Am I overpaying for stocks?

December 2, 2008 1:31 PM

Help me understand what I am paying for stocks at Sharebuilder.com

I have purchased two stocks at Sharebuilder.com. I am not looking for any criticism of the stock, or my time to start investing -- I am looking to understand why it seems like I paid too much for the stock.

I bought GM on 10/21/08. I believe I bought $71 worth, and there was a $4 automatic investment fee.

10/21/2008 BUY ORDER POSTING GM 9.9470 -$70.00

I bought $475 CV on 11/27/08 @ 12:58 ET. I paid $9.95 for the trade.

11/28/2008 BUY ORDER POSTING CV 25.0000 -$484.95

If I bought 9.9470 shares for $66, isnt that $6.635 a share?

If I bought 25 shares for $475, isnt that $19.00 a share?

Neither of these stocks hit that price -- infact GM was @ $5 that day... what am I missing?

posted by SirStan to work & money (8 comments total)

I'm not sure exactly what the case is here, but I'll throw out there that a lot of online discount brokerages make their money not from the $n commission, but from the spread between what they charge you for each share and what they're actually able to get the share for. You might want to take a look at sharebuilder's user agreement to see exactly how it works for them.
posted by losvedir at 1:53 PM on December 2, 2008

Are you talking about executing an individual trade thru the sharebuilder site, or your monthly auto-investment?
posted by nomisxid at 1:57 PM on December 2, 2008

GM traded between 6.45 and 6.72 on 10/21.

CV traded between 18.48 and 19.00 on 11/28.

You hit the intraday high on CV, but both prices seem to be valid.
posted by malocchio at 2:03 PM on December 2, 2008

Second malocchio. Google Finance gave me the same numbers. The CV price was only that high for a very short period of time that morning, but GM was definitely nowhere near 5.00 on the date you listed.
posted by burnmp3s at 2:12 PM on December 2, 2008

On your Trade Confirmations page, you can see the price per share without doing the calculation yourself.

The markets closed at 1 PM ET on 11/28, so that may have been a factor in your high price at 12:58 PM. Or you just got shafted a little.
posted by smackfu at 2:15 PM on December 2, 2008

How are these orders being placed? There are different kinds of trade orders. Are you saying "please buy $70 worth of GM today"? Or are you looking at the current price of GM, dividing that by the $70 you want to spend and saying "please buy 6.789 shares today"?

Remember, the stock market isn't a store where the prices just happen to change all the time. It's a market, where prices are determined by the buyers and sellers. People with stock they want to sell go out onto the floor and find people willing to buy. And vice versa. So regardless of what you put into that site, somewhere it turns into this (overly simplified):

Your Broker: I need to buy some GM stock, do you have any?
Some other broker: Yeah, I've got some at $3.50.
Third guy: Well, I have some at $3.25
Fourth guy: I'll take it all!
Fifth guy: Really, how much do you want?
Fourth guy: 100 shares

and so on, and so on. The price you pay is pure (hopefully) supply and demand, right at the instant the trade is going on. Or at least in the windows you've set up your trade for.

And then there is that arbitrage thing that the brokerage houses do. "Hey, this guy says he'll buy GM at $7. We have some, we'll sell ours to him, and hopefully replenish our supply a little later when it's cheaper."
posted by gjc at 5:56 PM on December 2, 2008

How are these orders being placed?

The $4 order is a weird one actually. It's an automatic investment plan, so all ShareBuilder commits to is "sometime on Tuesday, probably AM". Not really the kind of trade you make if you're concerned about the intra-day stock price, since it's a plan aimed at dollar-cost averaging.
posted by smackfu at 11:14 AM on December 3, 2008

This may not have been a factor in your purchase but also note that the prices you see on the Sharebuilder site are delayed by 20 minutes or more. If you really want to see the price at the exact time you are buying, look at Yahoo finance or something similar.

But - while Sharebuilder seems to be reputable and I use it myself - it probably isn't the site to use if you are worried about about the intra-day variations.
posted by RandlePatrickMcMurphy at 8:23 AM on December 4, 2008