on the $3 commission, but I suppose for most people this is not an issue. I like the fact that they eliminate the market makers, which means my orders should be executed more efficiently.
I’ll keep an eye on Sogo and see how they play out in the brokerage market. ~Nova~
Nice interview. $3 trades are definitely worth looking into.
I like the idea of using a deep discount broker for one trading style, and using a higher end broker for another style.
I’ve got two different portfolios, one is a buy and hold, the other a swing trading portfolio. I also dabble in the micro-cap stuff, but not heavily.
Cap
I emailed questions to Sogoinvest a week ago, and a week later, I still haven’t received a response. I called their phone number this morning almost an hour after their posted opening time on their website, and, contrary to the interview’s claims of answering the phone within 4 rings and not having overloaded phones, I was not able to reach a person.
I called later, and I did talk to a person. Although polite, they did not know the answers to my questions. I was transferred to two more people, and the final person said that, contrary to the interview, they do not have stop orders, yet. The developers are working on it, and they hope to have them by the end of the year. While you can use ACH to electronically transfer money from your checking account to Sogoinveset, your only options to get your money back are by check (free) or wire transfer (currently $20). Don’t forget to send in a signature form and a copy of a photo ID, or they won’t release your money.
If you are the type of person who
1. wants to regularly invest a little each month
2. wants it automatically taken out of your checking account
3. wants to invest in a specific stock instead of a mutual fund
4. isn’t concerned about the rise or fall in the price of the stock
5. is not very interested in being a trader
6. won’t need the cash quickly
then Sogoinvest is probably a good way to go.
If you are the type of person who
1. makes lots of trades
2. doesn’t want to be tied to a minimum investment
3. watches stock like a hawk so that you can sell on your own without a stop or trailing stop
then you might like Sogoinvest. There are other sites on the Internet were you can trade for less (e.g., half a cent per share), but they require a $2,000 investment or more. If you have the money, it might be worthwhile to look elsewhere.
If you aren’t one of those people, then Sogoinvest looks half baked. They don’t have the minimal features I would expect in order to do the most basic trading. This more of a savings-account-invested-in-stocks operation. I’m sticking with Scottrade for now, and I’ll keep my eye on Sogoinvest to see if they have something better to offer down the road, including Roth IRA accounts and trading options.
mose
mose,
Great write up, and thanks for contributing your experience.
I will forward your experience on to Mr. Yeh, as your customer service experience is something I’m sure he’ll want to know about. If appropriate, I’ll post his response.
I agree that it seems a bit awkward that the ACH transfer isn’t a two way street. In keeping with his mantra to keep it simple, it would cut down on a lot of processing time and paperwork to be able to transfer OUT your funds as well.
To clarify the part about the stops and limit orders (I spoke with Mr. Yeh about this after I wrote the interview), he said they have the capability to implement the functionality into Sogo Invest, they just haven’t done it yet as they don’t know if it’s something people need. In other words, they have it all figured out because they’ve done it already with their high-end Genesis platform, they just need to code it in to the Sogo Invest platform.
Anyway, thanks again for your feedback, and I’ll drop you an email with Mr. Yeh’s response.
Grant
Mose, this is the reply from Mr. Yeh:
I would like to answer to the questions:
For customer’s protection, in order to release money especailly by wire, we want to know the person requesting the money is indeed the account holder, and that is why we want to have a signature card on file.
We have the stop order. We are waiting to see if there is enough people requesting it before releasing it on Sogo.
This is what I said in the interview.
The phones should be picked up within 4 rings.
The e-mail should be responded quickly.
I’m looking into it.
We will keep on adding more and more features to Sogoinvest.
I will keep you posted on the progress.
Regards,
William Yeh
The following are stopping me from signing up with Sogoinvest:
a) no ACH-out, not only is it troublesome to have to call in to get money out, investors also lose the interest when the check is in the mail and not yet cashed (already mentioned earlier),
b) a wait of three days before money submitted by the ACH system is available for trading (according to feedback on the FW forum); other brokers let you trade with the money the same day you submit the ACH.
I want to feedback to your readers that while the per trade costs might be low, they need to be aware of the unconventional way Sogoinvest treats your money deposits and margin interest. These are what I gather from my emails with their customer service:
1) If you bought a security on margin, margin interest accrues on day T+1. This is very unlike most other brokerages which start charging margin interest only on day T+3, the settlement date.
2) When you submit a ACH into Sogoinvest on day T, you money gets deducted on day T+1 from your bank BUT the money will take another 3 more days before it posts to yout Sogoinvest account, i.e. on day T+4. I specifically asked whether any interest is earned and the answer is no. So, Sogoinvest dinks you of three days’ interest whenever you perform an ACH in.
The above amounts might be small but in principle, I dislike companies that think customers are fools and can tolerate unfair practices.
I document some of my additional comments in my blog HERE.
Thanks for the update, fundfan!
It appears that Sogo Invest has a few things to work out to make them competitive in the market, but from looking at your blog, it seems the orders are filled quickly and in some cases at a lower price than your limit order.
I agree with your notion that interest should be accrued the day it is drawn into the account, however there are a few middle men that take their processing time, so I’m not sure Sogo Invest is to blame for the slow ACH time (although they could, I just don’t know).
Thanks for your comments!
-Grant
Hi Grant,
Regarding the ACH, I don’t think it is the middlemen issue. When I first sogo asked about the ACH delay, their reply was
“we process ACH over the course of two dates to protect both ourselves and our users from fraud” — implying they have the money in their account.
(I have saved copies of all their replies in case they delete the replies in my account)
That was on 8/10/05. At that time, their customer service also says the timeline is
Day 1: submit ACH
Day 2: bank debited
Day 3: credit posted
I could accept that timeline and so I started investing with sogo.
Subsequently, they changed their policy to lengthen the delay. Now it is
Day 1: submit ACH
Day 2: bank debited
Day 5: credit posted
At the same time, I also found out that they start charging margin interest on day t+1, even before the trade settles.
Now, I have an ACH transfer which was debited from my bank on 8/16 (to pay for a trade that settles on 8/17) and is still not credited as of today 8/21. In the meantime, they are presumbly merrily charging me margin interest at 9.5%. This is simply unfair.
So I have stopped additional investments with sogo and I am watching to see if enough feedback will make sogo revise its policy. Otherwise, I will be doing an ACAT out real soon, before sogo starts charging for ACAT too.
PS. Just a long shot, since you managed to have an interview with their president, is it possible to feedback this to him?
Thanks for the additional thoughts, fundfan.
I will definitely feed this entire discussion on to William, as I’m sure he wants to know about this kind of stuff. If I get a reply from him, I’ll be sure to post it.
I agree with you, funds should be posted to the account as soon as possible, and I think there is enough protection in place (on the bank side and through the ACH transfer process) that an additional lag should not be required.
-Grant
Yeah, the “fraud prevention” reason cited is just a lame excuse to earn interest on the float at the clients’ expense. Many financial institutions can make do without this 3-day delay, including companies like Ameritrade, Etrade, Fidelity, Vanguard, GMACBank, VirtualBank, EmigrantDirect, just to name a few that I know of that do not impose a 3-day ACH delay.
fundfan, I agree there are more transparent companies out there.
However, I just ran across this today: I deposited a check from my employer last Saturday into my checking account. However, the check hasn’t cleared yet, and I still don’t have access to my funds, a full two business days later.
On the other hand, if I wrote you a check and you went and cashed it today, the funds would be withdrawn from MY account by tomorrow morning at the latest.
I guess it helps not to think about the lost 0.04% interest for three days…
-Grant
You must have deposited a large check. I deposit checks at the local Citibank branch and I have seen sums as large as 10k available immediately. Larger sums (>10k) take a maximum of 5 business days (this is for California).
In this regard, Citibank is one of the best and Citibank has my business for this reason. At most other banks, including BOA which I used to have an active account, they usually hold up to 10 or 12 business for large checks.
At Sogoinvest, the interest I lose is at 9.5% (margin interest rate) since I had assumed I can ACH-in the money to settle a trade. But Sogoinvest changed the rules mid-way and I am caught in the bait.
FundFan, I did receive a reply from William on your ACH and margin interest concerns. Looks like you had some influence on changes.
————————-
From William Yeh,
We do understand that the ACH process is currently longer than common industry practice; this was a temporary situation, until we developed a method to shorten the process while maintaining account security, which is now in place. The reason we had a longer period was to prevent funds from being transferred erroneously, in order to protect customers from fraud. Typical ACH processing times do range from 1 to 5 days, depending on the brokerage in question.
Effective immediately, SogoInvest has instituted a new bank account verification policy. Two small deposits are made to each bank account that is entered on our website, which are then viewed by customers in their bank accounts. Once the customer verifies the deposit amount on Sogoinvest.com, we can be reasonably sure the account is secure, and can therefore shorten the ACH process for that individual.
Very soon, the ACH time frame will be shortened to one or two business days for verified accounts.
With regards to margin interest, various brokers have different policies regarding when the margin is charged. Some charge the margin upon settlement (T+3), while others charge immediately, as soon as the funds are actually borrowed. Currently, SogoInvest imposes a margin charge upon the borrowed date. When compared to other brokerages that do have a T+3 policy, it should be noted that our margin charges are noticeably less.
SogoInvest is working very hard to provide our customers with the maximum value possible when it comes to all fees and commissions. If you have any questions, please feel free to contact me and the SogoInvest team at info@sogoinvest.com.
That is why I didn’t open an account. I have Sharebuilder and I thought (buying on Tuesdays) if Sogoinvest I can’t invest my money any faster with Sogoinvest because it takes 5 days to even get the money there and also 1 days to buy if their automated buys. So I thought if I make $500. on Friday in my business and I want to buy with Sogo it would take me ACTUALLY the Next , Next Monday (1 week and 1 day)to buy my ETF’s. So I decided that with Sharebuilder I could invest my money into the market faster ,with Sharebuilder even if I had to wait till Tuesdays to buy.(plus Sharebuilder even pays 4.25% while I wait the 3 days).
Vacman, that’s true, but it appears that Sogo is making some changes in the way they handle transfers.
It appears they’re going to do it like many others (paypal, etc) have done and it’s pretty easy to do once you’re “verified”.
I’d like to see them follow through with these changes, and see how people react to them.
Thanks for your thoughts,
Grant
Hi Grant,
Thanks for following up with the questions and alerting me to Sogoinvest’s reply.
It is encouraging to see Sogoinvest responding to the comments, and hopefully they will update their ACH timeline (it is still the old timeline when I checked this morning).
However, I don’t quite buy the margin interest argument since technically, the money is not borrowed until Sogoinvest has to settle the trade. Maybe Sogoinvest also credits the money the next day on a sale — I haven’t tried asking that question. If this is so, (I am thinking aloud) why not just stick to the industry practice?
I also suggest that Sogoinvest puts the unconventional way it calculates margin interest somewhere in their FAQ. Most people are not amused when they find out they are charged interest differently from what they expected.
Thanks Grant , I’ll wait and see. I like everything about Sogoinvest . I wish we knew how many accounts they have but they won’t even give us a estimate. (to see if anybody is really using them). Why did they go to 5 days ACH transfers ? Call them on the phone and ALSO E-mail them and you’ll get two different answers on that question. Foliofn did the same thing to their accounts and now the only way you can get new money to your account at Foliofn is to send a CHECK only. Hopefully they won’t follow Foliofn ways.
FundFan, I agree, it’s great to see a company respond to suggestions with open arms. According to William, they are working on their ACH system.
I also agree with your points on the interest issue, but to put it loosely, “their ball, their rules”. You would think, however, that deposits would be immediate, and you’d start drawing interest immediately as well.
Vacman, I’d like to see their account numbers too, just to see how well they’ve done in such a short period of time.
I think they’re still in a very fluid development stage, which means their policies and practices change quite frequently. As such, you may get different stories from different channels. Only speculation on my part though.
-Grant
Grant,
You are absolutely right on the “their ball, their rules”. That’s why I am providing feedback and waiting out for some time. If the rules are not changed and I still don’t like them, I will take my business elsewhere.
That’s the beauty of free commerce. If you don’t like their rules, you play elsewhere.
With so many players on the field, I think Sogo Invest needs to provide superior service in all aspects of the game, and that includes providing superior treatment of interest schedules.
Thanks for the feedback, by the way, I know William appreciates it, and I think it’s constructive criticism that accommodates change.
-Grant
For anyone interested, HERE’s my comparison of Sogoinvest with Ameritrade Izone.
Thanks indexfundfan, I copied your Izone and Sogoinvest comparison chart thanks for your effort. I don’t like that Sogo has many different answers to my questions.!!!!(dif Rep with dif answers). I hope they will get it together. I MAY tranfer my Scottrade account to them if I knew they would treat me as well as Scottrade has. Scottrade has been good and very honest with me so far and NEVER screwed up anything as of 8/31/2006(ha,ha,) thanks for your responses indexfundfan and Grant also!!! Vacman
vacman, I’m glad you found the table useful and took the trouble to provide feedback.
By the way, it is official now. Upon logon tonight, I noticed I have been charged margin interest at Sogoinvest due to their unusual way of calculating margin interest and delayed posting of ACH-in funds. I was still half hoping that the CSR made a mistake when I asked them how margin interest is charged.
The statement is however not out yet; I will try to figure out the details later when it comes out.
Good info guys. Since Sogo is so new, I think I’d give it time before I throw them to the curb completely.
I also think it’s important to remember that Sogo was (at least from my observations) created for the less savvy investor. Those who don’t buy on margin, and really don’t care about ACH timeliness. However, as I mentioned before, if they want YOUR business, they need to keep YOU happy. Since ACH transfers affect every account holder, not just margin traders, they need to at least be competitive with the rest of the players in the game.
I still view Sogo as an investors platform, not a traders platform. Mostly based on my conversations with William Yeh.
-Grant
Grant, I see what you are saying. Less savvy investors are easier to fleece; while savvy investors would not accept these practices.
BTW, I am not a trader. I had originally intended to use Sogoinvest to accumulate ETFs.
I don’t know I’d say that Sogo Invest is trying to fleece unsavvy investors, but those that have some experience with how other platforms and brokerages work will definitely be turned off by how they handle margin and ACH (especially ACH as it applies to ALL investors).
I rarely buy on margin, so how they handle the interest really doesn’t bother me too much. But having to wait a week before I can use my money does.
I still think Sogo is a good buy and hold brokerage, but they’ve definitely got some bugs to work out, as all new endeavors do.
-Grant
Grant and Indexfundfan, I’ve been investing for 10 years now and I have never used a margin. If we don’t have the money to buy a stock don’t borrow to buy it, it may bite you. So Sogoinvest would fit me just fine because I don’t BORROW to buy. I know that someone will say I made alot of money using margins but I know of some that GOT into trouble as well. STAY AWAY FROM BORROWING TO BUY STOCKS. Wait till we have the money then we’ll go buy a good quality stock.I don’t think SOGO is out to fleece anybody. I think they are REALLY wanting to start and get a good business going and then try to sell it to a bigger brokerage house.(that is where people make $40,000,000. in 2 or 3 years).That’s what will happen eventually!!!! I really like their platform but I feel more at easy with my current brokerage. Have a good weekend Grant and Indexfundfan. Vacman
I agree completely, Vacman.
It takes a lot of discipline to buy stocks on margin. A lack of discipline will cause you to lose your shorts, and then some. I’ve gone short only once, which forces you to “buy” with borrowed money. While I think there is definitely money to be made with this philosophy, it takes a completely different outlook on the market to be successful.
Also, remember that Sogo Invest is owned by a parent company in Genesis Securities, which IS a high end brokerage house. So there’s really no chance in Sogo Invest being bought out by anyone. Why would Genesis Securities want to see Sogo Invest be bought by their competition.
What’s more, the technology implemented in Sogo Invest was developed by Genesis.
The nice thing is that if you get to the point that you WANT a bigger brokerage house, Genesis Securities is the next step.
So I agree, Sogo is not out to fleece anyone, and they have the best of intentions. I think their primary focus is on the long term buy and hold investor who doesn’t want to watch their portfolio every single day.
Have a great holiday weekend to you!
-Grant
To Grant , I never thought about Genesis Sec. before(I keep thinking they are separate company) You are Prob. right, they aren’t likely to get bought out!!!! Do you remember Freetrade.com (owned my Ameritrade) Freetrade.com was opened for a year or so and your could trade 20 times a month for FREE(I think it was 20 trades ?)and after they got alot of accounts they closed down and moved them all over to IZONE .(owned by Ameritrade).Maybe they are thinking that way.? I STILL wonder WHY all other brokers can’t trade for $3.00 also!!!!!(they can but will not likely happen) If we owned Sogoinvest, we would say to ourselves, HEY, If Sharebuilder can get 1,250,000 account using a only Tuesday buys for $4.00 dollars a trade surely we can get alot of account ,allowing our customer to buy for $3.00 dollars a trade AND BUY EVERYDAY ???? If Sogoinvest makes it ,Sogo will get alot of Sharebuilder accounts because Sharebuilder customers really don’t like to wait till Tuesday to make a trade.(but they have to to get the $4.00 trade) 90% of Sharebuilder customers do buy on the Tuesday because that is the only day it is $4.00 a trade. NOW if Sharebuilder would go to another day to trade(like Tues and Thurs) Sogoinvest probl. wouldn’t get any of their customers. I really hope that Sogoinvest will make it because it will be good for them and US. All Brokers will have to adjust their Trade cost !!!! Have a GOOD Monday Grant,- Vacman
Vacman, remember that the direct link with Genesis has it’s benefits. Genesis executes it’s trades directly with the NASDAQ and NYSE, eliminating the middle man that brokers like Ameritrade and such have to go through. This is why brokerages like Ameritrade offer higher commissions: they have to go through a middle man to buy and sell shares with the market.
Additionally, Genesis is it’s own clearing house, eliminating yet another middle man.
So Sogo Invest has a direct advantage over other low-cost brokerages due to the relationship with Genesis.
-Grant
Holy cow, what a great dialog you guys have going on sogo investor! Do the peoplle at sogo really read this blog?
Grant , Do we really know how much we are saving by them going direct to the market (by-passing the middleman) .05 a share? On $10,000. dollars it may, may a difference! But for the average investor like us we are prob. only saving .50 cents or so on a trade(unless we trade 100,000 shares of options). Hey Ralph, We are just talking about a new brokerage company called SOGOinvest. Join in if you like. Grant ,is there a way to find out how much of the spread that the middleman would receive for the trade? I’m not as advance as you are, probably , so I’m not up on these issues. If Sogo cost us $3.00 a trade on 50 shares of WAG we are prob. only giving up .50 cents.(on $2,500 value trade) Grant, do you have any thoughts on how much we are really saving by using discount brokers (like SOGO)that are having a direct clearing firm in their back pocket?- Vacman
Unfortunately I can’t quantify how much Sogo Invest saves by clearing their own trades, etc.
All I know is that when I asked William Yeh, President of Sogo Invest, how he could offer $3 trades when nearly everyone else was higher, his remark was that his overhead was lower due to the direct link to the NASDAQ and NYSE, along with the fact that they clear their own trades.
Ralph, please feel free to join in if you have any questions! Yes, the people (although I don’t know exactly who) at Sogo Invest do read this blog post.
-Grant
Hey, you guys misunderstood how I use margin. I don’t borrow to buy stocks/ETF. Let me explain how I use margin at Ameritrade Izone.
Normally, I don’t keep a cash balance at Izone because of the low interest rate for cash balances. But when I need to buy an ETF, I just purchase it on the day I want “using margin”. But NO MONEY IS ACTUALLY BORROWED yet until the trade settles in day T+3. I would ACH the money into Izone by day T+3, and there is never any margin interest charged. Like Vacman, I would not borrow to buy a stock.
With this strategy:
1) My cash continues to work hard for me in a money market account at ~5%, not at Izone’s ~1% or Sogoinvest ~2%.
2) I can buy stocks/ETFs whenever I want without keeping money in the discount brokerage and earning miserable interest.
Don’t you guys want to keep your money earning at 5% before it is invested?
As I said before, Sogoinvest is the only brokerage that starts charging margin interest on the trade date (not settlement date). It does not work for me (for now).
Thanks for clarifying, and it appears you have a good system worked out. I can see where, using your methodology, you’d be concerned about margin.
As for me, the amount of free cash alotted for trading is never significant enough to even worry about interest as it applies to cash in my trading account.
I usually have a couple thousand in reserve, and the interest on that amount does not amount to much. In addition, if I ever decide I have excess cash, I invest it into high yield ETF’s or trusts like PVX, PGH, etc, earning at or above 10%.
However, the larger the number you play with in your cash account, the more important interest becomes.
-Grant
Grant, BTW which broker do you use?
Indexfundfan, I’m at another brokerage company, they won’t let us do that like you do.(I LIKE THE IDEA,THOUGH) I never thought of doing that before but that is a good way to do it.($3,000 at 5% is $1.23 for the three days) It really makes your trade cost go down -1.23 per trade. Yes I (like you indfdfn want my money growing even for 3 days) really have fun learning info. from Grant and Indexfundfan, thanks for letting me pick your brains and thoughts. I can see that SOGOinvest wouldn’t work for you(or me) if they are going to charge margin % on the 3 days. I better get to work Guys. Both of you have a good week, talk to you guys next weekend . Vacman
I currently use Ameritrade for most of my trading. I’ve thought about dabbling with Sogo Invest, but I need to rework some things in my portfolio before I can jump in.
As I have said, Sogo is not for everyone, and neither is Ameritrade. But I think there are aspects of Sogo Invest that could fit in to trading strategies.
-Grant
By the way, thanks for the continued discussion!
Vacman, are you with Scotrade? I could be wrong but I am quite sure they settle their trade at day T+3. What you need is to convert your account to a margin account and then make sure you move the funds for the trade to them by day T+3. Call Scotrade and ask them, specifically on 1) when is a trade settled, 2) when does margin interest start accruing and 3) when will funds moved to them be credited to your account. My mistake with Sogoinvest is that I failed to ask them these three questions specifically, and wrongly assumed that Sogoinvest follows industry conventions.
Indexfundfan, Yes I’m with Scottrade, and yes you are correct on ScottradeT+3 days. thanks , I’m checking on this issue thursday about converting my account over to margin for that reasons you said 2 days ago.(you got me to thinking,Thanks) I can see that I’m going to have a problem. Scottrade as of today(9/6/06) still doesn’t have a way to transfer money yet!!!! You have to send a check in the mail before you can buy stocks. You have to have the money in the account before you can buy. I’ll check on the margin issue Thursday so I think I would have 3 days to get the money there. Thanks, Indexfundfan….. I E-mailed Sogoinvest 9/4/06 and still haven’t got a response yet. They may TRY to answer the phones in 4 rings but their E-mails a lot of the time never get a answered. I E-mailed SOGO 3 weeks ago and still haven’t got anything back yet!!! I decided to erase my history I figure they won’t answer it after 3 weeks.I still wonder if they are really interested in customer service or interested in building a Web-site. So far I’m not very impressed with their responses. I wonder if what would happen to me if I REALLY needed help with an issue on my account!!!! My response would think they would re-act the same way.(NO-RESPONSE) that’s what I’m leeeeeeery about new brokerages. bye-Vacman
As of today 9/8/2006 Sogo hasn’t anwered my e-mail yet! Been 4 days so far.I may have to call . Vacman
Hey guys, I received an “official response” from Sogo Invest management concerning the issues related to how they handle margin. I have pasted it below:
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We at SogoInvest very much appreciate all customer feedback, whether sent to us directly or posted in the blogosphere. With this post, we would like to address the issue of margin interest.
SogoInvest policy has always been to charge margin interest when the funds are actually borrowed upon settlement. Typically, a trade is settled in 3 days from trade date (T+3).
All interest credits and debits are charged together, on the last day of the month, and are visible on the SogoInvest statement, which is available early the following month.
We will also shortly be releasing an update to our ACH timeline.
Our intention is to make the funds available for investing and trading when the client’s money hits the account.
If you have any questions, comments, or concerns, please feel free to contact us via email, secure message center, or phone.
Regards,
SogoInvest Management