It wasn’t too long ago that buying any type of stock typically included a broker’s fee. Those fees may not have appeared to be overly onerous, but they added up if a person traded stocks frequently. Even today, it’s common for brokers to charge up to $10 per transaction. That type of “low” transaction fee will quickly cut into any profit or increase a loss.
If you’re interested in exploring ways to avoid paying a commission, there are numerous techniques available that will accomplish that objective. Here are a few of the possible ways to avoid brokerage fees.
Take Advantage of No Load Mutual Funds
Mutual funds are common investments, and there are thousands of no load funds investors can choose from. While the majority of investors don’t want to invest all their money in mutual funds, no load funds provide a great way to create balance in a portfolio.
Don’t Be Afraid of IPOs
While some Initial Public Offerings (IPOs) are highly touted and attract countless investors, many more are issued without much fanfare. Yes, there is some level of risk involved when choosing to invest in IPOs, but there is also a solid possibility of generating significant profits. More importantly, IPOs don’t include a brokerage commission.
Remain Open to Special Offers from Online Brokers
While it doesn’t happen every day, some online brokers are known to offer free trades for clients. Most of the offers have time limits, so it pays to pay attention to the specials these brokers provide and take advantage of them.
At the same time, look at each company’s typical fees to ensure you’ll be able to sell or purchase more stocks economically when there are no special offers in place. If the rates are low enough, taking advantage of the specials is certainly worthwhile.
Somewhat like mutual funds, ETFs are baskets of securities investors use to balance their portfolios. ETFs include a huge range of options ranging from currencies and commodities to traditional stocks. That means investors can participate in trades that would be more complex if each category was purchased individually.
ETFs were designed to benefit individual investors, although institutional investors are known to purchase them as well. Given the diverse nature of the available ETFs, it pays to review the available options prior to making any buying decisions.
One issue to consider here is any restriction placed on trading ETFs. In some instances, there are mandatory holding periods that must be observed. Check for any restrictions prior to buying to determine if those restrictions may be onerous.
Look at Secondary Offerings
Many companies issue new stocks even though they’re already publicly traded. In some instances, the secondary offerings will be newly issued shares of the company. However, many secondary offerings involve stocks being sold by institutional investors. Secondary offerings will generally be priced at a level that closely matches the company’s current stock.
Discover Dividend Reinvestments
One interesting investment strategy is to take advantage of Dividend Reinvestment Plans (DRIPs). If you’re holding stocks that generate dividends, DRIPs allow those dividends to be plowed back into the company’s shares.
Here, it’s important an investor has confidence in the company’s ability to remain profitable. If the company’s stock tends to be overly risky, it may pay to take the dividend and put it into a more stable stock. If, on the other hand, you’re willing to gamble and there is a strong potential for high dividends, go ahead and take advantage of this opportunity.
Research Direct Stock Purchase Plans
This option is especially relevant for individual investors who are not looking to purchase large blocks of stock at any one time. Direct Stock Purchase Plans (DSPPs) allow people to invest predetermined amounts in stocks over a long period of time.
It’s interesting that the stocks can be from virtually any sector and size of company, which may be of importance to anyone focusing on specific types of investments. For example, if you’re exploring ways to invest in a specific type of high-tech startup, DSPPs are great ways to do so.
Take Advantage of New Strategies as They Evolve
Of course, the markets are always evolving. Strategies like specialized gifting services and stocks sold out of inventory are no longer as readily available, as the ways transactions are handled have changed. That doesn’t mean new investment concepts or adaptations of current ones won’t become popular.
It always pays to follow the trends to see which investment strategies are providing the highest returns and which ones are fading. Yes, that takes a little time, but it always pays to stay abreast of current trends to identify ones that are likely to meet your investment objectives.
Should Investors Shy Away from Any Broker Charging a Fee?
That’s really up to each investor to decide, but remember that finding a balance is generally the best idea when buying stocks. There may be times when the best option for achieving your long-term financial objectives demands you deal with a broker who charges a nominal fee.
The key words there are “nominal fee.” In the vast majority of instances, there is no reason to pay exorbitant fees. Since some brokers charge fees that tend to be much higher than normal, investors are always encouraged to shop for a broker that offers a range of services without overcharging for them. However, don’t pay fees when doing so isn’t absolutely necessary. There are many ways to avoid paying for trades.
Establish a Relationship with a Broker
Another important strategy is to develop a solid relationship with a broker you trust. Once that type of relationship is in effect, the broker will be better able to meet your portfolio goals and do so at a minimal expense. That means you’re more likely to hear about exciting opportunities before everyone knows about them.
Research, Research, Research
Always take the time to stay abreast of the markets and the newest trends. In most cases, that’s easy when you’re working with brokers like TradeZero America.