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Stockpile Review

Stockpile Review

Description

Stockpile allows clients to invest with as little as $5 by buying gift cards. But is this a legitimate investment model, or just a novelty?

Stockpile Review

Introduction

If you've been following the stock market for a while, you probably think you've seen it all. But if you haven't heard of Stockpile before, then you're in for something of a treat!

Everyone knows somebody who's just about impossible to buy gifts for, right?

Stockpile offers a unique option: gifting stocks.

Marketing themselves primarily as a stock gift card service that also happens to have a brokerage service, Stockpile lets you purchase gift cards that can be used for buying fractional shares in stocks or exchange-traded funds (ETFs).

You can buy and gift these in three different ways:

While e-gift cards and their printable counterparts can be loaded with any value, up to a maximum of $2,000, the plastic ones have some limitations. Like regular gift cards, they're available in incremental values, maxing at $100. And while e-gift and printable cards can be used to buy any of the stocks available through Stockpile, the plastic ones can only be redeemed with a smaller selection, made up of the most popular stocks.

That said, there's no sign-up process for the person buying the gift card. And the actual stock shopping process for the giftee is the same as it would be for any other online retailer, like Amazon. (By the way – Amazon is one of the companies you can buy fractional shares of through Stockpile. Take a look at the full list here.)

Considering younger generations are more hesitant to invest, it's a great way to get kids interested and build their knowledge slowly.

In fact, that's actually how Stockpile came about.

CEO Avi Lele was looking to get something more substantial than just toys for his nieces and nephews – and something that would last longer too. The available options for buying stocks were too limiting and expensive at the time, but the idea never left him.

Stockpile's trading fees are also incredibly low – only $2.99 for the first stock and $0.99 for each additional one. These and transaction fees (3%) are covered by the purchase of the gift card, though. So, for example, if you're buying a $25 gift card that will be used toward buying $25 worth of stocks or ETFs, you'll pay $29.95.

Another thing you'll need to bear in mind is that, legally, trades need to be approved by an adult if the giftee is under the age of 18.

You don't have to use Stockpile for giving gifts – you can invest in fractional shares for yourself as well, starting with just $5 (plus the $0.99 trade fee, of course – there's no initial stock fee of $2.99 in this case).

It's also free to sign up, which your giftee (or you, but only if you're buying for yourself) will have to do in order to trade. The only fees that would need to be paid are 1.5% of incoming cash total for debit card funding and $25 for domestic wire withdrawals. ACH deposits and withdrawals are free of charge, as are deposits via domestic wire.

The real question is whether Stockpile is just a novelty that will eventually wear out or a legitimate investment model and platform. And that's what we hope to clear up for you with our review.

Quick Facts

  • Account minimum: $0 (no minimum)
  • Account fees: $0
  • Trading fees: $2.99 for the first gift card stock plus $0.99 per additional stock, or just $0.99 per trade on the brokerage platform

Stockpile is Best For

Stockpile offers a unique opportunity that will benefit the following types of investors:

  • Novices who have never traded before or have limited experience
  • Young investors (as giftees and with appropriate adult approval if under the age of 18, or direct and without the need for approval if older)
  • DIY investors
  • Investors looking for low fees
  • Those wanting to invest in fractional shares

Pros

While the question as to whether or not Stockpile is just a novelty is a valid one, even novelties need to have considerable appeal. Here's what makes Stockpile so appealing to us.

+Gifting Model

As mentioned in our introduction, the idea of giving stocks as a gift not only solves the issue of trying to find a present for those difficult-to-shop-for relatives, but can also help teach younger generations the value of money and how to invest.

Stocks can be an expensive gift, of course. Amazon stocks are worth nearly $1,700 each at the moment, and Google Alphabet C nearly $1,200.

But because Stockpile deals with fractional shares, you can get part of a stock share in such companies, proportional to the dollar value of the gift card. For example, using the above values, a $50 gift card would be worth approximately 0.04% of a Google stock, or nearly 0.03% of an Amazon stock.

This makes Stockpile an excellent way to gift stocks. And with about 1,000 stocks and 100 ETFs to choose from, you can personalize the gift by buying a gift card toward shares of a company that means a lot to the giftee.

+Low Trading Fee

Considering most brokers charge $4.95 to $6.95 in trading fees (TD Ameritrade and E*Trade being an example of either value, respectively), Stockpile is dirt cheap.

As mentioned earlier, when buying a gift card, you'll only pay $2.99 trading fee for the first fractional share and $0.99 for subsequent ones. And if you're joining as a customer to trade yourself, you'll only ever pay $0.99 in trading fees.

That's a saving of between $3.96 and $5.96 on the base fee ($4.95 minus $0.99 and $6.95 minus $0.99). For the initial stock with gift cards, that's $1.96 to $3.96 savings ($4.95 minus $2.99 and $6.95 minus $2.99). The more fractional shares you buy, the more you save – and every dollar saved on trading fees is an extra dollar you can then invest.

+Fractional Shares

This is already partially covered in the previous two points, but it's worth highlighting: the ability to purchase fractional shares can be a huge advantage.

With Stockpile, you're investing in major companies. As mentioned, Amazon stocks sell for nearly $1,700 and Google stocks for nearly $1,200. Apple stocks aren't nearly as expensive, but at over $180 each, it's not within the reach of all investors.

Fractional shares allow you to earn interest by investing in these companies, which have a history of paying relatively high dividends in the long-term.

As time goes by, you can purchase progressively larger fractional shares. Eventually, you'll have bought at least one, if not more, full stocks or ETFs – and your returns will only compound.

+No Account Minimum

The lack of an account minimum is one of Stockpile's most attractive aspects.

If you receive a Stockpile gift card, for example, even if it's only for $5, you only need that amount to open and maintain your account. The same is true if you're investing for yourself. You won't have to worry about maintaining an account balance of $50,000 (FutureAdvisor) or even as low as $500 (Wealthfront).

Whatever amount you have available to start investing with is alright with Stockpile, making it more accessible to everyone.

+Free Dividend Reinvestment

If you're using the Stockpile app, you can have your dividends automatically reinvested in the same company that paid them. This means that your number of fractional shares will increase incrementally each time you earn returns.

The only requirement is that you have at least one stock in the account you're using. Stockpile won't charge any trading fees.

Theoretically, you'll be able to activate the automatic dividend reinvestment feature using the online platform too, but this isn't confirmed by Stockpile's website.

+No Annual Fees

Not every brokerage charges account fees, of course. Some cover costs with the commissions earned through trade fees, for example.

So considering Stockpile's trade fees are so incredibly low, it's definitely a bonus that they don't charge an account fee either.

For that matter, as mentioned in our introduction, there are very few fees that Stockpile do actually charge. Other than their trade fees, the only other amount you'll be charged is for debit card funding (1.5% of the transfer value, at a minimum charge of $0.75) or withdrawals via domestic wire ($25).

ACH transfers (in and out) and deposits made via domestic wire are free of charge. So are electronic statements, trade confirmations, and tax forms.

This does bring up the question of how Stockpile makes any money, of course.

The stock trade fees, while comparatively low, provide the company's income. This is actually why Stockpile markets itself first and foremost as a stock gift card service – that initial fee of $2.99 earns the company $2 more than what it gets from its brokerage services.

Cons

Unfortunately, no platform is perfect – just like no investment strategy is 100% foolproof.

While Stockpile is undoubtedly an attractive service, we do have a number of contention points with the company.

-Lack of Customer Support

Although Stockpile's website is neatly trimmed of the usual frills you would expect, it comes at a cost. The FAQ section, while covering many questions, doesn't answer everything you might want to know.

Unfortunately, that means you're reliant on the sparse online chat offering (via Intercom) that Stockpile uses for customer support, as well as email.

It doesn't appear to be necessarily live either, so you could wait a while to receive an answer. Stockpile doesn't offer telephone support either.

-Limited Options

While being able to buy fractional shares in major companies is certainly a boon, you're limited to about 1,000 stocks and 100 ETFs, as mentioned earlier.

This means you have to buy fractional shares in several different companies in order to achieve portfolio diversification. The knock-on effect is that it will also take you longer to purchase even one full share, even with those that cost considerably less than Google and Amazon.

-Not A Full-Service Broker

This is more of a quibble than a full-blown contention, Stockpile not being a full-service broker means you'll be limited in the type of investment accounts you can open.

This is especially an issue for active traders, as you can't buy and sell fractional shares as easily. However, if you're planning on investing long-term, it can still be a suitable option, especially if you use Stockpile to supplement your other investment accounts.

-Only Available to US Citizens

Stockpile appeals to a global community of investors. In fact, they recognize that they have interest from potential clients in Canada and Europe, as well as other areas of the world.

But you need to be a U.S. citizen, permanent resident, or have a valid U.S. Visa (within limitation) in order to become a customer.

-Gift Card Longevity

First and foremost, if Stockpile goes out of business before your giftee redeems their gift card, it becomes worthless. You won't be able to get your money back or trade the gift card for fractional shares anywhere else.

Secondly, if your giftee waits too long to redeem their gift card, they lose out on the original value.

Is Stockpile Right For You?

Stockpile certainly doesn't appear to just be a novelty, but you'll have to carefully consider the pros and cons of investing through them.

If you're just starting out and want to invest $100 (or less) in fractional shares each month until you can afford to switch to a robo-advisor like Wealthfront or Betterment, then the company is certainly an ideal way to do so.

The same goes for gifting stocks and helping young children learn the value of money and how to invest.

For the long run, however, you're probably going to be making that switch.

Conclusion

Stocks can be the gift that keeps on giving.

Considering how hesitant youth are to invest, helping them to start early can have drastically positive benefits in their future.

Not only could they potentially have a nice starting fund for moving to a bigger, more inclusive online discount brokerage, but they'll also be better prepared for the world of investments.

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