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Tuesday, 17 July 2012

Online Stock Trading Fees

Fees and commissions for online stock trading can add up fast, leaving investors scratching their heads at where the money is going. Online trading fees and commissions typically aren't a problem if you have an automatic investment plan set to make a few purchases per month, but if you're an active trader, all those transaction fees can get expensive. Before you sign up with an online stock trading or online forex trading account, make sure you understand the fees and commissions and how you're planning to use the account.

Online Trading Transaction Types and Commissions.

Most online trading firms charge different fees for different levels of service. You'll find a low fee for Internet transactions, a higher fee for phone transactions and the highest fee for broker-assisted transactions. When evaluating online trading fees, consider how you're likely to use the account. Are you comfortable placing orders through the Internet, or would you rather talk to a broker directly about your orders? This fee structure and how you plan to use your account plays a big role in which account is best for you.

The other way in which fees are broken down are by transaction type. Most online stock trading firms charge a very low fee for basic stock trades; in fact, one pricing method includes a few transactions for free every month, after which you're charged for each individual transaction. If you use your online trading account for options, you're looking at a base transaction fee, plus a fee per contract. Mutual funds in online trading firms typically have yet another pricing structure, with some funds at a low fee while other funds rate a higher fee. The online trading fees for mutual funds typically depend on whether they're load funds or no-load funds, and whether or not there's a transaction fee to buy into the funds. Bonds are typically traded on a net yield basis.

Online Trading Account Fees.

In addition to per-transaction commissions and fees, most online stock trading and online forex trading websites charge account fees. The most common type of account fee is a monthly membership fee, used to defray administrative charges. The monthly membership fee typically includes a limited number of free trades, but be sure to look at the per-transaction fees to decide whether or not the free trades truly represent a good value.

Many online stock trading and online forex trading accounts also have minimum account balance requirements. This can be a challenge if you're just getting started with investing and don't have a lot of money to commit in the beginning. If account balance requirements are a problem for you, be sure to examine the account fees with a fine tooth comb to see what fees are assessed for going under the minimum account balance. You might want to look elsewhere for an online trading account if the minimum balance presents an issue for you.

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