Where can you invest against low fees?
Do you want to invest against low costs? In this article we will reveal the brokers with the lowest transactions fees. By using this comparison you can save on your annual costs at your broker.
Costs can greatly reduce your profit! When you buy shares, you often pay a commission on each transaction. The cost of paying a commission every time is much higher than just the commission itself. The amount you pay cannot be invested in new shares, which means you will miss out on a lot of profit in the long run.
Fortunately, there are brokers who sell shares without charging commissions. This makes it possible to achieve good results on the stock market even with small investments. A good broker who does not charge transaction fees is eToro. Use the button below to open a free account immediately:
What is the cheapest broker for active trading?
Are you a more active trader? Do you want to open multiple transactions and be able to bet on a declining market? Do you want to be able to use leverage? Then a traditional broker is often not the best or cheapest option. When you want to trade actively, a CFD broker can be a good choice.
One of the cheaper CFD brokers is Plus500. At Plus500, you don’t pay commissions when you open a position. Moreover, you can try the possibilities risk-free with a demo of $40,000. Do you want to know more about Plus500? Read this comprehensive review. You can also open an account directly with the button below: (72% of retail investors lose money)
Why do you have to compare the fees?
It is important to compare brokers’ costs well. A cost difference of 0.5% can make a huge difference. We would like to illustrate this by means of an investment with a return of 8% or 7.5% after deducting costs. In this example, an amount of $100,000 has been invested. With a return of 8%, you get the following results:
- After 10 years, the investment is worth $21,589.
- After 30 years, the investment is worth $100,626.
- After 50 years, the investment is worth $469,016.
With a return of 7.5%, you get the following results:
- After 10 years, the investment is worth $20,610.
- After 30 years, the investment is worth $87,459.
- After 50 years, the investment is worth $371,897.
0.5% of cost difference seems very little, but in practice it can cost you thousands or even tens of thousands!
Don’t shoot yourself in the foot
Many investors choose to invest at their bank out of convenience. This is almost never a good idea. The rates are much higher at a bank than with a broker. Banks know that many people do not bother to properly research where they can invest cheaply. They have a well-known name and therefore receive enough customers.
At a bank, you often pay high fees on your investments. Many banks even charge annual fixed fees just for owning an account. If this is the case, you also pay money when you do not open new positions. Therefore, take a moment and choose a broker with a low rate. This can do a lot for you in the long run.
Choose advantageous investment products
When you buy bread from two different bakers, the prices can vary greatly. The same goes for brokers. Still, you might think, bread is bread. This is certainly the case with stockbrokers. Whether you buy stock from eToro or DEGIRO makes little difference. The share is 100% identical. But this is not the case with the various investment products. Some investment products are much more expensive than others. Therefore, also research whether the costs of the investment product are justified.
When you look at funds, you often find that active funds charge much higher transaction fees than passive funds. Yet most active funds do not achieve better results than funds that simply track an index. Therefore, always research whether the higher costs of the investment product are worth it.
What is the cheapest broker?
For this test, we bought 30 shares of Royal Dutch Shell. A Philips share costs 40 at the time of this writing. The value of the total transaction is therefore 1,200. For each broker, we calculate the transaction fee to determine where investing is cheaper. The costs are a snapshot taken on May 28, 2020. For the current costs you can consult the brokers’ websites.
- eToro: 0 commissions, we did not pay transaction fees for this transaction
- DEGIRO: 1,75 + 0.014%, we paid 2.30 for this transaction.
- Interactive brokers: 6 per stock transaction.
- IG: 8 when you have less than 2 transactions.
eToro is clearly the cheapest broker for this order. When you do a lot of share transactions, you can quickly save hundreds per year with this broker. Do you want to try out eToro for free with a demo? Use the button below to open a free account immediately:
Compare investing costs
Before you open an account with a broker, it is a good idea to compare the cost of your investments. Different providers have different rates.
Most stockbrokers charge a commission on each transaction. There are some providers where you can buy cheap or even completely free shares. Choose a broker with low commissions, especially when you want to invest with smaller amounts.
In addition to a commission, you also pay a spread with each broker. The spread is the difference between the purchase and selling price. It is wise to choose a broker that charges an attractive spread. This increases the profitability of your investments.
Some brokers charge activation fees when you want to trade on a particular exchange. It may therefore be smarter to trade with, for example, Plus500 or eToro. With these parties, you do not pay activation fees.
Always read the broker’s fees page carefully before investing. Brokers regularly sneakily hide additional rates in their terms. For example, you may have to pay some brokers to withdraw money or to receive dividends.