When you buy and sell stock, you pay a fee to your adviser or investment firm. This fee is called a commission. Commissions reduce the return on your investment in a stock.
This table shows the range of fees you might find, depending on the type of firm you invest with. Learn more about how advisers are paid.
|Type of firm||Do they offer advice?|| Fees|
|Full-service investment firm|
Commission-based account – commissions typically range between $75 and $100 each time you buy or sell.
|Discount brokerage firm|
Varies, based on the size of your trade and/or account. Typical fees range up to $30 each time you buy and sell, but some start as low as $5.
Example – You invest $1,000 in a stock and make $80 when you sell. That’s an 8% return on your investment. Then, you have to pay a $10 commission. This means you only get to keep $70. So your 8% return drops down to 7%.
You invest $1,000 in a different stock and make only $50 (or 5%). You have to pay the same $10 fee to the adviser. That means you get to keep only $40, and your return drops from 5% to just 4%.
The return you get from any stock investment will be reduced by what you pay in commissions and fees, and any tax you pay on the money you make.
3 ways to reduce commissions
Limit your trading – If you buy and sell stocks often, you'll pay a lot in commissions. This will reduce your returns.
Ask for a lower rate – If you trade frequently enough to be considered an active trader, your adviser or investment firm may give you a better deal on commissions.
Pay for the level of service you need – If you’re new to stock investing, you may want the advice of an adviser at a full-service firm. If you have experience investing in stocks and doing your own research, you’ll save in commissions with a discount brokerage.
Content in this section is provided in partnership with Investor Education Fund, a non-profit organization founded and supported by the Ontario Securities Commission that provides unbiased and independent financial tools to help Canadians make better money decisions. To find out more, go to: GetSmarterAboutMoney.ca
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