As part of my free trial of Contributor’s Corner, last week I bought 499 shares of Advanced Nutraceuticals (ANII.OB). ANII makes vitamins and supplements, and recently filed for a 500-to-1 reverse stock split. It’s doing this order to get under 300 shareholders and thus avoid all the paperwork involved with Sarbanes-Oxley compliance. Now, this could be a good or bad thing in people’s eyes, but I’m not focusing on that.

What I am focusing on is that in order to get rid of all the small shareholders, they are going to pay $4 for each share if you have 499 shares or less. ANII.OB is currently trading at ~$3.45. That’s about a 16% gain, and from George and other sources it seems like it is likely to go through. Here are some more articles:
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I got a call today from Scottrade that they want me to stop referring customers to them via this blog, as part of their Scottrade referral program. I didn’t have time to ask them exactly why since I was busy, but after hanging up I got to thinking – how is this a good idea for them? Not like I was spamming anybody. Isn’t that the whole point of having a referral program? To get more customers? Shrug.

…discussion at Vanguard Diehards forum, started by a newbie investor after today’s big stock market jump. Does it sound familiar?

I am 27 years old and just recently decided to buy into the market in a lump sum in a taxable account … on May 10, 2006, I jumped right in with about 35K. I couldn’t have picked a worse time to buy in. Two months later I’m down $2,600 with no recovery in sight, and little confidence of any near term turnaround. So last Friday, I moved everything to a money market account, and missed today’s bounce. Now I’m convinced that I will always make the wrong investment decisions, and can’t get the thought of knowing that I threw that money away out of my mind. What do I do now? Should I DCA money back in? Should I buy back in right now? Should I wait a few months and see how the market is performing? Should I cut my losses and abandon the market forever outside of my retirement accounts?

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I tend to swing constantly between being really interested in trading individual stocks and then not looking at a quote for weeks. To make things worse, I live in the Pacific time zone and the markets close at 1pm here. I am not a morning person, which leaves me with about two hours to trade each day! :/

I’ve always liked the idea of keeping the majority of my retirement savings in index funds, but having a separate money account to try and “beat the market”, as everyone says. Maybe either give it $50 a month, or cap it at 5% of my net worth? I’ve read several investing books that mention this as a way to manage the urge to actively trade, but does anyone out there actually have one of these accounts? If so, do you recommend it?

If you’re a Warren Buffett fan, you’ll enjoy this 3-part series by the Charlie Rose show on PBS, free for now via Google Video:

July 10, Monday – Warren Buffett: The Man
July 11, Tuesday – Warren Buffett: The Business
July 12, Wednesday – Warren Buffett: The Gift (not up yet)

From the brief bit I’ve seen, Buffett seems very energetic and interesting to listen to. I’ll definitely watch this later. Thanks to AK for the tip.

There is a new discount brokerage on the block – SogoInvest.com. Mentioned yesterday in the Wall Street Journal, this broker is interesting on a couple of levels.

Automatic Investing Broker King?
It’s obvious that this broker has buy-and-hold automatic brokers like ShareBuilder as one of its targets. It offers the same no minimums and easy dollar-cost-averaging via fractional shares and automatic weekly investing. But it’s cheaper. At the most basic plan, it offers $3 automatic trades vs. $4 at ShareBuilder. And whereas ShareBuilder charges $14.95 for real-time market trades, SogoInvest charges the same low $3. Nice.

If you want a lot of auto trades, you can get 15 free for $15/month, plus only $1 more for each additional one. Real-time trades are then only $1.50. However, if you truly want to “build your own mutual fund” with more than 20 stocks, FolioFN still offers 200 automatic trades per month, for $20/month or $200 a year.

Overall Discount Broker King?
Looked at another way, SogoInvest is just another really cheap discount broker. $3 a for market/limit orders is pretty solid. As an introductory offer, new signups at Sogo get $1 trades (both real-time and automatic) for 90 days. Note that IRAs are currently not available. A good question would be what kind of features they offer and how they compare with other brokers with trades in the $5-$7 range.

Still, I wouldn’t say they are the hands-down cheapest. MB Trading which still offers trades starting at only $1 (100 shares or less). Depending on your trading behavior, MB Trading or the similar Interactive Brokers might be cheaper.

Grant at TheCornerOfficeBlog has his own opinions on SogoInvest as well, and makes some good points.

I think that Sogo offers a good alternative to ShareBuilder (although SB has given me a decent amount of free money). But as a discount broker I’d weigh all the options first. Price is big, but not everything.

For me personally, I’m going to stick with Scottrade for my main account, and continue to tinker with my MB Trading account whenever I have enough time to do so. Of course, if they offer a juicy sign-up bonus…

The efficient market hypothesis contends that it is not possible to consistent beat the market on a risk-adjusted basis, as overall people are rational and all of the information available is already priced in the investment values.

On the flip side, the field of behavioral finance contends that humans are inherently irrational, and we, well, do stupid things. Here’s a list of such stupid things. I don’t know about you, but I think some of them definitely apply to me.
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When I started my first 401k about three years ago, I was boggled by the fund choices given to me. I ended up picking the Fidelity Freedom 2040 Fund (FFFFX), probably for the reason most people do – it looked simple and had tons of funds with great sounding names in it. Disciplined Equity? Value? Growth and Income? They all sounded pretty good to me. Who doesn’t want some discplined investing, value, or growth?

But what are you really buying? If you read its information page you see that this fund of funds includes 17 different stock funds and 6 different bond funds:
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As a follow-up to my post Researching Bridgeway Funds and BRSIX, I went ahead and opened an account with Bridgeway and bought $2,000 of BRSIX. I chose Bridgeway over other Micro-Cap alternatives for a variety of reasons.

First, after looking at the Micro-Cap ETFs, none of them were truly indexes either, as you really can’t be in this sector. They all have their own unique algorithm for choosing which stocks to hold, for better or worse. Also, since the ETFs are new it is unknown how they will react to large inflows or outflows of money as Micro-Caps are very volatile. These concerns are mentioned in this CBS MarketWatch article.
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