Help a noob invest with Schwab!

February 14, 2009 12:03 AM

Schwab investment instructions for the complete noob?

Just opened a Schwab One brokerage account in conjunction with the Schwab Bank Invest First Visa Signature Card.

First, if anyone has set up a One account recently, what information to you need to have when you call to activate MoneyLink? I hate being unprepared so any foreknowledge of what they need from me before I call would be great. Test deposits into my checking account have already been confirmed, so I'm not sure exactly why they need me to call now.

I want to use the rewards from the Visa which are credited to the account monthly to invest in index funds such as SWPIX or maybe a target retirement fund such as SWERX. How do I set it up to do this? It looks like once I buy into the fund I want, there are automatic settings that I can view and select, but unfortunately I can't see them until I buy in. Can I just tell them to sweep whatever's in the cash account into my chosen fund every month?

Any other experiences you have had with investing using the Schwab One brokerage account would also be welcome. There is so much information out there on investing, it's very hard to cut through all the noise.

posted by rabbitrabbit to work & money (10 comments total)

I don't know if now is really a good time to get into an S&P 500 index fund. If you had invested in $10,000 in the year 2000 when SWPIX first started it would be worth just $5,750 today. On the other hand, $10,000 invested in Apple would be worth $30,000.

2000 wasn't a very good year to get into the market, obviously. But if you had invested $10,000 into the S&P 500 all the way back in 1999, you'd have just $13,000 today. In comparison, Apple shares purchased in '95 would be worth almost $100,000.

I'm not saying that you should invest in Apple, but if you don't want to do the research and invest in specific companies and keep on top of them, then the stock market isn't a good idea, IMO, and index funds haven't made much money over the past 10 years or so. And there's no telling when the economy is going to stop sucking.
posted by delmoi at 12:38 AM on February 14

For MoneyLink, you just need the name of the other financial institution, the account number and the 9-digit ABA routing number. Since you already have the test deposit, I'm not sure what else you'll need. Just call them. I'm pretty sure a phone activation is just a security measure--sort of like how you have to call to activate a new credit card.

One of the better things about Schwab is their customer service. You should be able to reach a live person on the phone and get any question answered. Don't be shy. More phone numbers are here.
posted by mullacc at 12:44 AM on February 14

But if you had invested $10,000 into the S&P 500 all the way back in 1999

Err, actually I meant 1996.
posted by delmoi at 12:45 AM on February 14

delmoi: To be clear: aside from the initial buy-in, which is probably going to be around $100, I am going to be investing credit card rewards -- 2% cash back on charges that I made on the card, which is deposited into the linked brokerage account. This is a level of risk that is entirely acceptable, no matter what happens with stock values. :)
posted by rabbitrabbit at 12:48 AM on February 14

If you had invested in $10,000 in the year 2000 when SWPIX first started it would be worth just $5,750 today....But if you had invested $10,000 into the S&P 500 all the way back in 1996, you'd have just $13,000 today.

With dividends reinvested, it'd be more like $7,700 and $17,900 since 2000 and 1996, respectively.
posted by mullacc at 1:07 AM on February 14 [1 favorite]

In comparison, Apple shares purchased in '95 would be worth almost $100,000

This is only true because Apple's success wasn't easily foreseeable in '95. If it had been, the price of shares would've been higher then, and the relative gain ever since would've been much more modest. This is like telling people that investment is a bad idea when you consider how profitable certain lottery ticket purchases are; it's true for a tiny minority of people and a loser's game for everyone else.
posted by jon1270 at 5:29 AM on February 14 [1 favorite]

Re: Moneylink

Confirming the two trial deposits puts pending transfers of $0.00 to and from (or one or the other, if you didn't set up a two-way link) the new external account. Calling customer service seems to put the transfers through and adds the name of the external account to the drop-down list for your accounts on the website. Then you're good to go. All you need is the name of the external financial institution when you call in.
posted by roomwithaview at 11:58 AM on February 14

This is only true because Apple's success wasn't easily foreseeable in '95.

Not necessarily. Apple has had big swings even post "success!!!!". If you invested $10K in November 2003 and then dumped in December 2007 you'd have $279K.

Overall, if I were you I'd probably wait a few months before doing anything to see if the floor's been reached yet, my gut feeling is it hasn't been. Although, the amount of money you're investing is going to be very small to start, so you are correct that it probably won't be a big deal either way.
posted by barc0001 at 2:05 PM on February 14

I like this reverse reasoning approach to investing. Find a company that was in apparent peril and hence had a low stock price, and compare it to the price now. This totally appeals to the divide-and-conquer mentality. So all we need to make major bucks is a time machine. Easy picks, too.

Look, if you are asking this question, you should ignore people telling you to think about picking individual stocks. You are not qualified and at best you will be betting with the false notion that you are making an informed decision. Terrible idea.

One could argue whether now is a good time to invest. I think now is a terrible time since I expect the stimulus to fail and the economy to collapse further -- people who bought stocks in 2006 with high P/E are getting trashed now. OTOH If you are going to invest at this time, index funds have taken a beating -- buying now means getting a much better price than people got in 2006 and 2007. If you think the stimulus, obama, or whatever will make any difference and we are heading out of a recession this year, then there is no reason to think indices are a particularly bad deal.

Google for "index investing versus stock picking" and read up. Then go read average is not normal for some general thoughts as well as this writeup on returns.

On the specific questions:

1. They want you to call, call. No big deal. Setting up moneylink did not require a call for me, test deposits worked and that was all there was to it.

2. Target retirement funds suck, go for a no load/low fee index fund like the Vanguard funds
posted by rr at 8:47 PM on February 14

Thanks everyone. Called and activated MoneyLink, set it up to fund the account. I'm off to read up on index funds.
posted by rabbitrabbit at 1:06 PM on February 15