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My brokerage charges about $9 for stock and ETF trades. They charge $45 for mutual funds. What's so special about buying and selling mutual funds?

  • Simple reason: because you're doing it through a brokerage, and your brokerage can get you to pay that much. In maybe 40 years of buying & selling mutual funds, I've never paid a penny. – jamesqf Nov 1 '18 at 2:47
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Mutual fund "trading" is different than stocks and ETFs, and thus the cost structure is different. Stocks and ETFs are traded on an exchange, where there are significant economies of scale, reducing transaction costs.

Mutual funds are bought from the fund company itself, which is a different mechanism and cost structure. Whether $45 is a lot for the actual work that is involved I have no idea, but my broker offers several no-load, no-transaction-fee funds.

So your broker is likely just making up for the costs of interacting with the mutual fund companies themselves.

  • I wonder if it is to manipulate customers into preferred behavior? For instance, company F would prefer you buy company F's mutual funds in your company F account, so they charge you $50 if you instead buy a company V fund. And/or company V would prefer you buy your company V mutual funds in a company V account, so they charge company F $50 if you buy a company V fund in your company F account, and company F passes that cost on to you. – stannius Oct 31 '18 at 20:48
  • its always more expensive to buy direct that's why you use a broker / fund supermarket – Neuromancer Oct 31 '18 at 23:39
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There's a whole world of discount brokers out there who charge much lower commissions. Some even provide free trades.

  • Are you an advocate of moving retirement accounts to RobinHood? – horse hair Oct 31 '18 at 19:18
  • Robinhood is fine for the investor with a small account who wants to minimize the effect of commissions and whose needs are few, if not absent (research, charting, fast execution and reporting, quality customer support, low margin rates, portfolio margin, good option analytics, etc.). If you need more than a stripped down platform, you need to look elsewhere. There's also the issue of Payment For Order Flow. It's pocket change but indirectly, it's coming out of your pocket. Their margin scheme is also a problem. So no, not an advocate for RH unless minimal is your thing. – Bob Baerker Oct 31 '18 at 19:45
  • @horsehair I think all the major discount brokers offer low cost retirement accounts with a selection of no fee mutual funds. I think RobinHood's focus is more on avoiding commissions on stocks and ETFs. – Eric Oct 31 '18 at 20:34
  • I might be wrong, but when I try to search for "robinhood mutual fund fee" I see results that tell me you can't buy mutual funds at all on that platform. – stannius Oct 31 '18 at 21:13
  • @stannius - only YOLOs and tendies AFAIK – horse hair Oct 31 '18 at 21:53

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