As long as I can remember, to entice new customers, investment brokerages have offered a few upfront commission-free stock trades. In the last couple decades, there have been several online broker startups with no-commission trading as a business model. Because nothing is free, there is always a downside trade-off with these companies, such as batched trades at the end of the day, poor bid/ask spread, or they quickly go out of business. Last year, one of the zero-commission firms (Robin Hood) had a couple software glitches in their options platform, messing up orders that created large losses for customers; and they called it “erroneous option execution, sorry for the confusion” Um, no thanks – I think I’ll take my business elsewhere!
Now, the big boys are entering the no-cost commission game:
- Bank of America (Merrill Lynch) offers 10 free trades per month
- Chase Bank (JP Morgan) offers 100 free trades per year
- Wells Fargo (WellsTrade) offers 100 free trades per year
- Fidelity has free trading for 25 of their iShares ETFs
- Vanguard offers free trading on their ETFs
- Schwab offers free trading on their 8 ETFs
Some of these companies have minimum requirements to qualify for these free trades, such as $25,000 or $50,000 in your account. If you do not qualify for free-commission trading, there are many firms that charge as little as $2.95 per trade. A quick online search can show you which firms and more importantly, reviews from users. For example, I used the company Interactive Brokers for a couple years because they are super cheap. But their platform was just too cumbersome for me to use quickly and elegantly with multiple accounts. If you begin trading frequently (which I do not recommend) you can always try to negotiate a lower commission rate. I knew someone that inherited an old stock account at Raymond James in 2016, along with their $175 commission rate from the 1980s. Since the Raymond James broker wouldn’t even return his phone call, he transferred the account to TD Ameritrade for $6.95 commissions and saved a fortune when he rebalanced the portfolio. As the brokerage industry landscape changes, make sure to periodically shop around to get best deal for your circumstances, and possibly no-cost commissions to reduce your costs.