[Update: Loyal3 has ended the use of credit cards to purchase stocks therefore making the us of Loyal3 uselsess for miles and points enthusiasts] I have posted before about the opportunity that
Loyal3 offers to manufactured spending enthusiasts. My earlier post:
How to Meet Minimum Spending Requirements with Loyal3 gave details on how to use
Loyal3 to meet minimum spending requirements.
As a recap,
Loyal3 lets you buy a limited selection of stocks for a maximum of $50 at one time (fractional shares) for no fees and lets you use a credit card. What's the catch?
Loyal3 has two business days before it has to initiate the purchase meaning you do not know what price you will buy in at. Also, when you choose to sell your stock the sale will go through by the market close of the day you initiate the sale which means you won't know exactly what your stocks will sell for.
I have been playing around with earning miles from
Loyal3 over the past two months. So far I have had great success using
Loyal3 for manufactured spending. To date I have manufactured more than $20,000 in spending through
Loyal3. Not only have I gained the valuable rewards from my credit card, but I have also managed to turn a small profit on the buying and selling of the stocks. These profits are very small. For the $20,000 of stocks that I have bought and sold, I have made approximately $90 in profits.
I have used my
Barclays Arrival Plus World MasterCard exclusively for all of my purchases on
Loyal3. This credit card gives a return of 2.22% back to be used for travel related purchases. This means that my $20,000 in manufactured spending on
Loyal3 earned me $444.44 in travel rewards plus another $90 in short term capital gains. All this in less than two months.
I must add in that I am not a professional investment adviser. Proceed at your own risk. It is possible to lose money in the stock market.
I will share a little more about how I am doing this. First, my strategy has been to buy in for $5,000 per week at $1,000 per weekday. I need to select at least 10 different stocks. This is because there is a $2,500 maximum purchase of each stock per month. If I buy $100 of a stock each weekday for a whole month I will purchase around $2,200 per month of an individual stock. You run the risk of getting your account audited if you accidentally try to purchase more the $2,500 of an individual stock in a one month period.
Purchasing $1,000 per day requires 20 purchase transactions at $50 each. When I do this manually it takes me about 13 minutes every day.
Tip: Want to save yourself some time. Check out
iMacros for Firefox. This add on allows to to record and replay repetitious browser tasks. That's what I'm using.
I try to sell frequently. My strategy has been to track all of the stocks that I have purchased with the
portfolio tracker with Google Finance. Every weekday I look to see which stocks are up for the day. I sell the stocks that have made small gains more than the price I paid for the stock with
Loyal3. Some sales I might only gain $1.00 on $500 worth of stock.
There is some lead time when using
Loyal3. For me there is generally a 10 day period from the time of purchase to the time the money form the sale makes it to my checking account. For each step in the process it takes time:
- Purchase stock - 2 business days until stock is purchased posted to your account
- Sell Stock - 3 business days until the sale is finalized and funds are available in your Loyal3 account
- Transfer Funds form Loyal3 to your bank account. Most funds transfers can take up to 3 days to complete
With these time restrictions, it is not possible to cycle through the process within one week so a weekend will be included. This makes for some delays.
When I use my
Barclays Arrival Plus World MasterCard I get 2.22% back for travel related purchases. If I invest $5,000 per week and $20,000 per month, getting 2.22% return each week this comes out to a great return of 8.88% per month.
With an expectation of an 8.88% monthly return there is really no reason to want to hold on to any of the stocks. I doubt there are any stocks analysts predicting any stocks to make an 8.88% return per month.
You need to be careful though or you run the risk of getting your account shutdown. Here are some reason that may lead to your account being shut down:
- Changing credit cards frequently for purchases
- Attempting to purchase more than the maximum of $2,500 per stock per month
- Selling stocks with no regard for profits and losses
- Selling stocks too quickly (I try to hold onto the stocks for at least two days)
Also be aware that starting out by purchasing $1,000 in stocks (that means 20 $50 transactions) with
Loyal3 may initiate a fraud alert with your credit card. Start slowly.
If you have any questions or comments, feel free to leave them below.
