Investing in stocks can prove to be a very profitable option for you if you play the game according to the trends of the market. However most of us buy or sell stocks through our brokers who charge us a commission when we make a purchase or a sale, and these commissions can become costly over time.
The important question is whether we can trade in stocks without paying any commission for the same. There is good news for those people who want to trade in stocks commission free. You can just avoid the broker in the first place.
Though a broker can advise you on which stocks to buy and trade on your behalf you can gain good knowledge about stocks yourself from finance sites like Yahoo Finance and even trade on those sites without the need of a broker.
You can also find out as to which companies are selling their stocks directly to the customer without involving the broker. For example, there are 1,000 companies in the US alone who issue shares directly to the public.
These companies also have plans like the dividend reinvestment and stock purchase plans (DRIP) through which shareholders can reinvest their dividends in more shares that are again commission free.
To get the benefits of DRIP programs, the customers should already hold stocks in the company. However there are many companies mushrooming that offer these programs without the need of having existing shares in the company.
Man companies such as American Home Products allow their shareholders to buy shares worth $100,000 annually without charging any commission. Companies such as Pepsico allow annual commission free investments for about $60,000 a year.
Hence the market today has become more open to investors by doing away with commissions in many cases. This is because commissions have been a bane for many investors. Investors had to pay commissions equal to a significant percentage of their investment which turned out to be a major disadvantage of investing in shares.
In the case of mutual funds you may have found that you have had to pay an average of 8.5% on top of the investment amount in order to make a deposit in your account.
Commission Free Brokerages
At present there are many stock sites that help you trade in shares commission free up to a certain amount monthly. For example, NYSEs like Wells Fargo has joined with another NYSE like Bank of America to offer stock trades totally commission free.
This offer gives the customer an opportunity to do specific number of trades without paying commissions. Bank of America lets you make the first 30 stock trades per month without any commission while Wells Fargo provides 100 free trades annually.
Hence investors can now think about their strategies instead of worrying about high commission costs. Hence investors can diversify their portfolio by buying a few shares of different companies.
As the saying goes, nothing comes free in this world. So remember that organizations offering you commission free trades are doing it for a price. For example, Bank of America may want the customer to open an account in the bank and only when the customer establishes a relationship with the bank, he will be allowed commission free stock trades.