The
Investment
Bonus Game
A
34% return?
The article
on investing in the October
Money Runner lamented the fact that when it comes to earning
interest, it's the students that often loose out. Students often
don’t have the large balances to put in higher interest-earning
investments, or they aren’t able to stash away cash for long
periods becaise tuition fees and book cost keep creeping up. But
here’s another twist that may lend you additional earnings
on your hard-earned cash: There are on-line banks with 4 - 4 ½
% interest rate, which are paying well above the 0 - 1% interest
rate of most banks.
A 34% return? Can it be?
In the fight to grab new customers, on-line brokers
are scrapping for your business. Some offer incentives of free
trades; some give away free phones. But we found brokers offering
something much better - almost as good as an “A+” final
mark - cold hard cash.
To get the bonus cash, you have to put a
certain amount in and keep it there for a set amount of time.
We found that minimum amounts range from $0 up to $20,000, with
Royal Bank Action Direct having the lowest ammount to receive
a bonus ($0), and the Bank of Montreal Investorline having the
highest ($20,000) for the new-customer bonus. For a short-term
investment option, this may be a good safe bet for students.
In addition to the bonus, equally important is
the interest rate brokers pay you on your cash. We found
E*trade Canada offers the highest interest rate at 4 ½
% , while Royal Banks’ Action Direct pays the lowest at 3
%.
So what’s the best deal for students? We worked
out the various options based on the minimum return and time required
for investment. Then we calculated this into an annual return
rate for each broker. We used a 90-day period (the same as Canada
Savings bonds minimum period), since were looking at this as a
short-term investment option. E*trade Canada came out best
in cash return: 34.5% based on the minimum investment. If you
are looking for a trading account for investments, the
Action Direct account would be a good option. We found the poorest
return was with the Investor line account, which ad a high minimum
and would be of value only if you were an air mile collector.
| Discount
Broker |
Minimum |
Bonus |
Interest
Rate |
Annualized
Return
(3 months)
|
| E*trade
Canada |
$1000 |
$75
|
4
½% |
34.5% |
Royal
Bank
Action Direct |
$0 |
3
free trades ($100) |
3
% |
3%
plus $100 worth of trades |
| Bank
of Montreal Investorline |
$20,000 |
200
Air miles |
3
¼% |
3
1/4 % plus 200 airmiles |
| TD
Waterhouse |
$10,000 |
3
free trades ($87) |
3
¼% |
3
¼% plus $87 worth of trades |
While the E*trade option may or may not be the
best place to have your money over the long run, for the short-term
this is a safe bet that will give you a good return. Keep in mind
that although we found the E*trade option to be the best bet right
now, promotions change so that other offers down the road may
be better as these on-line brokers fight for your business. So
keep an eye out for these offers - they may give you a much-needed,
short-term boost to your earnings from time to time.
|
