Stockpile is a company we’ve blogged about before, they are basically a company that sells gift cards for different companies that can be turned into stocks for those companies. Previously you’ve only been able to purchase these stock gift cards online at Stockpile.com.
Today I received a tweet from @aegt which lead to this WSJ article (copy and paste the headline into Google to get around the paywall). Basically the article was announcing that these stock gift cards would be available at retailers (such as Office Depot & Kmart) starting this week.
Great news, right? Simply purchase these gift cards using a card that earns a 5%/5x category bonus (e.g at office supply stores for Office Depot) and get a big discount on Berkshire Hathaway stock (or any other large stock they plan to sell). The problem comes with the fees, the article states that a $25 Stockpile stock gift card (each card will be individually branded for the different stocks) will come with a $4.95 purchase fee. That’s basically an instant 25% loss (20% after you use a 5% card). It also states that cards will be available in $50 and $100 denominations but doesn’t let us know the fees.
Even if the $100 card has the $4.95 fee (unlikely, more likely is $5.95Â for the $100 card which is what they charge online if you use a credit card – actually I think it’ll be more like $5.95 for $50 and $6.95 for $100 as the retailer also want a larger cut of the pie) you’d only just break even. Then you need to take into account Stockpile.com’s fees which are as follows:
- Selling stock: $0.99 per trade +Â SEC/TAF fees
The other thing that you need to keep in mind is that Stockpile batch trades, so you might purchase and redeem a card on their site and get one price (which might not be the price of what you thought depending on when they actually process it) and then there will be a delay until the next batch is processed again when you sell the stock.
Like I said in my original review of Stockpile, I think the whole concept is gimmicky. I have no doubt people will purchase these cards to give as gifts and to use as an education vehicle for investment, but I think it sends entirely the wrong message. A high fee single stock portfolio is probably the worst thing you could do, almost nobody beats the market over a long period of time (and even less do so with high fees, if it’s possible at all). Buy your kids some low fee mutual funds instead, it’s not as sexy but it’ll certainly be more profitable in the end.
I don’t see this working as a resell/money maker either, even with a good category bonus or American Express sync offer the fees and hassle will eat into it too much. It’s an interesting concept but a hard pass for me.
Two of the example gift cards currently on the stockpile.com front page are $250 ebay and $500 coca-cola. I wonder if such cards will be real, if they will be purchasable by credit card, and, if so, what their fees would be.