Free Trades
Charles Schwab and TD Ameritrade have both announced that they are eliminating their usual commission for stock, option and ETF trades, to provide free trades to their customers. In the coming days, we may see other discount brokerages follow their lead, in part, or in whole. Until now, most brokerages only offered free trades on select securities, often on company owned mutual funds. For example, Fidelity has a list of mutual funds customers can buy for “free.” Schwab has a similar list. This new move opens up free trades to the world of stocks and options. Trading vs Investing New investors often confuse the concepts of trading and investing. Trading seems exciting and romantic. While it very much can be for the right people, the average person actually needs to be investing for long-term goals, rather than slinging stock trades. For investors building a well-diversified, long-term portfolio high commissions can impose an overhead that diminishes returns. That’s why low-cost brokerages like Schwab and Fidelity are preferred for many do it yourself investors. Zero-cost takes it one step further, providing the opportunity to build, maintain, and re-balance a portfolio without the added overhead of even a low commission. Traders, obviously, will …