Free Stock Trades and Hot Dogs
ManagingMoney.com recently came across another way our users can Save Money. How about Free Stock Trades? That's right, free. You can't get a much better deal than that.
Zecco.com, a division of Equinox Securities out of Ontario, California, is billing themselves as the industry's first online trading website that provides zero commission stock trading. Investors can make up to 10 trades in any one day up to a total of 40 trades a month at no cost with a minimum initial investment of only $2,500 in cash or securities. If you manage to do over 40 trades in one month the cost is only $3.50 per trade.
So how does Zecco do it? The company has created an online trading community and sells those famous Google ads on the side of their landing pages to generate revenue. There are no expensive TV commercials and marketing campaigns which lowers their costs relative to their competitors. By providing robust market data, tools, news, opinion, and insight the company expects their users to visit the sight frequently which makes the advertising model work.
To be fair, Zecco is not the only company offering free stock trades. Both Bank of America and Wells Fargo have jumped into the game but their "free" options are not as flexible as Zecco's. For example, Bank of America requires $25,000 of uninvested cash in the account to qualify while Wells Fargo requires $25,000 in combined bank account balances and limits customers to 100 trades per year. One has to wonder how discounters like Schwab and E*Trade are going to react to this new business model. Once again Google and the internet are turning traditional business models upside down.
Regretfully, we were a little late in discovering this opportunity. Zecco was founded last July 4th and celebrated their grand launch trading day on October 9th, 2006. At their grand launch trading day on Wall Street the company gave away free hot dogs as a way of saying "there is a free lunch and there is free trading." Over 4,000 hot dogs were eaten, and at their peak a new account was being opened at the rate of one per minute. Just think, if those were Nathans Famous (NATH) hot dogs you could have bought the stock and gotten the hot dog all for free!
On a more serious note, free doesn't always mean better and the advertising model has not proven itself yet. Robust market tools cost money and whether ads can generate enough revenue to compete with the tools the big Wall Street firms offer remains to be seen. However, right now, if you are an investor that knows what you want to buy and sell, free trading is a good deal. To find out more about Zecco, as well as other ways to Save and Make Money, or to use our free stock and mutual fund research tools, visit the ManagingMoney.com Investment Center.
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