You could potentially save a lot of money by picking the right brokerage. Suppose your broker charges you $18 per trade. If you trade often -- say, eight trades per month, or 96 per year -- the commission fees will cost you $1,728 per annum. Switch to a brokerage that charges you $7, and you'll pay only $672 for the year, saving $1,056. There you go -- an easy thousand smackers.
Of course, not all of us trade so often, which is a good thing. Some of us care more about how many mutual funds a brokerage offers, or the fees it levies for certain services, or whether it has a local branch office. Our Broker Center has lots of information to help you choose the best brokerage for yourself. You can also compare four solid brokerages via a handy broker comparison table.
But there's another way to make money off brokerages -- by investing in them. In recent months, business has been brisk at many brokerages, judging by quarterly reports.
For the quarter ended June 30, for example, Fidelity Investments reported total brokerage client assets up 21% year over year (to $1.52 trillion!). The quarter's daily average commissionable trades rose by 26% over the previous year.
According to a Los Angeles Times report, part of the boom is tied to interest income. As brokerages capture more clients and client assets grow, the brokerages can make more money from those assets by lending money, particularly via margin. Indeed, as the article reported, "Schwab's net interest revenue -- interest income minus interest expense -- rocketed 41% in the quarter from a year earlier. TD Ameritrade's net interest revenue surged 102%."
Want to know more about brokerages as possible investments? Check out these articles:
And don't forget to evaluate your brokerage and see whether it makes sense to use one that will serve your needs even better -- visit our Broker Center for more info.