SteveB,

For twice the miles that were mentioned earlier, the deal certainly does get better, especially if you normally would investin a lower-risk fund.

But for a person who would normally tolerate higher risk and reward, the cost of the miles increases. For example, to earn the 150,000 miles in the promotion you brought up, a person would pay about $8500 in lost returns at the 7.4% annual rate you mentioned, again assuming they would normally get a 10% return elsewhere in six months. IMHO, this is a reasonable target for growth stocks, given their performance over the past thirteen years. Of course, whether a person would normally invest in growth stocks or the bond funds you mentioned would depend on their age, risk tolerance, and other factors.

The point is that the higher the return a person would typically aim for, the higher the cost of the miles, because E*Trade's policy requires you to invest so as to limit risk and reward. For people who usually invest lower-risk/lower-reward, the promotion is a good deal. But for people who would normally tolerate more risk and see higher gains, the cost of the miles rises.

MSD

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