I Am NOT In Favor Of ‘Commission Free’ (i.e., FREE) Stock Trading!

by Anura Guruge


Click to ENLARGE. From ‘Yahoo Finance’. Google for more.


If you are worried about a $4.98 commission when making a stock trade (and I think $4.98 is what Fidelity charges I) then you should NOT be making that trade!

With online trading commissions are NOT what they used to be. Yes, I remember having to pay $70 to $80 per trade. That gave you pause, but again, in the end you were hoping to make thousands so even $80 would be a rounding error.

Then, with online trading, it became … $14.xx … $7.95 … and now $4.98.

$4.98.

I am HAPPY to give Fidelity $4.98 per trade, for all the services I get.

I will also, happily, make two concessions as to when a trade should/could be free.

  1. I am a great believer in kids getting into stock (and I have had lot of success with this, even helping kids who are not mine). So, I am all in favor that kids should be allowed to trade for free. Basically make UTMA (or equivalent) accounts — i.e., accounts involving those under 18 — commission free. That will be a winner.
  2. Also give those making ‘small’ trades a break. But, since folks invariably will try and abuse this, since folks are cheap, it will have to be restricted to one free trade a day. So, something like one $1,000 (or less) trade per day free, or one trade (per day) involving 30 shares or less.
    ….

So, why am I opposed to free trading. Because, I am old & savvy enough to know that there are NO free lunches. When brokerage house offer free trading they are going to be loosing millions if not billions in income! True statement. So, how are they going to make up for that.

First they will cut services. Yes, good folks will lose jobs. It will also mean that you will not be able to talk to a human. So, the elimination of services is my greatest fear. I get outstanding service from Fidelity. I would hate to see that not be the case.

Second, they are going to start hounding you to sell you services. You will get even more calls and e-mails offering this and that. They have to recoup the money they are losing. It will be ugly. To be honest it will not affect I! Fidelity, quite a long time ago, stopped trying to sell me anything. They know — and they can see — that I do very well on my own. So, they stopped calling me. But, it won’t stop them calling YOU.

There is another reason too. It will just further encourage foolish, mindless trading! I really hate that. Folks that buy and sell with no rhyme or reason. Panic and sell when the market is going down and then turning around buying the same stock when the market has gone up. They could save themselves so much money buy just buying and holding. My core stock portfolio has not changed since 2012. 7-years. SMILE. Yes, I have held the same stock for 7-years. SMILE.

So, that is my piece on this.


Related posts:
Check Category ‘Investments’.


by Anura Guruge


 

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