To maximize investment returns, an investor should always be aware of costs involved in trading stocks and try to minimize it as much as possible. We took a look at fifteen popular online brokerages and we’ve identified typical fees that contribute to the average cost of investing in stocks. The set of brokerages in our study includes: Sharebuilder, Firstrade, optionshouse, Merrill Edge, TD Ameritrade, SogoTrade, e*Trade, Charles Schwab, Scottrade, Fidelity, Tradestation, TIAA-CREF, Wells Trade, T. Rowe Price and TradeKing.
Average Cost of Trading Online
There are three main types of costs associated with opening and using an online brokerage account to trade stocks or ETFs: trading fees, account maintenance, and other variable fees. The table below lists the averages we've found based on the set of 15 popular online brokerage accounts.
|Account maintenance fee||32.50|
Average Trading Fees
Also called a base-trade fee, or fee-per-trade, this fee is charged every time you make a trade. Some online brokerages like e*Trade offer volume discounts i.e. if you trade a lot, you may be offered a lower base-trade fee. Tradestation, another discount online brokerage, also offers a fee-per-share model as an alternative of the fee-per-trade model.
|Lowest||TradeKing and OptionsHouse - $4.95||Sharebuilder and FirstTrade - $19.95|
|Highest||T. Rowe Price - $19.95||TIAA-CREF - $55|
Most investors open online brokerage accounts to trade stocks and ETFs. From our study, we discovered that the average cost to trade a stock or ETF through online brokerages is $8.90. Investors can minimize their trading costs by choosing brokerages that charge half the average fee per trade. e*Trade and TradeKing charge a fee per trade of $4.95, a bargain compared to T. Rowe Price’s fee per trade of $19.95.
It is important to note that the base trading fee is only for trades placed via the online platform. Online brokerages charge a separate fee for trades placed through a broker, called broker-assisted trades. On average, a broker-assisted trade can cost at least $30, usually more. If you place a trade through a broker at TIAA-CREF’s online brokerage, for example, current fees are $55.
Many brokerages offer different investment options besides stocks and ETFs. Brokerages may offer mutual funds, options, certificates of deposits, bonds and other investment assets. Investors should be aware that the base trading fee generally only applies for the trading of stocks and ETFs. Other fees may apply when you trade other investment options. For example, many online brokerages charge a transaction to trade mutual funds. On average, it would cost an investor $30 to trade mutual funds - we’ve broken down the costs to purchase mutual funds here. Some investment options may require broker assistance - at some brokerages, an investor could be charged a investment-specific fee (e.g. mutual fund transaction fee) on top of the broker assistance fee.
Average Account Maintenance Fees
Account maintenance fees, sometimes also called inactivity fees, are generally assessed annually. Usually, this fee is triggered when an account’s value drops below a certain threshold or an account has been dormant (i.e. zero executed trades) for a certain period of time.
|Minimum Balance||Account Maintenance Fee|
|All except WellsTrade and TradeKing - $0||All except Wells Trade, TIAA, T. Rowe Price, TradeKing - $0|
|Wells Trade - $5000||TradeKing - $50|
Out of the fifteen online brokerages we surveyed, only Wells Trade and TradeKing have a minimum balance requirement ($5,000 for Wells Trade and $2,500 for TradeKing). While the majority of the online brokerages in our study do not assess maintenance fees on their clients’ accounts, those that do charge an average account maintenance fee of $32.50. TradeKing charges the highest fee at $50, but this fee is only assessed when the account value dips below $2,500 and no trades were made in the preceding 12 months. T. Rowe Price is the only brokerage that charges a maintenance fee ($30) regardless of the value of your brokerage account.
It’s important to note that a minimum balance is not the same as the required minimum to open a new account. For example, TradeKing does not impose an account opening minimum, but does require that the account value is at least $2,500 to waive its annual maintenance fee. Nearly half of the online brokerages in our study require a minimum amount to open a brokerage account. Bigger investment management firms with online brokerage arms may impose minimums as high as $5,000; Fidelity requires at least $2,500 to open a brokerage account, while TradeStation requires $5,000. If you’re a new investor, or if your investable fund is on the small side, don’t worry - many online brokerages have no opening minimum requirements. Merrill Edge, Sharebuilder and OptionsHouse do not impose a minimum requirement, among others and also do not charge account maintenance fees.
Fees for Other Services
Besides trading and account maintenance fees, online brokerages also charge miscellaneous fees. Examples of these fees include account transfer fees, outgoing wires transfer fees, paper statement fees and checking account annual fees.
While all brokerage accounts assess service fees, we don’t consider these fees to be part of the average cost to trade stocks due to high user variability. We’ve broken out "hidden fees" and other less common charges in our guide here.
Why does this information matter? Unlike projected returns on investment, which are based on forecasts and not entirely within the investor’s control, fees are actual costs and can be controlled. By minimizing your cost to trade, you’re on the right path to successful investing.