The Savings That Can Be Achieved With Robinhood’s $0 Commissions:
As a part-time stock trader, I prefer to use Robinhood as my brokerage of choice. And there’s one major reason for this – there are no commission fees. With your typical brokerage firm, you’ll end up paying at least $5-10 per trade (every time you buy or sell a stock), and if you have a rather small portfolio, that can eat into profits much quicker than you think. Before you know it, your gains are cut in half or more, and you’re left wondering how you can make this whole stock trading thing work.
Personal Example of How Commission Fees Could’ve Limited My Trading Profits:
Let me give you a quick example of the savings that can be achieved with Robinhood from personal experience. Over the last three months, from 6/23 to 9/23, my modest Robinhood account has grown $444.62 (20.26%) – keep in mind that’s without any commission charges. I made about 83 trades during that timespan. As mentioned earlier, a “trade” is completed and a commission is charged (with a classic stock brokerage) every time you buy or sell a stock.
|Brokerage||Commission Per Trade ($)||Trades (Past 3 Months)||Total Commissions ($)
||Total Profit/Loss ($)|
If I used a discount brokerage like TradeKing, for example, I could’ve expected to pay $4.95 per trade or $410.85 in total commission fees ($4.95 per trade x 83 trades) – that would’ve wiped out over 90% of my trading profits during that stretch. And if I used E*Trade which charges $9.99 per trade – forget about it. My entire profit would be down the tubes, and in fact, it’d turn into a $384.55 loss. This is a big deal for all traders, especially beginners, and it’s important to be aware of the cost-friendly options available – Robinhood opens up the market to traders who never thought it was financially possible for them to participate.
The Wrap Up – Robinhood is Most Advantageous For Active Traders With Small Portfolios:
If you’re making a lot of trades with a small portfolio, that’s obviously a situation where commission fees can become a mountain to overcome. If you’re working with a rather large $100,000+ portfolio then a $5-10 commission charge per trade seems like a drop in the bucket, but with $5,000 or less it feels a lot different.
As you can see in my example above, a $400 profit (with no commissions) is a lot different than a $400 loss (with commissions) – an enormous $800 swing. That’s the disparity between using a commission-free service like Robinhood and other stock trading brokerages that charge you for each and every trade you make.
Stop Paying Up to (and Sometimes Over) $10 Per Trade and Take Advantage of Robinhood’s Commission-Free Structure.
Written by Matt Thomas (@MattThomasTP)
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