Brokerage fees

When you’re a long-term investor, the risk of losing money on your investments is probably always present in your mind. Falling stock prices are an obvious danger, but there are other, more subtle ways to bleed money - mostly in the form of brokerage fees. They may seem tiny, but they can add up over time. So here’s all you need to know about brokerage costs you will face as a long-term investor.

Brokerage fees - a quick summary

So what are brokerage fees? They are charged by your broker for the various services they provide - including, but not limited to, the buying and selling of stocks and other assets.
Trading fees are typically charged on top of the price of the stock you’re buying (or deducted from the price when you sell a stock). If you click to buy a stock with a price of $200, you may see a $201 total price tag on your order form - that $1 is the trading fee charged by your broker.
Non-trading fees are basically everything else - they can include inactivity fees, withdrawal fees, deposit fees, account fees and so on.
The easiest way to avoid losing too much money to fees is to simply be aware of and keep track of them. Ideally, fees are displayed on the broker’s website, so it’s worth checking them before you sign up (or better yet, use our stock fee calculator to see what a typical trade would cost you at various brokers).
Once you’ve started investing, make sure to check your monthly account statements, as they should include a summary of your trading and non-trading costs. Unfortunately, these statements aren’t always very transparent, so don’t hesitate to do your own math if necessary, or contact your broker’s customer service if something looks out of place.

Types of brokerage fees

Trading fees
  • Commission - Commissions are usually based on traded volume or, alternatively, charged as a flat fee per trade. Volume-based commission can be charged on a per-share basis (such as $0.005/share, regardless of the share price), or as a percentage of your trade (such as 0.1%). Sometimes brokers apply a combination of volume-based and flat pricing.
  • Spread - The spread is the difference between the buy (‘ask’) and the sell (‘bid’) price. It’s a less obvious fee you pay for your transactions, but it’s a cost you incur basically every time you sell a stock. For example, if stock ‘X’ has a sell price of $100 and a buy price of $101, and you were to buy and then immediately sell it, you would lose $1 even though the share price didn’t move anywhere.
  • Margin rate - Trading on margin basically means that you borrow money from your broker to trade. As a long-term investor, you’re unlikely to do this often, but if you do, you’ll have to pay interest on the money you borrowed. The interest rates brokers charge can differ widely, especially in a rapidly changing interest-rate environment.
  • Conversion fee - A conversion fee is charged when your transaction requires a currency conversion. This can occur during trading (e.g. if you have a euro account at your broker but want to buy a US stock priced in USD); or when you deposit or withdraw money to/from your broker account (e.g. if your home currency is GBP but you have a USD broker account). Conversion fees are usually charged in the form of spreads, like the buy-sell spread you may see at a currency exchange booth. They can really add up if you trade often; worse yet, many brokers don’t even display them on your account statements.
Non-trading fees
  • Inactivity fee - Inactivity fees are charged by some brokers if you don’t use your account for an extended period. It usually kicks in after a few months or one year, and it’s typically only a few dollars per month but can be higher sometimes.
  • Withdrawal fee - Some brokers charge a fee (usually a flat fee) when you withdraw money from your account. Simple bank transfers are free at most brokers, but wire transfers or overseas withdrawals can sometimes be pricey.
  • Deposit fee - Deposit fees may be charged when you put money in your broker account. Thankfully, the vast majority of online brokers no longer charge deposit fees.
  • Account fee - Brokers may charge a monthly or quarterly account fee simply for maintaining your account. Fortunately, very few brokers charge account fees these days.
  • Custody fee - Custody fees are charged by some brokers for the safekeeping of your stock, ETF, mutual fund or bond investments. It is a small percentage of the value of your current holdings, usually in the range of 0.1-0.5% per year and often involving a minimum fee and/or a maximum cap. Most brokers don’t charge a custody fee, or waive it above a certain account balance or trading activity.

Commission-free equity trading

The good news about fees is that they’re often zero. Waiving deposit, withdrawal or account fees has become pretty much the norm among online brokers, but an increasing number of stockbrokers now also offer commission-free stock trading. Can this be too good to be true?
In short, commission free is really commission free, meaning you are not directly charged anything for trading stocks (and ETFs). However, brokers usually find ways to make money on commission-free stock trading, ways where you may end up footing some of the bill.
The most common of these is payment for order flow. Remember what we wrote about spreads? Normally, most of that spread goes toward the profit of so-called market makers - basically large trading entities that help execute everyone’s buy/sell orders. Brokers can receive a slice of this profit in exchange for channeling your buy/sell order to a specific market maker. Because of that, the buy/sell spread you see on your trading platform is not necessarily the best that’s available on the market, but the one that your broker is profiting the most from.
Among other limitations, note that commission-free trading sometimes applies to US stocks only, not international stocks. Also, watch out for hidden charges such as conversion fees, which may occur when trading an asset in a currency other than yours.

Brokerage fees by broker

Inactivity fee
If you’re a long-term investor who doesn’t trade often, inactivity fees can sometimes kick in. If this is something you’d like to avoid, check below if the broker of your choice charges inactivity fees.
Non-trading fees
Many brokers have more or less eliminated non-trading fees, but they can still pop up sometimes. See if your current broker or the one you’re considering using charges anything.
Equity commission fees
Does your current broker charge any commissions for trading equities, and if so, can you get a better deal elsewhere? Browse the list below to find out.
Overall fee levels
Trading fees and non-trading fees are only part of the picture. If you want to take a step back and see how brokers compare by their overall fee levels, browse the list below.


Can you avoid brokerage fees?

How are brokerage fees calculated?

What is the difference between a brokerage fee and a commission?

Does a brokerage account cost money?

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