Originally Posted by
Happy
The "cost analysis" is NOT a straight cpm analysis as I already mentioned.
Fido would not work for folks who already earned the bonuses before, or who have existing Fido accounts. Fido is known to even turn down some people whose existing accounts were only 401K rollover accounts while the offer specifically said it is for regular brokerage accounts.
Ameritrade does require you to put the money (if you dont have assets to move over, or you do not want to move the assets over just for the miles sake) in the account for the specified duration. Else the miles are taken back proportionally. FWIW, I have Ameritrade account which I only give them the minimum $2000 so I can use the Real Time Streamline Quote Service for free. The trading activities are still done at the Fido accounts. $2000 at 2.4% a year would cost me $48 yet any decent real time quote feed would cost $20 and up per month - just for information sake - so the $2000 tied up at Ameritrade serves me well. However I am not willing to give them any more than that just for the sake of getting 50K miles.
BankDirect - if one already has a healthy balance of AA miles, there is no point to hoard it while given up the cash for other earning opportunities especially if one is in lower tax bracket. Hoarding miles with a calculated real cost, is never a good idea in my opinion because you do run the risk of devaluation.
That is where the "cost analysis" in a broader sense that I refer to -
not just the simple way of looking at the cpm cost.
Like if someone already has 1 to 2 millions miles in his account, and said person is in low tax bracket, I do not see why he or she would still want to do the Bank Direct with his money - because the alternative could be, although not totally risk-free, use the money to buy a Blue Chip Name, High Dividend Yield stock that yields 4 to 5% dividend which is still taxed at a lower rate than ordinary income. Surprisingly in today's stock market, you can find those names quite easily. Of course, you would still be subject to the ups and downs of the stock market but choose carefully you would do fine even if we go back to a 2nd recession. I would not even go into using the money for trading which surprisingly is actually working with the market volatility. This is not for most people but would definitely be applicable to some who do trade the stock market. The return is far greater than your 2.4% after tax - for the whole year... It can be many times of that in a few weeks... but that is of course an entirely different subject.
. . .
To recap for those other simple-minded folks like myself:
1. Even though there are numerous reports on the Fidelity thread that say otherwise, don't expect any bonus miles from Fidelity if you've ever had any relationship with them. (Nevermind that we've never established whether the subject of this whole discussion -- lkar -- has ever had any dealings with Fidelity in the past.)
2. When considering whether or not to take advantage of the BankDirect AA deal, one should not compare the foregone return of a similar investment, but instead, the correct comparison is to what one could "reasonably expect" to achieve in the stock market.
I can't wait for the next installment of AA Miles for Dummies. I've obviously got a lot to learn!