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3 Annoying Brokerage Account Fees to Avoid

The Motley Fool
The Motley Fool
 2022-01-25

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Any money you have set aside for emergency situations or expenses should sit in a savings account . But if you have additional funds you don't expect to need right away, then investing that money is a good bet. That way, you'll have an opportunity to grow that money into a larger sum. Though, you must keep in mind that investing carries inherent risk, and it's possible to wind up with less money than what you started with.

If you're new to investing, you may be tasked with finding the right brokerage account . With all of the choices out there, that's no easy feat.

But there's one relatively easy way to whittle down your options, and it's focusing on brokerage accounts that don't impose pesky fees that can eat away at your returns. Here are three specific fees you should do your best to avoid.

1. Trading fees

Some people open a brokerage account and buy or sell stocks every few months. Or, you might end up buying or selling stocks several times a week. That's something you should have the freedom to do without being held back by costly fees. It definitely pays to seek out a brokerage account with commission-free trading so you're not being charged every time you make a move.

The good news is that these days, commission-free stock trading is pretty much the norm. And while you may be charged fees to buy and sell mutual fund shares or ETFs , some brokerages offer no-fee options for these assets, too. It pays to dig around and see what choices you have.

2. Maintenance fees

You may be familiar with account maintenance fees in the context of checking accounts . Unfortunately, some brokerage accounts impose those fees as well. Thankfully, though, these fees have gotten less common in recent years. If you sign up with a well-known brokerage, you'll typically manage to avoid them.

3. Inactivity fees

You may go through periods where you're making trades in your brokerage account on a daily basis. And you may also have periods where you want to sit back and leave your portfolio alone for months on end. The latter should be an option you get to explore without penalty. That's why it pays to avoid a brokerage account that charges an inactivity fee for not making trades in your portfolio.

If you have a brokerage account that charges an inactivity fee, and you intend to adopt a "buy and hold" strategy (where you load up on quality investments and hold them for many years), then you may be at risk of losing money due to inactivity. Fortunately, there are plenty of brokerages that don't impose an inactivity fee, so all you need to do is seek them out.

The less money you lose to brokerage account fees, the more money you stand to make and keep. It pays to avoid these specific fees when searching for a new brokerage account. And if you already have a brokerage account, take a look and see if any of these fees apply. If they do, it may be time to move your money elsewhere.

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