Initial Review of Loyal3

I’m a new investor that starting my journey in July 2014.  I’ve started small and plan to slowly accumulate wealth, in part by, dividend growth investing (DGI), investment property, maximizing my retirement plans and reducing overall expenditures while using side methods to raise my overall capital.  

A colleague of mine tipped me off to Loyal3, which prides itself on the motto “Own what you Love” and the key words of “democratizing the capital markets.”  He opened the account up a few months prior to me.  After some of my own research, I opened up an account with them in July, with somewhat hesitation and skepticism.  From a business standpoint, I didn’t really understand the monetization of their niche of no fee investing.  I’ve learned they receive payments from companies for IPO fees, along with their social stock plan.  In that essence, they do generate capital, but for the long run, I’m still hesitant on the sustainability of the business model.

However, I still decided to give Loyal3 a shot, by investing in a small number of companies on a routine basis.  I’ll not worry so much about the daily price of a stock, but focus on long term accumulation, which is in essence, dollar cost averaging.   I didn’t set a pre-determined amount for any company, but rather allocate funds to a particular stock throughout the month, as I added capital or received dividends.  Now, three months in I feel that I can give a fair review of Loyal3. 

Pros:

1.  No fees.  This one isn’t hard.  For an investor like myself, no fees make investing a possibility and easy to start.  I don’t have to save up $1000 or another higher amount to offset the trading fees.  I can simply put $10 bucks here and 25 bucks there, when I choose. 

2.  Ease of setup and use.  The website is very basic and no frills.  After you set up account, you simply pick a stock that is listed and either buy on a one time basis or monthly plan. 

3.  The ability to use a credit card.  No brainer here; rewards!  I use a rewards credit card to purchase a stock and then get 1% cash back.  Not bad at all.  You can purchase with credit card in amounts of 10, 25, and 50. 

Cons:

1.  Not a bad selection of stocks to purchase, such as KO, AAPL, WMT, MCD.  But, you are limited.  50+ stocks on their site currently, but they are adding, such as Kraft recently. 

2.  No control on purchase or sell price. You basically buy on market orders, as they buy/sell on batch orders.  Unlike some reviews I've read, I've never had an issue with perceived price gouging. I've had some purchases go through at or near the day high, but others at the day low. 

3.  When using a credit card or purchase from your bank account, it takes two business days and three business days respectively.  However, if you do not like this method, you can simply add funds to your account and submit an order when you have available funds in the account.  Using this method, you purchase stocks on the same day using their batch purchase.  I find myself using the available funds method now, as I can watch the market during the day and pick a stock that may have a slight dip for the purchase that day.  As long as you place the order by 2 p.m. EST you are good to go. 

4.  Not an established brokerage.  I’m still hesitant to believe that Loyal3 can sustain its current business model.  Obviously, time will tell, but I’ll keep plugging away small amounts for the time being. 

Overall, I really like my experience with Loyal3.  I’m a small investor that is just starting out, so it is absolutely great to have the ability to slowly accumulate shares with no fees.  I’m saving a ton of money and building a diversified portfolio.  It is not my only method to purchase stocks, but I’m using it as an additional tool to accumulate shares in certain companies.  I’m still cautious and to be honest, I will probably transfer my holdings out eventually to my main brokerage account, but not in the foreseeable future.  Who knows, Loyal3 may become a very established brokerage by then with no risk of closing, changes, etc.  FYI, Loyal3 advised me, after I asked, that you can only transfer your entire account over and you cannot re-open an account.  Basically, you cannot just transfer KO out and leave AAPL in.  It’s the whole account or nothing, and you cannot simply re-open another account afterwards. 

I’ll post some other information as I think of it and with my purchases.  Anyone else using Loyal3?   Thanks for stopping by.