High brokerage can reduce your returns substantially

High brokerage can reduce your returns substantially

Anything we buy requires the cost. People go for the lowest cost to make the trade more profitable. It is everyone’s expectation to get things with high quality at low cost. Especially when this is about investment, investors go for profit as much as possible with a cost that is as less as possible. After all that is tactics of any investment. Investors always try hard to pay just what is enough for the service to increase their profit.

When it comes to brokerage for stock brokers it is not an exception. Investors mostly opt for low cost services with high quality. Brokerage fee varies highly among different types of brokers. Everyone knows that discount stock brokers are paid less than the full service stock brokers mainly because of the difference in their brokerage fee. Of course the service changes accordingly. A discount broker can never give as much facility as a full service stock brokers give. However the cost is way too high in full service stock brokers when compared to discount stock brokers. Can the returns be as good as the low brokerages give? Let’s see.

There are many other fees included in the brokerage that might take you by surprise if not looked out for. These include inactivity fee that you pay if you hold the stock for a long time. There is the transfer fee that you will have to pay if you change your broker. The account maintenance service is for the services that help in expanding the brokers’ resources. These may be searching for historic data, mailing statements and so on. You also have to pay minimum equity requirement fees for not maintaining the minimum balance. The details about these extra fees may not be known to you in the beginning but since you read this article I’m sure you won’t be much surprised when it is revealed later.

It is important that the investor has to look for the return reports. Every investor has to know the rate of return of his/her investment. It has to be included in the statement given by the broker. To tell the truth most of the investors are interested in knowing the rate of returns but what actually happens is that they are mostly disguised or hidden. It is found that approximately 78% of the brokerage firms, especially the high brokerage firms, give statements that lack the information about the rate of return. Investors wish to see the benefits of their investments and its corresponding costs. But the brokerage firms fail to give.

Instead they give statements regarding the trade over a short period of time to keep the investors silent for some time. Such statements may seem satisfying. But that is not what an investor wants from a broker. Investors use brokers for the main reason that they provide long term result. If that is not there then there is no point in having a stock broker. You can just say that the payment given to them is high in such cases. Most of the investors would be baffled wondering where happens to money that is invested.

Remember every single penny of your investment has to be worth something. See that you don’t waste any of them. The money that you pay for the stock brokers has to be worth something too. You have to be careful in choosing your broker in regards with the cost. On the other hand you can’t just save your money doing nothing with it. You have to invest them but wisely. Don’t spend them on unnecessary reasons. Every single step you take in any investment should be profitable and cost efficient.