1

I have previous trading experience in almost all the markets I mentioned above, but since I am new to the US, I don't know much about brokerage fees and other fees or taxes related to online trading in the US. In our country, brokerages charged a percentage of the transaction as fees on all buy/sell transactions. Additionally, government tax was deducted automatically from every transaction. I am wondering what all the related fees are in online trading in the USA?

2
  • 2
    Why would you expect it to be free? How would they earn money?
    – littleadv
    Commented Mar 1 at 1:23
  • Most major discount brokers in the US do not charge a commission for stock transactions. Some offer free option trading and mutual fund as well. Commented Mar 1 at 21:03

2 Answers 2

2

I am not aware of any platform that allows trading all of these things for free.

If you separate however, you may find some.

Trading

  • Equities - Discount brokers allow, for most parts, trading equities with no commissions per trade. You get what you pay for - you receive no personalized analysis, no support beyond basic customer support, and no guidance. You can get all these things, for additional fees. Representative-assisted orders, for example, would be quite expensive (about $40 at Fidelity, right now). These brokers use other income streams: for example through either selling add-on products like margin trading, customized advisory, or selling their order flow to others putting their customers at a slight disadvantage. This actually works well for most retail investors with "buy and hold" strategy following indexes or major self-picked stocks.

  • Options/Futures - these have fees almost universally (with some minor exceptions for very specific types and volumes of contracts).

  • Crypto - these are really hard to see into. Crypto exchanges more often than not ended up being either on the other side of the trade, or plain scam operations. There may be some crypto brokers that are both free, and reliable, but I'm not familiar with any (although I'm also not dealing with crypto).

  • Funds - the fee structures on funds are a bit more complex. Not all funds are available through all brokers, because brokers charge funds fees. Some brokers who don't charge the fund - would then charge per transaction (e.g.: Fidelity charges about $50 for trading such funds). In some cases there is a holding requirement to avoid fees (again, taking Fidelity as an example, no-transaction fund has a holding requirement of 60-90 days, otherwise a transaction fee is charged). ETFs are usually charged fees as equities.

Taxes

This is a separate matter.

  • Residents - In the US, for tax residents, there's rarely withholding at source as you're used to (salaries being one major notable exception). This is because the tax structure in the US is pretty complex, and the same transaction yielding the same net income would be taxed differently depending on the individual circumstances of the taxpayer.

  • Non-residents - for non-residents there is withholding, on the taxable income (dividends or real estate, for example). However there too, tax treaties may change the rate or taxability of items. This can be reported to the withholding agent using the form W8-BEN.

2
  • Interesting information. I am also new to the US and interested in online investment. I am wondering how does the Forex market work? Is Forex an exchange organization like NYSE or NASDAQ within the US? Are Forex brokerages different from stock and crypto brokerages? Do they also charge fees? What about taxes on Forex transactions? Commented Mar 1 at 22:02
  • 1
    @user3486308 forex is somewhat similar to crypto in a sense that most "forex sites" are scams. In essence you're trading futures on currency pairs.
    – littleadv
    Commented Mar 1 at 22:03
1

I know of only one way to avoid brokerage fees on equities: for a mutual fund, you may be able to work directly with the investment house which runs that fund. This "house broker" will not deal in anything but funds operated by that company -- no other company's funds, no stocks, no derivatives, no limit orders, no immediate turn-around. But if all you want to do is basic buy or sell operations, then for at least at least some classes of shares, they'll do it without additional costs.

If you think you're going to time the market, this won't do it for you. If you think you're going to jump in and out rapidly, ditto. But if you're basically a buy, hold, and occasionally rebalance investor, and don't feel you need an advisor (or are getting decent advice from another broker, perhaps the one managing your retirement accounts), the House Broker may be all you need for mutual funds.

6
  • Thank you so much for the comment. Actually I don't care mutual funds ot retirement accounts. What I need to do is buy and sell company shares like Apple, Microsoft, or cryptos like bitcoin, or maybe options or future contracts all directly by myself. If they also give me a more advanced platform to run a robot on it or be able to specify buying and selling points, etc, that would be a big advantage, but avoiding bullying/selling fees and being able to invest and more diverse funds (stocks.options,fuutres,crypto,etc) is more important to me. Commented Mar 1 at 3:17
  • 1
    As I said, I know of no other legitimate free trading platform. A few scams, perhaps. If you want the service, you are generally going to have to pay for it. Sure, that takes a bite out of your profits. But that's how you get people to spend their time and money on your transaction. Either it's worth paying to play or it isn't.
    – keshlam
    Commented Mar 1 at 6:18
  • HUH? Most major brokers currently offer no commission trading on stocks and ETFs today: Fidelity, E*Trade, Vanguard, Schwab, et al. Commented Mar 1 at 13:48
  • 1
    @BobBaerker true, but they charge in different ways. Either through selling your orders before they're executed, or by charging the funds to have them on their trading platform. IIRC none provides free options trading. Also, E*Trade has revolutionized discount trading, but sadly doesn't exist any more. It's Morgan Stanley now.
    – littleadv
    Commented Mar 1 at 19:48
  • 1
    @BobBaerker actually charging fund fees is more directly related to the retail consumer than order flow sales. But selling order flow may be much more important to day traders or high frequency traders (who'd also be much more susceptible to any other fee structure, as well). Buy and hold investors wouldn't care all that much neither for the order fee nor for the order flow sales.
    – littleadv
    Commented Mar 1 at 20:58

You must log in to answer this question.

Not the answer you're looking for? Browse other questions tagged .