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How to Minimize Fees and Commissions for Investing

If there’s one way to boost your investment returns, it’s by first lowering your investment costs and fees. Yup, many beginning investors may not realize this, but investing doesn’t only grow your money; it’ll cost you some money, too. We’re talking about the fees associated with investing.

🤔 Understanding common investing fees

Regardless of how you choose to invest, you’re going to have to face some inevitable investing fees. Here are some of which you should be aware:

  • General Trading Fee: This is the bare minimum you need to trade under a brokerage service
  • Account Maintenance Fee: This is the fee you pay just to have your account managed
  • Commission Fee: This is a percentage a broker may take off the top, often according to the total assets under management or per new contribution
  • Stock Trade Fee: This may be a flat or share-based fee for stocks
  • Broker-Assisted Trade Fee: Some brokers who operate by phone may charge their own fees
  • Mutual Fund Trade Fee: You may have mutual fund trade fees depending on the type of fund you plan to trade
  • Front-End Load Fee: This is the fee you’re charged upon purchase of mutual fund share
  • Back-End Load Fee: Brokers charge back-end load fees when you cash out your fund
  • Base Fee: This is a flat rate per option trade
  • Per-Contract Fee: This is a fee that may have several tiers depending on your option trading
  • Exercise Fee: Some online brokers charge a fee for exercising, rather than closing, your option(s)
  • Assignment Fee: If you have an option automatically bought or sold based on certain conditions, you may have an assignment fee

What this means for you

While investing was once reserved for the Wall Street elite, any average Joe and Jane can get started rather simply these days. That’s thanks to a number of options you have to invest your money, like these three alternatives:

  • Robo-Advisors: Robo-advisors use algorithms and AI to determine the best portfolios for you — taking into account your investor type, tolerance for risk, investment time horizon and other key factors. Many robo-advisors will point investors toward ETFs, which are lower-cost and automatically diversified due to their makeup. Using a robo-advisor is ideal for investors of any level who want to “set it and forget it.” Where the costs come into play with robo-advisors are the startup fees and expense ratios.
  • Full-Service Brokers: Full-service brokers are the most expensive investing option, so they typically only deal with high-net worth clients. But despite their expensive deposit minimums (which can be upwards of $25,000 or even higher), clients get what they pay for. Full-service brokers offer a full range of services and financial advice, from building retirement accounts and estate planning to trading in stocks, ETFs, mutual funds and more exotic trading options. Full-service brokers typically charge commission on transactions, plus a percent of the value of your assets. This is usually about one to two percent, which can significantly add up over time.
  • Discount Brokers: Discount brokers are a popular option among those who can’t afford the exorbitantly high fees of a full-service brokerage. They operate online and often offer commission-free stock trades but make their money via fees for more advanced financial transactions (these range anywhere from about $2 to $10 per trade). Some discount brokers also have minimum deposit restrictions, which range from $100 to $1,000 or more.

Unfortunately, no matter how you choose to invest, you’re going to have fees to pay. But the good news is that you can take actions to reduce those fees.

Disclosures

Q.ai is the trade name of Quantalytics Holdings, LLC. Q.ai, LLC is a wholly-owned subsidiary of Quantalytics Holdings, LLC ("Quantalytics"). Quantalytics offers automated financial advice tools through Quantalytics Investment Advisors, LLC ("QAI"), an SEC-registered investment advisor. QIA’s investment advisory services are ONLY available only to residents of the United States. Disclosures concerning QIA’s investment advisory services are available on its Form ADV filed with the SEC. The content in this newsletter is for informational purposes only and does not constitute a comprehensive description of Q.ai's investment advisory services.

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