Don’t Forget the Cost of Selling Stock Certificates

When newcomers to the stock market invest they are almost invariably surprised by the amount of commissions they pay.  Active stock traders can pay many thousands of dollars in commissions in a single year.  In order to accurately forecast what your returns might be, you must remember to add in the commissions on both sides of your trade.  You will be paying a fee when you sell stock in addition to the fees you pay when you purchase your shares.

As you become a more active trader, the percentage of your profits that will be allocated to paying commissions goes up.  An active trader can easily make 10 trades a day.  If this trader is paying $10 per trade he is spending $200 just in commissions.  This means that in order for the trader to break even for the day he must be $200 to the good on his stock trades.  It is a common mistake to only factor in one side of the cost of the trade.  Many people would just multiply the number of trades (10) by the cost per trade ($10) to get the estimated fees.  As you can see you must double this result to account for selling stock certificates.

Taking note of the example above it makes it very clear that an active trader would save a large amount of money if he used a cheap stock trading brokerage.  There are many good discount brokers available online.  Some of the more well respected brokers are:  Scottrade, Charles Schwab, etrade, and Trade King.  It takes a certain amount of research to keep up with the different pricing schedules available from the different brokers.  As you can see by the $200 per day cost, a little research can save a lot of money.  Don’t simply choose a broker based on their prices, but don’t ignore them either.  Saving $100 or more every day could make the difference between being a profitable trader and losing money for the year.

Related posts:

1. Trying the Toronto Stock Exchange
2. Identifying Legitimate Stock Investing Software
3. Selling with Rent to Own is a Good Solution in a Down Market!