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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9 thoughts on “How to avoid high fees when investing in stocks?”

  1. 3e vidēji par katru darijumu.. ir kādi online pakalpojumi kur var pirkt pārdot aktīvāk bez komisijām? Vai princips ir tikai buy hold

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