Fees for buying and selling stocks
When you buy and sell stock, you pay a fee to your advisor or investment firm. This fee is called a commission. Commissions reduce the return on your investment in a stock.
This table shows the range of fees you might find, depending on the type of firm you invest with. Learn more about how advisors are paid.
|Type of firm||Do they offer advice?||Fees|
|Full-service investment firm||Yes||Commission-based account – commissions typically range between $75 and $100 each time you buy or sell.
Fee-based account – you pay an annual fee, which includes the cost of advice and trading commissions. The fee is typically 1-2% of the value of your account.
|Discount brokerage firm||No||Varies, based on the size of your trade and/or account. Typical fees range up to $30 each time you buy and sell, but some start as low as $5.|
Example – You invest $1,000 in a stock and make $80 when you sell. That’s an 8% return on your investment. Then, you have to pay a $10 commission. This means you only get to keep $70. So your 8% return drops down to 7%.
You invest $1,000 in a different stock and make only $50 (or 5%). You have to pay the same $10 fee to the advisor. That means you get to keep only $40, and your return drops from 5% to just 4%.
The return you get from any stock investment will be reduced by what you pay in commissions and fees, and any tax you pay on the money you make.
3 ways to reduce commissions
- Limit your trading – If you buy and sell stocks often, you’ll pay a lot in commissionsCommissions What you pay to a broker or agent for their services. Often called a “sales commission”. For example, you pay a fee to someone who buys or sell stocks or real estate for you.+ read full definition. This will reduce your returns.
- Ask for a lower rate – If you tradeTrade The process where one person or party buys an investment from another.+ read full definition frequently enough to be considered an active trader, your advisor or investmentInvestment An item of value you buy to get income or to grow in value.+ read full definition firm may give you a better deal on commissions.
- Pay for the level of service you need – If you’re new to stockStock An investment that gives you part ownership or shares in a company. Often provides voting rights in some business decisions.+ read full definition investing, you may want the advice of an advisor at a full-service firm. If you have experience investing in stocks and doing your own research, you’ll save in commissions with a discount brokerageDiscount brokerage A brokerage firm that charges lower fees to buy and sell investments, as opposed to a full-service brokerage. Does not provide investment advice.+ read full definition.
The commissions you pay for buying and selling a stock will reduce the return on your investment.
Reduce the commissions you pay by:
- limiting your trading
- asking for a lower rate
- paying only for the level of service you need