What Is A Commission Based Fee?

When speaking in terms of a stock market trade, regardless of the entity, a commission based fee system is most often in place.  A commission based fee is the amount an investor, the customer, pays to their stockbroker to manage their stock purchases and sales.  Also known a stockbroker charge or a stock trade fee, these amounts charged vary widely from broker to broker and are most often percentage based.  The percentage for the commission based fee is assessed on the either the earnings directly from the stocks which have been purchased, or on the overall value of the investment portfolio, or in some cases the stockbroker charge is a combination of the two.  Unlike popular online stock brokerage firms such as ING Direct or TD Waterhouse, commission based stock fees are not typically charged per each actual trade or sale of a given stock, bond or commodity.

Why Pay Commission Based Fees

There is a reason why millions of stock market investors choose to pay on a commission based fee: advice and guidance.  When investing online through an online broker, the stock trade fee is low, most often less than $20, and is paid once to make a single trade.  If the stock makes significant gains the profits remain that of the investor alone: no commission based fee to share with the brokerage firm.  This may seem to be an advantage in stock market investing, keeping more of your return in your pocket, but commission based fees for regular stockbrokers have their place.  With online stockbroker firms you must make the decisions yourself when investing.  When using a regular commission based fee stockbroker, also called a portfolio manager, the stock picks are made by the broker themselves in most cases.  Your input and experience are not needed.  The stockbroker will at least in theory work as hard as possible to buy stocks, based on their extensive experience and education that perform well.  They have a motive.  The more money your stocks make that they invest for you, the higher they can bill you for your commission based fee.  A commission based fee is typically from a portion of a percentage point to .01% or more of all assets you invest with the stockbroker.

Related posts:

1. What Is A Broker?
2. What Are Online Stock Trading Fees?
3. What Is A Flat Rate Fee?
4. How Do I Start Online Stock Trading?
5. How Do I Start Investing?