What Are Brokerage Fees?
In general, brokerage fees are fees the broker charges you to hold and manage your investments. These fees might include annual fees, fees for researching investment data, and inactivity fees if you aren’t trading regularly. It’s important you are aware of the different types of brokerage fees, as well as the types of brokers available to manage your investments. Be aware of hidden fees these will cost you a fortune (bid-spread widening, holding fees, option execution fees, etc), we will disscuss them in a seperate blog post.
Full-service brokers are paid commissions based on transactions. The average fee per transaction at a full-service broker is $150. This is much lower than in the past but still much higher than discount brokers where on average a transaction costs approximately $10.
At a full-service broker, you are paying a premium for research, education, and advice. But it’s important to remember that full-service brokers are also salespeople.
There are also full-service brokers that charge an annual fee between 1% and 1.5% of total assets managed for a client, so will eschew per-trade charges. If you don’t feel comfortable researching and making your own trades, this is a good option to consider. These brokers will also have an incentive to perform well because if your portfolio performs assets under management increase, meaning they make more for managing them. If you’re interested in the full-service broker, please contact firstname.lastname@example.org
Discount brokers generally do not offer investment advice. Trading fees for online discount brokers range anywhere from $7.5 to $20, but most are between $10 and $15. These rates are subject to change.
Most investors don’t bother reading Securities and Exchange Commission (SEC) filings, but SEC filings are available to the public and the information within them is like taking an open book test. The answers are provided for you. Unlike press releases, a public company must state the facts in its SEC filings. This makes it relatively easy to research stocks.
Also, pay close attention to industry trends. If fast-casual food chains that offer natural and organic food are in, go with the trend, not against it. Do your research to determine the best of the breed. And you don’t even need to dive that deep. As a general rule, if the broader market is hot, revenue growth will be the key factor driving stock price appreciation. Investors and traders love revenue growth in bull market environments. If the broader market is cold, net income growth and a strong balance sheet will be the keys to success. Investors and traders like to run to safety for dividends and share buybacks in these environments.
The Bottom Line
If you’re impulsive and/or not willing to do your homework, then you should consider a full-service broker. Otherwise, a discount broker, which allows you to execute trades but does not offer investment advice, is a better option.