How to avoid high fees when investing in stocks?

My experience with banks

I did my first stock trades in 2009 – used Swedbank and bought stocks in Baltic stock market. Later I also made couple of trades in US market, but was not happy about it. Paying $25-27 per each trade seemed too high. If I invest $1000 in one company and pay $50 in commissions to Swedbank, then I need to get at least 5% return just to cover trading fees. Not cool. Spent 250 EUR in fees.

fees

Then last year I wanted to buy some stocks again, but this time opened an account in DNB bank and got access to their trading platform – much more advanced, could also short stocks and paid 2x lower fees: 12-14 USD per trade. Seemed better, but still I needed to think carefully how big each trade needs to be so fees don’t get excessive.

Recently was surprised by $90 yearly fee for receiving US dividends in 2015. It is quite hard to get an overview of all the fees I have paid, but after I close my positions and probably get another $90 fee for 2016, looks like I will have spent 900+ USD in fees.

And couple of months ago I decided to check out, how options work – but it was very expensive and super complicated in Swedbank (what a surprise), and not available in DNB Trade platform, so I opened another account – this time in Norvik bank. I did my first options trade with $HLF, paid 50 USD in fees.

So in total I have opened trading accounts in 3 banks and spent more than $1200 in fees. Was it a good decision? Probably not, but I had no idea there is a better solution.

How to avoid high fees?

Easy – stay away from banks and instead open an account in Interactive Brokers. They charge a $10 monthly fee, but their commissions are so low, you might not notice them. For example, a week ago I bought 82 shares of $URA ETF and guess, how much I paid in fees? $1.00 

screenshot-2016-11-20-23-01-46

Right now I have closed my Swedbank investment account and all Norvik accounts, and I am in process of closing all positions in DNB. So I will move all my trading activity to Interactive Brokers.

What are the advantages?

  • super low fees: 10-30 times lower than in banks.
  • easy to open an account – spent 30 min., got approved in 2-3 days.
  • all the possible features – stocks, options, shorting, etc.
  • access to many international exchanges.
  • secure 2-factor authorization: web login + Touch ID from phone.

In short – banks are good at charging and hiding fees, but if you want to get good returns for yourself not banks, then use a low cost online broker. If I had known that Interactive Brokers is available also in Latvia, I would probably have saved about $1000.

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