Have I mentioned how much I am loving having accounts at TD Ameritrade? Oh yes, I believe I covered some of that in my article, “Benefits of Switching Brokerages.” For those keeping track, I have my IRA at TD Ameritrade, as well as custodial accounts for each of my two sons. Recently, I received a check for a good chunk of money and decided to use it to open a Trust account with TD Ameritrade.
New TD Ameritrade Trust Account
I mailed my application in to their office in Nebraska on a Friday. The application was delivered on a Wednesday, my account was set up on the following Monday. I talked with my local TD Ameritrade representative on the phone that same day and he was able to give me my new account number. I also arranged to head to the local branch later that day with my check to deposit it and fund the account. Then on Wednesday, I was able to call customer support to get my new Trust account set up online and link it to my IRA, so that I can see and switch through all of my accounts from one dashboard. Now on Thursday, I am ready to start looking at investments.
As background info, I already have a main brokerage account with E*Trade that is substantial and well diversified, an emergency fund in a high interest savings account with a solid 3 months of expenses in it (or longer if we were to live more frugally), my IRA, checking and savings accounts with a Main Street bank, the custodial accounts for my boys, 529 accounts for my boys, and a few small, experimental accounts that I am using as part of the Grow Your Dough Challenge.
Trust Account Investment Plan
Today, I am deciding how I want to invest the money in this new TD Ameritrade Trust account. I’m treating the account as if it is a foundation, where I don’t touch the principle, but I haven’t gone through all the paperwork of creating a foundation and I don’t have the legal obligations of a foundation. I have one special goal with this account, which is that I would like to use 50% of the money that I gain from dividends and interest each year as charitable contributions for my favorite non-profit organizations for the following year. The remainder of the earnings will cover taxes and get reinvested.
Therefore, I am looking mostly for investments with good dividends or solid companies with some dividends and growth potential. No speculative investments here and no low interest investments either. As I have just opened the account, I have 500 commission free trades for 60 days. I’ll be selecting the ETFs (exchange-traded funds) I am interested in and setting up limit orders at prices that I believe the funds might dip down to in the next month. If an order doesn’t go through, I will re-evaluate next month and either change the order price or make a different investment selection.
ETF Screener at TD Ameritrade
In order to help fulfill my investing goals for this account, I decided to use the ETF screener at TD Ameritrade. I found the ETF Screener under the Research & Ideas heading and went to work creating the screen. On the left there is a menu of categories with drop down boxes allowing the user to choose specific criteria. I set up the criteria with the minimums that I would consider in each category. I’ve included a screenshot below to illustrate my choices and you can see how each additional guideline reduces the number of ETFs that meet my needs. When you choose your own ETFs, you may want to make different choices based on your financial goals, risk tolerance, timeline, etc.
ETF Screener Criteria Explained
The criteria that I used was:
- Gross Expense Ratio: .45% or less. I strongly dislike giving my money away in fees and when there are so many lower cost ETFs available that will meet my needs, I see little point in paying a higher expense ratio.
- Distribution Yield: 2.2% or more. This is slightly more than the average distribution yield and I want something that pays back better than average. The yield at 2.2% is the percentage you would get back in interest if your money is in a good high interest rate savings account, so I wanted to get more back than that.
- Current Price: $200 or less. This is really a personal preference. I’m a little more on the financially conservative side of moderate and I would like to reduce the risk of a large loss from one share of stock. Therefore, I don’t like investing in stocks that cost a lot of money per share as I feel like they have further to fall if the price drops (yes, I do understand that conversely they may climb much higher).
- Dividend 12-month Totals: $1 per share or more. This is the average amount and again, I’d like to be above average. Also, most of the good dividend paying stocks or ETFs I hold in my main account manage to generate more than $1 per share, so I think this is a reasonable criteria. Also, since one of the goals of this account is to get cash from dividends, it is important to screen out those that are below average.
- Total Net Assets: $50 million or more. I decided to create a minimum total net assets screen to weed out some of the smaller ETFs. Frankly, the level of assets above this minimum will hold less weight in my future decision making than some of the other factors or fundamental areas that aren’t covered by the screen.
- Beta: 1.2 or less. I am looking for ETFs with lower volatility, so I added beta to the criteria. I wanted to exclude any ETFs that hold riskier or less proven companies. The average beta is .84, but I felt that was a little too low considering the beta for some of the established tech companies like Apple and Facebook are in the 1.2 to 1.4 range. I figured that even though such companies are above the beta I chose, that they may still be included in the ETFs because less volatile companies will also be included to help lower the overall beta figure.
- Morningstar Star Ratings: 5-star, 4-star, and 3-star ratings were all right with me. I am happy to choose among strong buy, buy, and even hold ratings (as their might be some deals to be had there).
- ETF Type: Equities, Sectors, International. I don’t want Bonds or Commodities ETFs so I left those out, mainly because after running the screen without this category selected, I was getting High Yield Bond ETFs in my results, which I know I don’t want to invest in for this account.
ETF Screener Results
By choosing all of these criteria, the number of ETFs left in the screen is 82. That is still plenty for me to research further to make my choices on what ETFs I will be adding to this account. I sorted the results by Dividend Yield and it was interesting to note that the top ETF listed is a REIT ETF (USRT) that I had already entered a limit order for in this account! I’m sharing the screenshots of the full results in case these criteria work for you and you would like to launch your own further research. Sorry the screenshots are small, you’ll have to CTRL-Scroll Up to zoom in on the details. I’ll write another post in the future about my final ETF choices.
The ETF selection process continues in the article, “My Process for Selecting Steady Dividend ETFs.”