The Hidden Costs Of Online Trading
I love the commercials on TV with the baby doing online trading at one of the large online companies. I’m not mentioning the name because I’m not advertising for anyone or recommending one over the other. Actually I’m not recommending it at all, but I’m not condemning any either. I’m just here to get the facts out.
Truth be told, online trading really is easy to do. The other truth is that it’s also expensive. This isn’t the type of thing you start doing if you only have a couple of hundred dollars to start out with. Do that and you’re pretty much going to lose all your money the first month… probably. You might get lucky and strike the biggest gainer in years first time out; but for the money you have to spend, probably not.
Everything I mention below doesn’t pertain to all of the online traders, but most of them do. The fees have wide ranges, but there are fees.
First, although there are minimum trading amounts that aren’t all that high, most services require at least a $100 deposit, though some want higher. Some require you to basically open a checking or savings account with them, where you’ll deposit the money you’re going to use. Banking fees come out up front, so that if you bust on your investments they have their money. Other fees come out when you start trading. Fees are waived if you either have between $2,500 and $5,000 sitting in an account or have an automatic withdrawal from your regular bank going into your account of between $100 and $300.
Trading fees are based on how many transactions you perform on a monthly basis. Obviously the more money you have in your account, the more trading you can do. It costs more if you trade less, but you’re only paying for transactions. You have to make sure you have enough money to invest in whatever stock you’re planning on buying as well.
Want some help with trading? You might need it if you want to invest in foreign markets. That’s going to cost you as well, and it’s not cheap. Depending on where you’re trading costs will range anywhere from around $10 to upwards of a few thousand; yes, you read that correctly. Don’t even think about investing in the Japanese market unless you’re well heeled with cash.
The lucky thing for you is if you’re making money and doing it all on your own, it’s all yours, since they’re taking their money by charging you to do the transactions. You will have to take care of your own taxes as well, although some of these companies will help you out… for a small fee. There are lots of options each company offers you, and my advice would be to sit down with a dictionary or Google next to you and look up each of the terms before you get too deep into it.
One last thing. There’s also fees if you either close your account or basically don’t have enough money to invest any longer, and they’ll make sure to take those out before you get to do anything else. Depending on the company, you’ll have between 90 days and 6 months to decide if you want to continue trying to make money this way.
Think seriously before doing anything like this. It might seem like fun, but if you start making money early you could get addicted. People have quit their jobs thinking this is easy, and when the turnaround comes, and it always does, scrambled to figure out what to do with their investment. Don’t trade with money you need, but if you have some spare money, or even wish to use some of that money to invest in things like money markets or other types of safe investment accounts, it’s not a bad way to go. At least it’ll be easier for you to see what’s taking place with your investments easier.