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Any money you have set aside for emergencies or expenses should be deposited in a savings account. But if you have extra funds that you don’t think you need right away, then investing that money is a good bet. In this way, you will have the opportunity to grow this money into a larger sum. However, you should keep in mind that investing comes with inherent risks and it is possible to end up with less money than you started with.
If you’re new to investing, you may be tasked with finding the right brokerage account. With all the choices available to you, this is no small feat.
But there’s a relatively easy way to narrow your options, and it focuses on brokerage accounts that don’t charge pesky fees that can eat away at your returns. Here are three specific fees you should do your best to avoid.
1. Trading fees
Some people open a brokerage account and buy or sell stocks every few months. Or, you might end up buying or selling stocks several times a week. This is something you should have the freedom to do without being held back by expensive fees. It is definitely beneficial to look for a brokerage account with commission-free trading so that you are not be charged each time you make a move.
The good news is that commission-free stock trading is pretty much the norm these days. And while you may be charged fees for buying and selling shares of mutual funds or ETFs, some brokerages also offer no-fee options for these assets. It pays to dig in and see what choices you have.
2. Maintenance costs
You may be familiar with account maintenance fees for checking accounts. Unfortunately, some brokerage accounts also charge these fees. Fortunately, however, these fees have become less common in recent years. If you sign up with a well-known brokerage, you will usually be able to avoid them.
3. Inactivity Fees
You may go through periods where you transact daily in your brokerage account. And you may also have periods where you want to sit back and leave your wallet alone for months. The latter should be an option you can explore without penalty. That’s why it pays to avoid a brokerage account that charges inactivity fees for not making trades in your wallet.
If you have a brokerage account that charges inactivity fees and you intend to adopt a “buy and hold” strategy (where you load up quality investments and hold them for many years), you risk to lose money due to inactivity. Luckily, there are plenty of brokerages out there that don’t charge idle fees, so all you need to do is research them.
The less money you lose in brokerage account fees, the more money you have to earn and keep. It pays to avoid these specific fees when looking for a new brokerage account. And if you already have a brokerage account, take a look and see if any of these fees apply. If they do, it might be time to move your money elsewhere.
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