Finally! Fidelity Moves to $0
After Interactive Brokers and Schwab announced they were dropping commissions to $0 many other brokerages quickly followed suit with announcements of their own over the next few hours and days. All except for my brokerage: Fidelity. I figured it was just a matter of time before they followed suit, but that week or so seemed to take forever.
Luckily on Thursday of last week Fidelity finally announced that they too would be dropping commissions to $0 effective immediately. With a bit of cash sitting in my brokerage account I decided to celebrate in one of my favorite ways by picking up a few shares of some great companies.
I didn't put a lot of capital to work, but I was able to pick up 8 total shares across 4 different companies for the low, low cost of $0 in commission.
Combined I was able to invest $1,261 and boosted my forward dividends by $24.24. That's a pretty paltry 1.92% yield, but I fully expect Becton, Dickinson & Company and Disney to make up for that with higher growth while Smucker and 3M chug along nicely with solid starting dividend yields and dividend growth in the 4-8% range over the long term.
The valuations for BDX, MMM and DIS all appear to be somewhere in the range of fair value. 3M is likely in mid to low end of the fair value range while BDX and DIS are likely closer to the high end.
JM Smucker appears to be the only real value purchase at least on a P/E and EV/EBITDA basis; although an argument could be made for 3M.
Does $0 Commissions Change My Plans?
Now that some monthly cash flow is freed up with one of the car loans being D-U-N, my rough plan was to make ~$1k per month debt payments, ~$1k per month transferred to the brokerage account and any remaining cash flow each month would go to whatever I felt offered the better opportunity.
However, now that $0 commissions have entered the picture I have to admit that my plans are likely to change.
Looking back at our income and expenses we've averaged ~$2,950 of positive monthly cash flow when looking at just work income and core expenses. The majority of non-core expenses has been accelerated debt repayment.
Assuming the future is reasonably similar to the past, that means we should have somewhere around $3,000 to work with each month between debt reduction, building cash savings and investing.
The rough plan remains with ~$1k going to debt reduction each month; however, I'm bumping up the target amount to transfer into the brokerage account to ~$1.5k. That still leaves ~$500 which will go towards either of those two or to just stock piling cash.
With the ~$1.5k to the brokerage account the idea is that I'll use $500 per month to dollar cost average into some positions that I really want to build up. With the remaining ~$1k it will go into cash reserves in the brokerage account for larger scale value purchases. At some point I'll reach a limit on the cash reserves, likely in the $10-20k range, and then all of the monthly transfer will go to dollar cost averaging.
The last 5 years or so have taught me that our plans are very much in flux. While I'd love to be able to execute 100% on the plans, the fact is that they are more guideposts rather than being set in stone.
That being said it's still a good idea to have something to aim for and I'm absolutely stoked to see the race to zero commission finally play out.
Has your brokerage joined in on the $0 commission party? Have you changed your investment plans to do more dollar cost averaging as opposed to larger purchases?