What Is a Brokerage Fee?

Introduction

Every dollar you pay in fees is a dollar that is not growing in your investment account. Brokerage fees used to be a big cost of investing, but today, many investors pay very little. Understanding the fees that remain can help you keep more of your money.

Commissions

A commission is a fee for buying or selling an investment. Not long ago, online brokers charged around $5 to $10 per trade. In 2019, major brokers like Charles Schwab, Fidelity, and TD Ameritrade cut commissions on stock and ETF trades to zero, and most brokers followed. Some still charge commissions on options, mutual funds, or bonds.

Other Fees to Watch

Some brokers charge account maintenance fees, transfer fees for moving your account elsewhere, or fees for paper statements. Options trades often have per-contract fees. Some brokers earn money through payment for order flow, which means they are paid to send trades to certain market makers.

Choosing a Low-Cost Broker

When choosing a brokerage, compare fees, available investments, account minimums, and tools for beginners. Many brokers offer custodial accounts for minors with no fees. Remember that brokerage fees are separate from fund fees, so check expense ratios on any funds you buy.

Conclusion

Brokerage fees are lower than ever, but they still matter. Picking a low-cost broker means more of your money stays invested and growing for your future!