Interested in TD Ameritrade?

Here are some pointers based on my own experience. These are my own views and isn’t personal financial advice. I have to make that point crystal clear.  You have to do your own homework.

1. Be smarter than the Waithenian investor

There’s a  couple of ways I could have been smarter. To fund my account, I withdrew my money from Hatch Invest so I had to pay their FX fees. Given the size of my account, it may have been cheaper to transfer my investments to TD Ameritrade. If you want to transfer to another US broker, check your provider for the costs in transferring and the timeframes involved.

There’s also one unanswered question that I need to resolve in the way I signed up. I applied using my IRD number in my W-8Ben form. The question here is does this mean I don’t qualify for the tax treaty benefits – or a lower withholding tax rate on dividends? In a worst scenario, I may have do a W-7 form then redo my W8- Ben again to qualify.  Fortunately, you can submit your W-8Ben online with TD Ameritrade so that’s not hassle.  I’m going to get specialist advice on this and tax deductibility from margin trading. I will post on this as soon as I’ve found out.  Watch this space!

2. Be consistent with your documents

Ensure the name on the bank statement you’ve printed off is the same as the one you put on your application form. If there’s an initial on your bank statement, I suggest including a utility bill in order to avoid having to resend your forms like yours truly, the great doofus.

3. Focus on your strategy using their screening tools

Be clear about your goals and risk profile before you start investing. Once you get clarity, use the screening tools for ETFs, stocks and mutual funds to help filter things that may interest you. This may help you on your DIY journey.

4. Make the most of their superb educational content 

TD Ameritrade excels in their educational content – it’s very impressive and amongst the best I’ve seen when it comes to investments. They are light years ahead of anything I’ve seen in New Zealand or Australia. There’s stuff on there for the beginner investor through to experts. You can learn everything from margin trading to starting out in shares to complex trading strategies through videos, articles and their immersive online courses.

5. There aren’t any fractional shares

No fractional shares may make it harder for some youngsters to purchase the likes of Amazon and Alphabet. Apparently, they will consider fractional investing as part of their roadmap. They may be pressure on them to do so. Robinhood and Schwab have recently announced that they will offer fractional investing in 2020. However, that’s an if.

6. Don’t assume everything is $0 commission 

Shares and ETFs are $0 commission. Yes, you heard that one correctly. However, over-the-counter American depositary receipts (ADRs) are $6.95 per trade plus custodial fees. There’s also costs for mutual funds (managed funds). The terminology used for mutual funds is different to managed funds in New Zealand (e.g. load fee). This can confuse, so do your homework.

7. Ditch those dreams of futures and options

TD Ameritrade offer futures and options trading. However, under the Financial Markets Conduct Act, TD Ameritrade needs a license to offer derivative products to New Zealand retail investors and they don’t have one. If you have dreams of going short like Michael Burry or Jim Chanos, there are many exotic ETFs on the platform.  There are some really interesting ones that many Kiwis may not know about. You can, for example, go short on retail shopping through the Decline of the Retail Store ETF (EMTY).

8. It’s DIY tax time

With TD Ameritrade, do your taxes yourself or with a tax accountant. Tax is not a barrier for me. In fact, I want a huge tax bill. If I have a lot of tax at the end of year, I must have made an awful amount of money. However, that’s just me. Others may see the world differently. Tax can be like a root canal for some. It’s recommended you get tax adviser if you decide to invest with TD Ameritrade.

9. Be careful with margin trading

 Kiwis can margin trade with TD Ameritrade. Although gearing can magnify returns, it can also magnify losses. For this reason it’s important you carefully consider your strategy before you apply.  If possible you should seek advice.

10. Get on the blower if you get stuck 

If in doubt, call them. In my experience, their service is very good. You don’t have to wait long to speak to someone. I found their Nebraska-based call centre staff to be informative, helpful and friendly (aside from the sheep jokes).

The above is my opinion. It is not intended to act as personal financial advice. It does not take into you account your financial objectives, situation and needs. It is strongly recommended you financial seek from an Authorised Financial Adviser in making a decision to invest.