Individual Stocks

Online Trading

Even given the many choices of online brokerages, how do we decide which firm is best to use?

Experts cited in a recent Money article suggest that fees charged to execute trades are a very important factor, since these fees depress an investor’s returns over time. Money cites a study by the popular online site NerdWallet that found investors are overpaying certain very large and reputable online brokerage firms $1.8 billion per year in fees. The article also concludes that the fees are not necessarily justifiable, as investors are not necessarily receiving additional services in exchange for paying higher fees. The trades are not executed any faster, and research and investing resources are no better at some online firms that require a higher fee compared with other online discount brokerage firms that charge clients a lower fee. Moreover, although many firms charge a fee to switch accounts, the fee normally pays for itself within months of paying reduced fees at a new firm. The author of the Money article finishes by stating that investors should shop around and compare the details of fees of each online brokerage firm before deciding to set up an account.



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