You probably already know by now that one of the best ways to grow your money is to invest it for the long term in the stock market. But in order to own and profit from stocks, you have to buy and -- eventually -- sell them, which means trading fees. Fortunately, those fees have been falling, and many brokerages will give customers a quantity of free trades each year.
But in this mailbag segment from the Rule Breaker Investing podcast, a listener would like to know the best ways to get more of those. To help answer that question, host and Motley Fool co-founder David Gardner has brought back frequent guest Bill Mann, the Fool's global director of small-cap research.
To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. A full transcript follows the video.
This video was recorded on April 24, 2019.
David Gardner: Rule Breaker mailbag item No. 2. The ostensible reason that I had Bill in, but it's a pleasure to have him in anyway. No. 2, this one comes from John Rustad. He writes this. "Hi David and Bill Mann. Recently I heard Bill on a podcast mention he's a TD Ameritrade customer. Now, as a TD customer as well, I'd like to know how to get more free trades. Any ideas? When calling TD to ask for this, the answer provided is they offer more training and their customer service is better than competitors'. One way to get free trades is by the referral program. Not exactly sure I want to spend my time that way. It would seem I'm not the only one. I've heard many Fools talking about getting free trades." TD Ameritrade, Bill Mann?
Bill Mann: Yes. The one thing that I would say -- and John has already done this -- is you have to ask. What you need to understand about brokerages at this point is that the trades themselves are commodities for them. They cost them nothing. So it really makes no sense -- in fact, I think within the next five years, most trades will actually be free. Brokers know this. They know this about themselves. They know this about their businesses. So when you call and ask, you can simply say: "I have made x number of trades. I've been with you for x number of years." Let's call it out, for me with Ameritrade, it'd be 25 years.
Gardner: Wow! Was it Ameritrade back then? It was just Ameritrade back then.
Mann: I was with Waterhouse.
Gardner: Waterhouse Securities was purchased by TD Bank, which then merges with Ameritrade some years later.
Mann: That's right! I was with Waterhouse.
Gardner: We had a lot of early advertisements -- since we were back in the day in the 1990s, you were with us, Bill -- from some of the early-stage discount brokers. Do you remember Mr. Stock?
Mann: [laughs] Mr. Stock. I had not thought about Mr. Stock in... DayTech was another.
Gardner: Yep. That might even be part of Ameritrade.
Mann: I think it is.
Gardner: It all seems to have rolled up into just a few different companies.
Mann: I was Waterhouse, so I've been there a long time. You have to understand that they don't want you to go anywhere else because they make so much more money on you by virtue of your money and your assets being with them, through stock lending, through lots of other things, through just having those assets in-house. So they don't want you to go anywhere. Ask. Ask very nicely, but be clear on the fact that it would be quite easy for you to leave. Be nice about it. They want to say yes. They don't want you to leave. So, yeah, just keep asking, but be prepared to leave.
Gardner: It sounds like John was told things like, "Hey, referral program. That's the way you can get free trades. Let us know your buddy, and if your buddy joins, you can get free trades.
Mann: My buddy's got a brokerage account. I don't know about yours.
Gardner: So you suspect that's maybe an initial line that you'll be provided. But maybe if you keep pushing on a little bit -- like, I'm going to move my account to my buddy's --
Mann: Right! My buddy's happy with his brokerage. Just keep in mind that it costs them nothing to do trades for you. And I mean nothing. Nothing. Not virtually nothing. Nothing. Tell them that you'll do x number of trades in a year. We don't like doing a lot of trades, but if they're free, it's helpful. They still make money on the spreads between the buy and the ask when you buy and sell.
Gardner: Bill, what would get you to move your account? You and I are somewhere around the age of 50 now.
Mann: Somewhere around there.
Gardner: Very close to 50, Bill, if I recall. Just weeks ago.
Mann: [laughs] That's right.
Gardner: Could you see yourself moving your account in the next 25 years?
Mann: Sure. As with a lot of people, my children have their college accounts and those are different brokers.
Gardner: Spread it out.
Mann: A lot of people have their credit at multiple brokers. So, yeah, it would require some paperwork. But to save $400-$600 in trades over the course of the remainder of my shortening life, I would do that in a second.
Gardner: Are you saying, right now, on this podcast, to TD Ameritrade, if they don't offer you -- let's go with 100 free trades -- that you, Bill Mann, are going to move your account?
Mann: That's a bit much. I actually have made the call. They have come way down and have offered me quite a bit, so there's no real need to. I'm very happy at TD Ameritrade.