Hello again and welcome back to the Millennial Revolution Investment Workshop! New readers, please click here to start from the beginning.
While we were at Ecuador partying it up at Chautauqua, our readers started getting a strange email from TD Ameritrade. Here’s a screenshot of what it said…
Great. So what the Hell does this mean? Well…
Goodbye Index ETFs
In short, they’re revamping their list of ETFs eligible for their commission-free ETF program. And from reviewing the changes, it ain’t good.
To recap, when we started running this workshop, we went through all the ETFs available to both our Canadian and American readers and came up with a list. On the US side, it was…
|BND||Vanguard Total Bond Index ETF|
|VTI||Vanguard Total Stock Market ETF|
|VEU||Vanguard FTSE All-World Ex-US Index ETF|
All 3 were carefully selected to give you the lowest-cost exposure to the bond and equity indexes you needed to build a portfolio to retire with. And when I saw low-cost, I mean it. The MERs for each ETF range from 0.04% to 0.1%.
As a result of that, our American workshop portfolio is up a respectable 6% YTD.
But it’s not just low-MERs that are important. Trading costs are important as well, especially in the accumulation phase of your career where you typically are adding money into your portfolio every 2 weeks. Your typical bank-run trading platform will charge anywhere from $5 to $15 per trade, and if you’re already retired that may not be such a bad thing since you only tend to rebalance once a year. But if you’re wasting $15 PER TRADE every two weeks, that adds up quickly and can easily blow up your retirement.
That’s why we partnered up with TD Ameritrade, which provided commission-free ETF trading for a select group of about 100 ETFS, with the ETFs we were using being among that list of 100 commission-free funds.
Then this update came, in which they were happily touting that they were expanding their commission-free ETF list to 296 funds. The only problem?
They removed the low-cost Index funds we were using.
And what did they replace them with?
Basically, it looks like high-fee actively traded ETFs that I wouldn’t touch with a ten foot pole. In fact, I don’t see a single S&P 500 Index fund at ALL in their new updated list!
What Does This Mean?
While we can sit here and speculate on why they made these changes (*cough* kickbacks *cough*), the fact of the matter is that building a retirement portfolio on a platform that charges $6.95 per trade is no longer feasible. Hell, if I were to pay this amount every time I did a DCA buy, I would have paid $20.85 every time, or a commission of $20.85/$500 = 4.2% of my entire portfolio in trading costs! Goodbye 6% gain!
So what does this mean?
We can no longer recommend TD Ameritrade on Millennial-Revolution.com.
As a result, over the next few days/weeks, I will be going back through this site and scrubbing any reference to TD Ameritrade on our workshop, our blog articles, and anywhere where we recommended this company. Maybe they’ll change their ways in the future to once again be a good product for people seeking early retirement, but until then I can’t in good conscience recommend them anymore.
What Should I Do?
For now, nothing. This change doesn’t officially take into effect until November 20, 2017, so until then no immediate action needs to be taken. For me, I’ll need to go out and do some research to find a new brokerage account that doesn’t charge a ridiculous fee to trade ETFs. If anyone knows of any, please let me know in the comments so I can add it to my list to investigate.
And it goes without saying that for our Canadian readers, you don’t have to do anything at all. This change affects our American readers only.
What Does This Mean for Millennial-Revolution.com?
I’m not gonna lie. This is a wrench that got thrown into the gears.
Here on this site, we pride ourselves on teaching people how to save, how to invest, and how to retire in your 30s for FREE. Because a part of the ethos of this site is that we believe this knowledge is a human right rather than something only available to privileged already-rich people with money to blow.
And a big part of that was relying on affiliate income from companies we used ourselves and trusted. We would recommend a product that we believed in, they would pay us a commission for the referral, and we could continue doing all this teaching while never charging our readers a dime.
This change by TD Ameritrade blows up a big part of our affiliate income, which we rely on to offset the costs of running the site as well as the REAL MONEY we use to run the workshop investments.
But sometimes when you’re running a blog, a situation comes up where you have to choose between the blog earning money and standing up for your audience. And we here at Millennial-Revolution.com will choose to stand up for our audience every single time.
Because we’re FI! We don’t need the money to fund our living expenses!
So while other bloggers who are on their way to FI or who are writing about paying off their debt or whatever may be tempted to keep taking that sweet sweet affiliate money in exchange for their silence, we will simply go Fuck THAT Noise. We only recommend products that are good for YOU, not good for US. So that’s why we decided to announce this the way we did. You came here for transparency, and transparency is what you’re going to get it.
But that doesn’t mean we’re sitting on our laurels. For some time now we’ve been kind of nervous relying too much on affiliates to sustain this site. FIRECracker in particular has been expecting one of the affiliates to try to pull a fast one like this for some time now. It’s just part of her suspicious nature, and unfortunately she’s been proven right.
So as a result, we’ve been hard at work developing extra cool features for the site that you might find interesting. We were hoping to launch these some time next year, but now it seems an earlier reveal might be in order. So stay tuned!
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Disclaimer: The views expressed is provided as a general source of information only and should not be considered to be personal investment advice or solicitation to buy or sell securities. Investors considering any investment should consult with their investment advisor to ensure that it is suitable for the investor’s circumstances and risk tolerance before making any investment decisions. The information contained in this blog was obtained from sources believe to be reliable, however, we cannot represent that it is accurate or complete.
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