Last month, I praised ShareBuilder for its low fees in a list of the best true discount brokerages. In the past, ShareBuilder has offered free money in the form of account opening bonuses to attract new customers, but these promotions have been missing since ING Direct purchased the brokerage.

ShareBuilder has introduced a new $25 bonus, only applicable for new customers. In order to qualify, open a new account, use the promotion code ING25JULY08, and make a trade by July 31. After the first trade, the $25 will be deposited within four weeks.

Note: To use this code, on the account opening screen, select the box next to “I’m responding to a promotion.” The website will prompt you for your promotion code. If you enter the incorrect code, ShareBuilder will let you know and not let you proceed to the next screen. If the code is valid, you will be able to proceed to the next step, but there is no immediate acknowledgment of the code’s acceptance.

My strategy would be to open an account with this promotion code, transfer $25 into the account, purchase an exchange-traded fund or a stock. The purchase will require a $4 fee, so you will be buying $21 worth of the investment. Wait for the bonus to deposited into your ShareBuilder account, and transfer the $25 back to your savings or checking.

Following this plan, you will have $21 in your investment without having spent any of your own money. ShareBuilder does not currently charge account maintenance or inactivity fees, so your free money will only be eaten away by the poor performance of your investment. I hope that your ShareBuilder investments perform better than mine have, though.

Thanks to Consumerism Commentary reader Sarah for informing me about this new promotion.

Active stock trading has more in common with gambling than it does with investing. On top of that, it’s expensive gambling. When you step up to a quarter slot machine, you know each bet will cost a quarter. You don’t lose a nickel on each spin as a “transaction fee.” In order to play the stock market, with “play” being the operative word, you lose money right off the bat in the form of commissions.

So if you’re going to invest in stocks, it makes sense to find the least expensive option. Here are some of the more popular choices. What are your experiences with these brokerages?

ShareBuilder. ShareBuilder’s lowest commission fee on an account without a monthly fee is $4. Last year, ShareBuilder was incorporated into ING Direct. Out of all the discount brokerages listed here, ShareBuilder is the only one with which I’ve had direct experience, and I haven’t had any problems. I currently have three investment accounts, each initiated with free money from account opening bonuses. I invested in one exchange-traded fund and two stocks, MSFT and AKAM. The accounts haven’t fared well, but since I’m playing with small amounts of free money, I am not shouldering much overall risk to my portfolio.

If you trade more often, ShareBuilder is willing to give you a discount on your commissions and some free trades, but you’ll have to fork over $12 or $20 each month. Keep in mind that the low commission will only qualify you for a bulk purchase. That is, if I place a $4 order today, it won’t be executed until next Tuesday with all this week’s orders. If I wanted to purchase a stock in real time, I’d have to spend $9.95 for a real-time purchase.

No matter which monthly plan you join, you’ll have to pay a $9.95 fee for selling.

Zecco. Zecco offers up to ten free trades every month if you maintain a minimum of $2,500 with the brokerage. Otherwise, each trade costs $4.50. These are all real-time transactions, not bulk, like ShareBuilder. Zecco charges $10 if you want to buy a no-load mutual fund, however. That’s an unappealing fee, and it’s a reminder than one should keep holdings in an appropriate account. Zecco might be a good low-cost option for stock trading, but Vanguard and Fidelity might be more appropriate for mutual funds.

Both Zecco and ShareBuilder will not charge you for inactivity. It doesn’t hurt to let your account sit if you decide to stop trading, at least until they change their terms and decide to begin charging an inactivity fee.

E*TRADE. If you have less than $12,000 at E*trade, this brokerage will charge a $12.99 commission fee for each trade. Additionally, E*TRADE will charge a quarterly fee unless you meet one of the many conditions described here.

My comapny stock purchase plan is maintained by E*trade, and due to the market’s poor performance, I’m waiting until the stock is higher before selling my shares acquired over the past two quarters. By combining more share sales in one transaction in the future, I’m also saving on transaction fees. It costs $19.95 every time I sell ESPP shares, so I can save money by not selling four times a year (and also, I hope, waiting for the stock to rise).

Scottrade. Three years ago, Wachovia announced they were adding a $50 annual fee to my discount brokerage account. I tried to get the fee waived, but my protests fell on deaf ears. Rather than paying the $50 fee once and continuing to do so every year, I opted to pay the $75 account termination fee to move my funds to Scottrade. Scottrade offers no account fees other than the $7 commission for online trading. As I was holding only one mutual fund and I didn’t plan to do any trading, the account was free for me.

When I opened up my new Scottrade account, I was referred to a “local” branch. The closest branch was an hour away. I didn’t have to visit the branch to open my account and transfer the mutual fund shares, but they did call me quite often until they realized I wasn’t planning on buying any more products.

TD Ameritrade. TD Ameritrade is “that broker with the actor spokesperson,” formerly TD Waterhouse. To trade stocks online, TD Ameritrade charges a $9.95 commission.

These are the low-cost stock trading brokerages I am familiar with, though I’ve had personal experience with only a few. If there are any others I should know about, please leave a comment with some information. Also, please share your experiences and reviews.

I own shares in one exchange-traded fund, iShares Dow Jones U.S. Telecommunications Sector Index Fund (IYZ). I picked up the shares with free money from a Sharebuilder bonus, and since it was free money, I decided to attempt to choose an investment narrower than my typical investing philosophy would normally allow. Rather than a broad stock market index fund, I selected an industry that I thought would have great prospects for the 21st century.

For a while, ETFs became a favorite investment vehicle in the financial media. In the most basic form, ETFs are like index mutual funds. They benefit from low turnover, little tax liability, and low management fees. You can trade ETFs like stocks with a similar transaction fee. If you have a lump sum to invest for the long-term, the larger the lump sum investment, the smaller the fee is as a percentage of the assets.

According to Money Magazine, Wall Street is taking advantage of the popularity and frugal reputation of ETFs by creating an increasing number of these investments with higher turnover and fees.

Like index mutual funds, ETFs were designed to track traditional market benchmarks with long track records, like the Dow and the S&P 500. But to stand out from their rivals, lately providers have been cobbling together portfolios based on custom-designed indexes they hope will beat the market’s performance…

No question, traditional index ETFs are still dirt cheap, typically charging 0.20% or less. Yet the average expense ratio for ETFs overall is much higher—0.53% of assets vs. 0.35% in 2002. What’s the deal? Newer ETFs with complex strategies tend to incur higher management and transaction fees.

IYZ falls right below the industry average with a total expense ratio of 0.48%. What have I received for this fee so far? I funded the account on August 9, 2005 with $50. As of today, after reinvesting dividends, my account is valued at $46.99.

Would I have been better off with VOX, Vanguard’s equivalent ETF? It appears that the two funds follow each other closely, but Vanguard carries a slight advantage. The lower expense ratio (0.23%) seems to account for Vanguard’s better performance. That slight advantage could account for a significant difference between the two funds’ performance if I hold onto the account for decades.

Despite recent poor performance, I believe the telecommunications industry is a great choice for the next century or so. I don’t mind “timing” the market with a free $50.

The best investment in 10 years: Get in while you can [Money Magazine]

If you’re a long-time reader of Consumerism Commentary, you may remember that I earned over $175 in bonuses over a year ago by using a number of promotional offers for opening accounts at ShareBuilder. I used the bonus money to invest in IYZ, MSFT and AKAM, all of which have not performed particularly well.

Now that ING Direct has acquired ShareBuilder, they’re bringing back the $50 bonus. Simply open a new account. When you are prompted for a promotion code, use SHARE50. As always, there is fine print:

You must open a new ShareBuilder Account and purchase at least one security to receive this offer. Please note the $50 credit will post to your account approximately 4 weeks after the first transaction executes. Not valid with IRA or Education Savings Accounts. Not valid with any other offers. Valid only for first time account holders with ShareBuilder. ShareBuilder reserves the right to terminate this offer at any time.

Note the bold print above. In the past, current account holders could open multiple accounts and apply bonuses to each, but this type of activity seems to be curtailed by New Management.

If you take the approach I did, this bonus is basically free money for purchasing a stock or ETF. For each bonus I received, I picked one of the three investments I mentioned above, and invested my own money to start, but not more than the bonus amount. Once I received the bonus in my ShareBuilder account, I withdrew the amount and deposited it back into savings.

Last month, ING Direct acquired ShareBuilder, a discount online brokerage. The two companies seem to make a good pair, so I think it was a good move for the company.

ShareBuilder has now lowered the commission charged for real-time trades to $9.95. Automatic investments, orders which are grouped together with many customers and executed as many as 7 days later, are still $4. Low prices make dabbling in the stock market more appealing to novices. Lower prices are always welcome, but is this a good thing? Personally, I’ll stick with my buy-and-hold strategy and wide diversification among stocks.

A few years ago, ShareBuilder was offering sign-up bonuses, so I used some free money to buy an ETF and two stocks, IYZ, MSFT, and AKAM. I can’t say that any one of these options has shown stellar performance since I placed the orders. This “play money” is only a small fraction of my investments.

I received this email last night, and it was news to me. I’ve had no problems dealing with ING Direct, nor have I had any problems dealing with ShareBuilder. I have accounts with both companies. For a while, ShareBuilder was offering significant bonuses to those who opened accounts, and ING Direct has always had their referral fees. Both companies offered these ways to make some money for a time.

Many customers have had problems with ShareBuilder closing their accounts for receiving too many bonuses, and ING Direct has been through a spate of bad public relations during this past year as it closed many individuals’ accounts or removed access to overdraft protection without warning. Also, ING Direct is no longer the king of high-yield savings accounts, and hasn’t been for several years.

Even still, they are both solid companies, but I never expected them to join forces. Here is the full email. Read the rest of this article »