Not what I meant, but capital gains are another issue, but I am not in the US. In the UK we pay a 0.5% tax on ever transaction and often around £10 per transaction, so its quite substantial. I should probably have said costs, not fees.
How much are total costs in the US?
If you trade frequently even low costs add up. If its 0.1% and you trade monthly it ends up being 1.2% over the course of an year.
All the major US brokers started doing free trades for stocks and etfs. For Vanguard, most of the index expense ratios are really low, like %.05 percent, but that’s not a trading fee.
If you’re trading US large-cap stocks at low frequency these are not really material costs for even a wealthy retail investor. Certainly not next to taxes.
Not what I meant, but capital gains are another issue, but I am not in the US. In the UK we pay a 0.5% tax on ever transaction and often around £10 per transaction, so its quite substantial. I should probably have said costs, not fees.
How much are total costs in the US?
If you trade frequently even low costs add up. If its 0.1% and you trade monthly it ends up being 1.2% over the course of an year.
10+/trade is going back to the early 2000s for the US.
Now it's effectively 0 for most common trades. Here is Schwab for example:
https://www.schwab.com/pricing
If someone is a big options trader they can probably find a better per contract price out there.
How do they profit? There must be a cost somewhere? Another reply mentioned spreads - still a cost (you lose money when you trade).
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All the major US brokers started doing free trades for stocks and etfs. For Vanguard, most of the index expense ratios are really low, like %.05 percent, but that’s not a trading fee.
Even for paid transactions that typically give better pricing (IBKR Pro), the prices are extremely cheap.
How do they make money from you as a customer?
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You also pay a spread every time you trade, especially if you're using a retail brokerage like robin hood that sells order flow to market makers.
It doesn't show up anywhere in your statement, but it's a real trading fee nonetheless, so it's still better not to trade too much
Retail is offered tighter spreads because it’s safe to assume they have no edge at scale.
The explicit fees are near zero, but if you watch your trade you always get an adverse price.
what are you talking about. you're not going to fill worse than nbbo
You pay the spread and you also have impact in the market.
If you’re trading US large-cap stocks at low frequency these are not really material costs for even a wealthy retail investor. Certainly not next to taxes.
The spread is a material cost, but the market impact is negligible for retail investors, yes.