How Everyday Investors Can Save $1.8 Billion in Unnecessary Brokerage Fees
By Susan Lyon, financial analyst with NerdWallet
We all know we can get more affordable groceries by switching to less fancy brands – but did you know this same principle can be used to save you money while investing?
A new NerdWallet study finds that investors are throwing away over $1.8 billion in unnecessary fees with the largest 3 online brokerages: Charles Schwab Corp (NYSE:SCHW), TD Ameritrade Holding Corp. (NYSE:AMTD), and E-Trade Financial Corporation (NASDAQ:ETFC). They could save a lot of money per trade by switching to more affordable but lesser known competitors.
The typical investor with these 3 brokerages makes one to two trades per month; while this might not sound like a lot of savings, we did the math and it really adds up. For what most investors need, very similar services as offered by the big three can be found for a fraction of the price, saving the average user $110 per year ($1.8 billion total).
The good news? Quality isn’t sacrificed when you do go with a lower cost online broker. Read on to learn why.
The Devil’s In the Details: Why Top Brokerages Don’t Give You the Advantage
NerdWallet’s study finds that the extra cost of going with one of these top 3 “name brand” brokerages pays more for advertising and overhead expenses, rather than better services as one might assume. This chart breaks down their spending by cost, comparing it to the average cost of one trade at each brokerage:
Compare Brokerage Fees
So how can a savvy investor save big? NerdWallet’s new brokerage account comparison tool allows users to do their research before they invest, so they are made aware of all hidden and unpublished fees upfront to avoid unpleasant surprises later on.
The tool allows investors to search by what matters most to them – price per trade, services, and data tools – so they can find the best match for what they need. Happy hunting!