The primary method of investing in ShareBuilder is to define an investment strategy: given X dollars, invest a certain portion in ABC, a certain portion in DEF and so on. This is called an automatic investment plan, and as soon as you have X dollars transferred into your account, the application will execute your plan on the following Tuesday. This allows you to dollar-cost average into a portfolio consistently over time, and makes it very simple to do so. It’s not a very important feature if you are interested in taking a more proactive role in your investment, and it’s not the reason why I used them. The reason why I use them is that, because they are owned by ING Direct, I can transfer money between my investment and checking account instantly. I can execute trades without having had to pre-fund the investment account because of this, which makes a big difference if you need to carry out large trades on the spot.

Now, having sold about $4,000 in those shares I mentioned earlier, I was ready to withdraw that money and put it to a different use. However, I had to wait three business days before I could transfer that money back into my checking account. The sale took place on a Friday, so this meant that I had to wait until at least Wednesday. Not a problem.

Or so I thought.

Remember that automatic investment plan which kicks in on Tuesday? Well guess what, ShareBuilder will reinvest your money into the the very shares you sold, automatically and without warning, and before you can have a chance to withdraw it! That’s right, even though the money isn’t available to be withdrawn because I have to wait for the trade to “settle” (whatever the fuck that means), apparently money from unsettled trades are available for ShareBuilder’s automatic investment plan to reinvest in the shares I had just sold out of. From my net proceeds, they took $870 — about 20% — and put it back into the companies I had just profited from!

Now, not only do I have to wait until those shares rise back above the price that I sold them, but I have to pay regular income tax on any of the profit I make from those sales.

Their customer service form claims that any queries will be responded to within 48 hours, but apparently that’s not the case if you’re complaining about their automatic investment program stealing your money and investing it before you have a chance to withdraw it. I wrote them more than a week ago and haven’t heard shit from them.

I opened up an account with Scottrade today and will be doing all of my future investment with them. ShareBuilder and its too-clever automatic investor can go to hell.