Back in the olden days of investing you had to call up your broker and get them to buy a particular stock at a certain price (or if you were lazy you could just let them buy it at the market price). The broker, who was physically on the trading floor at the time had to go and put in a bid and hopefully the transaction would complete without losing too much profit. Basically this kept a lot of people out of the stock market, and probably kept stock prices down from where it could of been because it was a pain the ass to invest. But with most things the internet made things easier. And for being a pain the ass to the broker, he got to charge you a fee for making the trade and most times it was not cheap either.
From what I understand the first trading platform was in August 1994, when K. Aufhauser & Company, Inc (who was later acquired by T.D Ameritrade) came out with its “WealthWEB” platform and in the decade or so after basically every big brokerage house has a overwhelming presence with their various online platforms. These online platforms made investing incredibly easy, virtually anyone could invest in anything, essentially doing the job that the broker did on the trading floor, but with lightning fast internet speed. However those funny commissions stuck around. It wasn’t too long ago that $7 per trade was standard and option trades costed you $50 to execute. In fact many brokerage houses still have commissions and to my surprise people still pay them.
Of course before I start rattling off new zany ways to cheat commission charges be aware that if you are a big time investor or day trader playing with actual large stacks of cash, then you should probably stick to a brokerage house with a great platform. But if you’re the average joe, ThinkOrSwim is not necessary to put your money in an index fund. Spending money when you don’t have too is always the wrong move.
The preeminent commission free trading platform is Robinhood. In fact they were the ones that started this trend in the first place. Just download the app and you can trade whatever you want for as long as you want with out fear of wrecking your gains with commission charges. Acorns is also another app that offers commission free trading and has a great fractional trading platform that allows users to invest spare change, but it does have a $5 fee to start trading, so you might have to stop going to Starbucks for a day to afford it.
Also even big brokerage houses are starting to roll out commission free trading. For example E*TRADE is allowing free trades on new accounts for 60 days with a deposit of $10,000 or more. Another brokerage house that is following this trend is TD Ameritrade offering, like E*TRADE, commission free trading for 60 days with a minimum deposit of just $3,000. And if you really want to act like an adult you can access the over 1,800 commission free ETF’s that are accessible through Vanguard, but there is a $20 service fee that is charged each year.
In conclusion in 2019 with the rise of internet, people are now more capable to do the job that their brokers used to do. And while in some situations the advice of a season stock buyer will vastly out value the intuition of an investor, this doesn’t really apply to the Average Joe. Basically, stop paying commissions to throw money into Exchange Traded Funds that you are only going to check twice a year.
DISCLAIMER: I am not a financial advisory professional and I was not paid or compensated in any way by the companies that talked about in this article. Everything I discussed was in my opinion only. All investment decisions should be made with the guidance of a trusted financial advisory professional.