Guide to Brokerage Fees | The Motley Fool (2024)

It is certainly cheaper to be an investor than it was a few decades ago. It used to be quite common to pay hundreds of dollars in trading commissions per transaction when buying stocks, ETFs, and other investments, but now investors pay a fraction of this, and sometimes nothing at all.

While the brokerage fee structure has been disrupted in recent years, that doesn't mean investing is completely free. Here's a quick guide to the various fees you may have to pay your broker for investments and related services.

What is a brokerage fee?

A brokerage fee is a charge in exchange for completing a transaction or for ongoing management of one's investments. The most well-known type of brokerage fee is a trading commission, but there are several other types of fees charged by brokers for various investment services (more on these below).

How are brokerage fees calculated?

Brokerage fees are typically calculated as a flat rate per trade. A mutual fund commission, for example, is typically the same whether you're investing $5,000 or $500,000. However, some commissions are percentage-based, such as robo-advisor management fees. Cryptocurrency trading commissions often have a percentage-based component as well.

Other types of commissions are a flat rate per item traded. Options trading fees are in this category, as most brokers charge a small fee (usually in the $0.50 to $1.00 range) for every contract traded.

How much are brokerage fees?

Fees can vary significantly between brokers. Virtually all have eliminated commissions on online stock trading, but there can be major differences elsewhere. For example, options trading typically costs between $0.50 and $1 per contract, but there are some brokers that don't charge anything. Mutual fund commissions are a similar situation and can range from free to more than $50 per trade.

The point is that there's no good answer to the question of "how much are brokerage fees?" It depends on which broker you use and what types of investments you make. For example, a mutual fund investor might find a broker's $39.99 mutual fund commission to be high, but someone who does not (and doesn't plan to) invest in mutual funds doesn't need to pay any attention to this as long as the other fees are acceptable.

How broker fees impact your returns

Until about five years ago, trading commissions were a much larger factor. But it's still important to take costs into consideration. For example, a 1% annual management fee on an actively managed mutual fund might not sound excessive, but it could cost you thousands of dollars (or much more) in returns over a period of decades.

To illustrate this, consider this example. Let's say that you invest $20,000 into mutual funds that produce average returns of 10% per year over the long run. Here's how your account would grow without any fees compared with a 1% annual management fee:

This is certainly a simplified example, but it does a great job of illustrating just how costly those seemingly small investment fees can be over time. In this case, a 1% management fee would have cost you more than $346,000 in returns over a period of four decades!

Types of brokerage fees

Commissions are the best-known type of brokerage fee you might encounter, but they certainly aren't the only cost of investing you should keep in mind. Here are some of the charges a broker may have.


Virtually all brokers have eliminated commissions for online stock trades, but there are still investment commissions to keep in mind. For example, while online stock trades are free, most brokers still charge for trades made by phone with the broker's assistance or for stocks that trade on the over the counter (OTC) markets. Many have commissions for options and cryptocurrencies, and most have mutual fund commissions for funds that aren't on a no-transaction-fee (NTF) list.

Inactivity fees

Some brokers -- especially those that are designed with frequent traders in mind -- charge an inactivity fee if your account remains idle for too long.


Some brokers offer subscriptions to investing publications, third party research tools, and even trading apps that you'll have to pay a monthly or annual subscription fee to use.

Expense ratios

If you invest in a mutual fund or ETF, it will almost certainly have management fees, and these are known as the fund's expense ratio. An expense ratio is the percentage of your assets that go towards fees each year. It isn't a direct cost (it is simply reflected in the fund's performance), but it is important to realize that mutual fund and ETF investing isn't free.

Custodial fees

Some brokers charge an additional (usually small) fee for retirement accounts like IRAs, known as a custodial fee.

Management fees

If you have a professional investment manager selecting stocks and ETFs for your portfolio, you'll probably have to pay for the privilege. The standard management fee tends to be 0.80%-1.0% of assets under management annually for a human financial advisor, while a robo advisor that automatically allocates your money tends to charge around 0.20%-0.50%.

Other fees

Brokers often charge fees for certain services and activities that may or may not apply to you. These may include wire transfer fees, insufficient fund fees for check deposits, fees for transferring investments to an external account, a fee for requesting a paper statement or trade confirmation, and fees for trading foreign stocks, just to name a few.

How to avoid stock broker fees

To be sure, finding a broker that meets your needs and is a great fit for the types of investments and trading behavior you use is more important than finding the cheapest option. But with that in mind, the best way to keep brokerage fees to a minimum is to shop around. Our top brokers list is a good place to start, and once you've narrowed down the list to two or three that best meet your needs, compare their pricing.

One smart move is to thoroughly read a broker's pricing structure before opening an account. You can typically find it through the broker's home page or by running an internet search for "'NAME OF BROKER' pricing." This can be a smart way to compare two or more brokerages you're interested in -- especially if their commission structure is identical.

Which brokerage has the lowest fees?

All major brokers that we cover have eliminated commissions on online stock trading, but there are some that charge fees for trading options, mutual funds, and cryptocurrencies. Some brokers are focused on eliminating fees; Robinhood, SoFi, and Webull are a few popular examples where most trades are completely free.

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  • In many cases, brokerage fees can be well worth it. For example, a robo-advisor can create a custom investment portfolio for a fee of 0.25%-0.40% per year, which is significantly less than you'll pay to a human advisor. However, it's important to shop around because different brokers have very different pricing structures.

  • Brokerage firms are businesses that intend to earn a profit from facilitating investments, and fees are a big component of how they do it. Having said that, there has been a movement to disrupt the traditional brokerage pricing models, so some brokers have fee structures that are much lower than have traditionally existed.

Guide to Brokerage Fees | The Motley Fool (2024)


How much should my brokerage fee be? ›

Full-Service Brokerage Fees

Not so long ago, it was not uncommon for a full-service broker to charge upward of $100 per trade for orders placed with a human broker. The standard commission for full-service brokers today is between 1% to 2% of a client's managed assets.

Which brokerage has the lowest fees? ›

Examples of brokers with Lowest brokerage charges in India include Zerodha, Angel One & Kotak Securities . These platforms often appeal to traders and investors seeking cost-effective options with transparent fee structures, providing a variety of financial instruments at competitive rates.

What brokerage do most millionaires use? ›

Best Brokers for High Net Worth Individuals
  • Charles Schwab - Best for high net worth investors.
  • Merrill Edge - Best rewards program.
  • Fidelity - Best overall online broker.
  • Interactive Brokers - Great overall, best for professionals.
  • E*TRADE - Best web-based platform.
Mar 28, 2024

What are the fees of brokerage firms? ›

It can be percentage based or a flat fee per trade. Percentage-based brokerage fees can range between 0.01% to 0.05% of the total value involved in a transaction, the lowest brokerage charges being 0.01%. On the other hand, flat fees range from Rs.

Is 1% brokerage fee high? ›

Broker agents are trying to sell you products and can even tag fees for conversations and meetings. After all, that's how the agents and their firms make money. For a traditional financial advisor, the industry standard is to charge a fee that is about 1% of the assets under management.

How can I avoid paying brokerage fees? ›

If you are ordering online you may end up having to accept the package by the shipping method used by the company from which you are ordering. But remember you have choice to self-clear to avoid extra fees. And if you are sending a gift a gift to someone you can also prepay the duty and taxes and brokerage fees.

Is brokerage fee worth it? ›

In many cases, brokerage fees can be well worth it. For example, a robo-advisor can create a custom investment portfolio for a fee of 0.25%-0.40% per year, which is significantly less than you'll pay to a human advisor.

Which stock broker has zero brokerage? ›

Brokers like Zerodha, Upstox, Fyers, ProStocks and Indiabulls offer brokerage free investment in the India stock market. The customer doesn't pay any commission while trading in the equity delivery segment.

Who charges highest brokerage? ›

Brokerage Comparison
NameA/C opening chargeDelivery Brokerage
HDFC SecuritiesRs.999/Free0.50% or minimum Rs.25 or ceiling of 2.5% on transaction value
SBI SecuritiesRs.8500.50% or 5 Paisa per share (whichever is high)
Kotak SecuritiesRs.499/Free0.25%
9 more rows

What brokers does Warren Buffett use? ›

Meet John Freund: Warren Buffett's Broker Of 30 Years And The Citi Banker Who Alerted Him To Sokol's Deception. John Freund is not just Warren Buffett's broker of 30 years.

Do rich people use Schwab? ›

From now, Schwab has two brands to manage its wealthiest clients, with their level of investible assets determining which they will be automatically enrolled into: Schwab Private Client Services for HNW ($1 million-plus of investible assets)

What are the top 5 brokerage firm? ›

5 Largest Brokerage Firms of 2024
Stock Brokerage FirmAssets under management*
Vanguard Group$8.6 trillion
Charles Schwab$8.5 trillion
Fidelity Investments$4.4 trillion
JPMorgan Chase & Co.$3.9 trillion
1 more row
Jan 25, 2024

How much does Charles Schwab charge per trade? ›

Online listed stock and ETF trades at Schwab are commission-free. Online options trades are $0.65 per contract. Service charges apply for automated phone trades ($5) and broker-assisted trades ($25) for stocks, ETFs, and Options. Futures trades are $2.25 per contract8 for both online and broker-assisted trades.

Does Fidelity charge fees? ›

1. $0.00 commission applies to online U.S. equity trades, exchange-traded funds (ETFs) and options (+ $ 0.65 per contract fee) in a Fidelity retail account only for Fidelity Brokerage Services LLC retail clients. Sell orders are subject to an activity assessment fee (from $0.01 to $0.03 per $1,000 of principal).

Are stock brokerage fees tax deductible? ›

The IRS does not allow you to write off transaction fees, such as brokerage fees and commissions, when you buy or sell stocks. Instead, you can add the amount of those fees to the purchase price of your stock. The purchase price plus the cost to acquire your stock equals your cost basis.

What is the formula for brokerage fees? ›

Formula to Calculate Brokerage

To compute brokerage charges, use the following formula: ‍Brokerage = Number of bought/sold shares x Price of one unit of stock x brokerage percentage.

How do you calculate brokerage? ›

The brokerage is computed based on the total cost of the shares at the chosen percentage. Consequently, the brokerage formula is as follows. Intraday brokerage = market price of one share * the number of shares * 0.05%. Delivery brokerage = market price of one share * the number of shares * 0.50%.

Is brokerage fee same as commission? ›

Brokerage fees are any commissions or fees that your broker charges you. Also called broker fees, they are generally charged if you buy or sell shares and other investments, or complete any negotiations or delivery orders. Some brokerages also charge fees for consultations.

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