How to Open a Brokerage Account

By Bob Moeller
WEAC Member Benefits

March 2004

Financial Planning Seminars
Achieving Financial Independence

We all know it is very difficult these days to earn a decent return on CDs, bonds, etc. Those of you who attended my seminars last fall know we spent some time going over a viable alternative – carefully selected individual stock issues that pay a steady, dependable dividend each quarter and that hopefully will raise that dividend regularly.

Frequently I am asked, “How do I go about buying a stock?” I usually suggest people open a discount brokerage account. I get a lot of blank stares. So, I decided that for this article I would open an account, relating to you the process I went through.

I could have chosen from many discounters but for this exercise chose Muriel Siebert & Co. Why? My readings suggested it is good at service, is ranked near the top by some business magazines, offers low rates of $14.95 per trade for Internet trades and $37.50 for broker-assisted trades, and does not require a lot of trades that would add extra charges. At that rate, for example, if you bought 300 shares of a $25 stock – at a cost of $7,500 – your $14.95 fee would amount to just 0.2%. A full-service broker might charge more than 10 times that amount.

I called the toll-free number (1-800-786-2511, extension 5148) and asked for a packet. It arrived about two weeks later. I completed the form and returned it with a check to open up a Siebert money market account. The money in that account is used to conveniently transfer funds to purchase stocks and as a repository for receiving dividends.

As soon as my account was opened, the money in it began earning low money market interest rates. I will soon get blank checks in the mail to draw upon my money if I wish, with no charge for the checks.

I decided to choose a dividend stock. After researching stocks through the Value Line service (which can be found at any sizeable public library) and through Siebert’s online research service, I decided to purchase stock in Associated Bank of Green Bay (ASBC).

The Siebert research service provided the Standard and Poor’s research sheet. I learned S&P gave ASBC a fair value of $41.50, and a dividend of $1.36, yielding 3.1%. The company started in 1969 and has raised the dividend every single year for 33 straight years! Further, the amounts of increase are decent. The price today is about $43.75, a little high, but I intend to hold for a long time.

I decided to put in an Internet order through Siebert’s Web site. I followed the simple directions and decided to order 100 shares.

I had the option of ordering the stock at “market” price or setting a lower limit for how much I was willing to pay. The market price was $43.76, which is the price the specialist would pay me if I were selling it at that moment. The listed “ask” price was $43.78, which is the price at which the specialist would sell it to me at that moment. Normally I would offer the market price, but I decided to put in what’s called a “limit order” at $43.75. That means I am bidding less than the specialist. If the stock keeps going up, I may never get it. I could have made my limit much lower, but if the price never got that low, I would not find a seller. My limit order is good for 90 days, and I can cancel or change it anytime.

By the end of the day, the stock declined and I got my buy. I spent $4,375 plus $14.95 commissions.

I now have an active new account, with stock that will be held at Siebert, and a money market account to automatically receive my dividends. I will get my first dividend of $34 on March 31 and will probably instruct Siebert to reinvest the dividend in more stock, a free service.

I did all this without ever having to talk to – or pay extra for talking to – a broker.

Yes, it can be that easy to control your own investments and save a lot in commissions.

Impressed with the service
When going through the process described above, I made a mistake, but found Muriel Siebert very forgiving. After I completed the form to open up an account and returned it with a check (drawn on another brokerage house), I heard nothing for three weeks. Then I received a very embarrassing call informing me that the account was opened, but I had sent them the wrong check. My other brokerage house had changed banks and sent me new checks, but I used one of the old ones, and it bounced. Siebert's reaction? The account was open and I earned 3 cents money market interest (later removed of course) for the couple of days the bad check was there. I was impressed with their service and, of course, sent them another check.

Posted February 27, 2004