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It is certainly cheaper to be an investor than it was a few decades ago. It used to be quite common to pay hundreds of dollars in trading commissions per transaction when buying stocks, ETFs, and other investments, but now investors pay a fraction of this, and sometimes nothing at all.
While the brokerage fee structure has been disrupted in recent years, that doesn't mean investing is completely free. Here's a quick guide to the various fees you may have to pay your broker for investments and related services.
A brokerage fee is a charge in exchange for completing a transaction or for ongoing management of one's investments. The most well-known type of brokerage fee is a trading commission, but there are several other types of fees charged by brokers for various investment services (more on these below).
Brokerage fees are typically calculated as a flat rate per trade. A mutual fund commission, for example, is typically the same whether you're investing $5,000 or $500,000. However, some commissions are percentage-based, such as robo-advisor management fees. Cryptocurrency trading commissions often have a percentage-based component as well.
Other types of commissions are a flat rate per item traded. Options trading fees are in this category, as most brokers charge a small fee (usually in the $0.50 to $1.00 range) for every contract traded.
Fees can vary significantly between brokers. Virtually all have eliminated commissions on online stock trading, but there can be major differences elsewhere. For example, options trading typically costs between $0.50 and $1 per contract, but there are some brokers that don't charge anything. Mutual fund commissions are a similar situation and can range from free to more than $50 per trade.
The point is that there's no good answer to the question of "how much are brokerage fees?" It depends on which broker you use and what types of investments you make. For example, a mutual fund investor might find a broker's $39.99 mutual fund commission to be high, but someone who does not (and doesn't plan to) invest in mutual funds doesn't need to pay any attention to this as long as the other fees are acceptable.
$0 commission for online U.S. stock and ETFs*. No account fees****.
$0****
Fidelity makes investing easy with $0 commission trades, powerful tools, and 24/7 support. Trade stocks, ETFs, options, and even crypto -- all in one place. Get expert insights, automate your investing, and potentially earn more on uninvested cash.
On Fidelity's Secure Website.
Commission-free stock, mutual fund, and ETF trades; other fees apply
$0
E*TRADE offers low fees and tons of account types. If you need it, chances are, E*TRADE has it. You can access advanced features through its popular Power E*TRADE platform. Open an E*TRADE account to trade fee-free mutual funds and do all your investing in one place.
On E*TRADE's Secure Website.
$0 on trades of stocks, ETFs and their options. Other fees may apply.
$0
A top pick for beginners, Robinhood combines $0 commission trades, an easy-to-use app, and a rare retirement deposit match.
On Robinhood's Secure Website.
Until about five years ago, trading commissions were a much larger factor. But it's still important to take costs into consideration. For example, a 1% annual management fee on an actively managed mutual fund might not sound excessive, but it could cost you thousands of dollars (or much more) in returns over a period of decades.
To illustrate this, consider this example. Let's say that you invest $20,000 into mutual funds that produce average returns of 10% per year over the long run. Here's how your account would grow without any fees compared with a 1% annual management fee:
| Time period | Investment with no fees | Investment with 1% management fee |
|---|---|---|
| 5 years | $40,263 | $38,466 |
| 10 years | $64,844 | $59,184 |
| 20 years | $168,188 | $140,110 |
| 30 years | $436,235 | $331,692 |
| 40 years | $1,131,481 | $785,236 |
This is certainly a simplified example, but it does a great job of illustrating just how costly those seemingly small investment fees can be over time. In this case, a 1% management fee would have cost you more than $346,000 in returns over a period of four decades!
Commissions are the best-known type of brokerage fee you might encounter, but they certainly aren't the only cost of investing you should keep in mind. Here are some of the charges a broker may have.
Virtually all brokers have eliminated commissions for online stock trades, but there are still investment commissions to keep in mind. For example, while online stock trades are free, most brokers still charge for trades made by phone with the broker's assistance or for stocks that trade on the over the counter (OTC) markets. Many have commissions for options and cryptocurrencies, and most have mutual fund commissions for funds that aren't on a no-transaction-fee (NTF) list.
Some brokers -- especially those that are designed with frequent traders in mind -- charge an inactivity fee if your account remains idle for too long.
Some brokers offer subscriptions to investing publications, third party research tools, and even trading apps that you'll have to pay a monthly or annual subscription fee to use.
If you invest in a mutual fund or ETF, it will almost certainly have management fees, and these are known as the fund's expense ratio. An expense ratio is the percentage of your assets that go towards fees each year. It isn't a direct cost (it is simply reflected in the fund's performance), but it is important to realize that mutual fund and ETF investing isn't free.
Some brokers charge an additional (usually small) fee for retirement accounts like IRAs, known as a custodial fee.
If you have a professional investment manager selecting stocks and ETFs for your portfolio, you'll probably have to pay for the privilege. The standard management fee tends to be 0.80%-1.0% of assets under management annually for a human financial advisor, while a robo-advisor that automatically allocates your money tends to charge around 0.20%-0.50%.
Brokers often charge fees for certain services and activities that may or may not apply to you. These may include wire transfer fees, insufficient fund fees for check deposits, fees for transferring investments to an external account, a fee for requesting a paper statement or trade confirmation, and fees for trading foreign stocks, just to name a few.
To be sure, finding a broker that meets your needs and is a great fit for the types of investments and trading behavior you use is more important than finding the cheapest option. But with that in mind, the best way to keep brokerage fees to a minimum is to shop around. Our top brokers list is a good place to start, and once you've narrowed down the list to two or three that best meet your needs, compare their pricing.
One smart move is to thoroughly read a broker's pricing structure before opening an account. You can typically find it through the broker's home page or by running an internet search for "'NAME OF BROKER' pricing." This can be a smart way to compare two or more brokerages you're interested in -- especially if their commission structure is identical.
All major brokers that we cover have eliminated commissions on online stock trading, but there are some that charge fees for trading options, mutual funds, and cryptocurrencies. Some brokers are focused on eliminating fees; Robinhood, SoFi, and Webull are a few popular examples where most trades are completely free.
Uncover the names of the select brokers that landed a spot on Motley Fool Money's shortlist for the best online stock brokers. Our top picks pack in valuable perks, including some that offer $0 commissions and big bonuses.
In many cases, brokerage fees can be well worth it. For example, a robo-advisor can create a custom investment portfolio for a fee of 0.25%-0.40% per year, which is significantly less than you'll pay to a human advisor. However, it's important to shop around because different brokers have very different pricing structures.
Brokerage firms are businesses that intend to earn a profit from facilitating investments, and fees are a big component of how they do it. Having said that, there has been a movement to disrupt the traditional brokerage pricing models, so some brokers have fee structures that are much lower than have traditionally existed.
Motley Fool Stock Disclosures
Matt Frankel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Target. The Motley Fool has a disclosure policy.Fidelity disclosure
Investing involves risk, including risk of loss
* - $0.00 commission applies to online U.S. equity trades and exchange-traded funds (ETFs) in a Fidelity retail account only for Fidelity Brokerage Services LLC retail clients. Sell orders are subject to an activity assessment fee (historically from $0.01 to $0.03 per $1,000 of principal). Other exclusions and conditions may apply. A limited number of ETFs are subject to a transaction-based service fee of $100. See full list at Fidelity.com/commissions. Employee equity compensation transactions and accounts managed by advisors or intermediaries through Fidelity Institutional® are subject to different commission schedules.
**Fidelity Crypto® is offered by Fidelity Digital Assets®. Investing involves risk, including risk of total loss. Crypto as an asset class is highly volatile, can become illiquid at any time, and is for investors with a high risk tolerance. Crypto may also be more susceptible to market manipulation than securities. Crypto is not insured by the Federal Deposit Insurance Corporation or the Securities Investor Protection Corporation. Investors in crypto do not benefit from the same regulatory protections applicable to registered securities. Fidelity Crypto® accounts and custody and trading of crypto in such accounts are provided by Fidelity Digital Asset Services, LLC, which is chartered as a limited purpose trust company by the New York State Department of Financial Services to engage in virtual currency business (NMLS ID 1773897). Brokerage services in support of securities trading are provided by Fidelity Brokerage Services LLC (“FBS”), and related custody services are provided by National Financial Services LLC (“NFS”), each a registered broker-dealer and member NYSE and SIPC. Neither FBS nor NFS offer crypto as a direct investment nor provide trading or custody services for such assets. Fidelity Crypto and Fidelity Digital Assets are registered service marks of FMR LLC.
***Options trading entails significant risk and is not appropriate for all investors. Certain complex options strategies carry additional risk. Before trading options, please read Characteristics and Risks of Standardized Options. Supporting documentation for any claims, if applicable, will be furnished upon request.
****Zero account minimums and zero account fees apply to retail brokerage accounts only. Expenses charged by investments (e.g., funds, managed accounts, and certain HSAs) and commissions, interest charges, or other expenses for transactions may still apply. See Fidelity.com/commissions for further details.
E*TRADE services are available just to U.S. residents.
Robinhood disclosure
Margin borrowing increases your level of market risk, as a result it has the potential to magnify both your gains and losses. Before using margin, customers must determine whether this type of strategy is right for them given their investment objectives and risk tolerance. Regardless of the underlying value of the securities you purchased, you must repay your margin loan. Robinhood Financial can change its maintenance margin requirements at any time without prior notice. If the equity in your account falls below the minimum maintenance requirements (varies according to the security), you'll have to deposit additional cash or acceptable collateral. If you fail to meet your minimums, Robinhood Financial may be forced to sell some or all of your securities, with or without your prior approval. For more information please see Robinhood Financial's Margin Disclosure Statement, Margin Agreement and FINRA Investor Information.
Margin trading involves risk and may not be suitable for all investors. Borrowing on margin increases your level of market risk and can amplify both gains and losses.
Robinhood Financial may change maintenance margin requirements at any time without prior notice. If the equity in your account falls below minimum maintenance requirements, you may need to deposit additional cash or collateral. If those requirements are not met, Robinhood Financial may sell securities in your account without prior approval.
The 3% matching on annual contributions requires a subscription with Robinhood Gold ($5/mo) and customers must stay subscribed to Gold for 1 year from the date of the first eligible deposit to keep the full Gold match. The funds that earned the match must be kept in the account for at least 5 years to avoid a potential Early IRA Match Removal Fee. Match rate subject to change. Non-Gold customers receive a 1% match. Offer only applies to self-directed IRAs. For more information refer to the IRA Match FAQ.
You must have compensation (wage income) in order to contribute to an IRA. Funds being contributed into or distributed from retirement accounts may entail tax consequences. Contributions are limited and withdrawals before age 59 1/2 may be subject to a penalty tax. Robinhood does not provide tax advice; please consult with a tax adviser if you have questions.
The Robinhood IRA is available to any U.S. customer with a Robinhood brokerage account in good standing.
Robinhood Strategies charges an annual management fee of 0.25% on the net portfolio value of each managed account. Eligible Robinhood Gold subscribers pay no management fees on the portion of their managed account net portfolio value that exceeds $100,000, thereby limiting the annual management fee to $250. Other fees apply.
All investments involve risk and loss of principal is possible.
Brokerage services are offered through Robinhood Financial LLC, ("RHF") a registered broker dealer (member SIPC) and clearing services through Robinhood Securities, LLC, ("RHS") a registered broker dealer (member SIPC).
RHF and RHS are not banks. All are separate but affiliated entities. Securities offered by RHF are not FDIC insured and involve risk, including possible loss of principal.
Robinhood Gold is a subscription-based membership program of premium services offered through Robinhood Gold, LLC.
Portfolio management of managed accounts by Robinhood Asset Management, LLC ("Robinhood Strategies"), an SEC-registered investment advisor.
Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before trading options.
Cryptocurrency trading is offered through Robinhood Crypto, LLC (NMLS ID 1702840). Trading and holding digital assets involves significant risk, including the risk of substantial loss. Cryptocurrency held through Robinhood Crypto is not FDIC insured or SIPC protected.
*Trading and owning digital assets involves significant risk, including the risk of substantial loss. Cryptocurrency trading is offered through an account with Robinhood Crypto, LLC (NMLS ID 1702840). Robinhood Crypto is licensed to engage in virtual currency business activity by the
New York State Department of Financial Services. Cryptocurrency held through Robinhood Crypto is not FDIC insured or SIPC protected.
** Network fees may apply. Availability may be subject to regulatory approval in certain states.
