Online trading platforms have made investing easier today than ever. And smart investing is crucial for quickly boosting your net worth and beating inflation.
It is essential to adopt the right strategies to grow your investment portfolio to ensure the high trading fees don’t take the fun out of your wins. The good news is that you can take a few steps to cut your trading costs.
Below are 9 ways to reduce your trading fees and get the best ROI from your portfolio.
How to Reduce Your Trading Fees
Find a new broker
Lowering your broker costs can be as simple as choosing a trading platform with reasonable rates.
It is easy to be swayed by flashy TV advertising or online PPC ads. Still, it doesn’t always guarantee that a platform or broker is the greatest option for managing your portfolio and future transactions. Commission rates can vary even between two trader platforms using the same strategy.
So you must read and understand the proposed prices. Meanwhile, verify if the broker provides access to the commodities you desire to invest in. Aside from trading commissions, it’s critical to look into any expenses for deposits and withdrawals.
Try and negotiate
Automated broker systems are a popular way for millions of people to invest.
However, working with a human broker is also a viable technique for maximizing your trading. For instance, you can negotiate reduced commission fees when working with a human broker. It can be difficult to negotiate for reduced commission in the early months.
However, after a few months of demonstrating how much business you bring to the broker, you can ask for a lower compensation structure. The broker will be more willing to sit at the negotiation table to avoid losing you as a customer.
Consider zero-fee brokers
Using zero-fee brokers is probably the best approach to saving on trading expenses. They sell retail transactions to market makers “off-exchange” to avoid associated fees. This way, you can execute transactions without commission.
It is worth mentioning that zero-fee brokers might not be entirely free. Some supporters argue that zero-fee brokers profit from lending to margin traders and earn interest on customer deposits. This strategy is geared towards persuading customers to patronize their services.
Meanwhile, some critics raise issues of conflict of interest, suggesting that zero-fee brokers may overcharge their customers. In clear terms, you may be charged no fee, but the prices of the assets you purchase may be greater than those offered by other brokerages.
Avoid exercising options at expiry
Every options contract, unlike a stock, has an expiration date. Because it restricts the time you may purchase, sell, or execute the options contract, the expiration date substantially influences its value.
Exercising options at expiration can be expensive, though. It costs commissions, and you may be surprised at the expenses associated with that side of the deal when you have an assignment. As a result, try to exit the transaction using an opposing options order.
Read also: Managing Your Financial Life Using Crypto as Currency
Adjust your commission structure
As mentioned earlier, you can find a new broker. However, the best approach is to select one with a commission model that matches your trading style.
Statista data shows a significant increase in households participating in private investments. Butmany people may be unaware of the effect moving from per-trade costs to per-share commissions can have on their financial gains.
If the trades you make are generally small, using a per-share price commission structure can reduce your fees.
Most brokers’ commissions per share are small compared to a fixed price per trade. And the former can add up quickly if you take out large orders. But if you only buy a few shares at a time, using the fixed price per trade can be beneficial.
Shop around for lower trading fees
Trading costs may be decreasing daily. Therefore, you might want to look around and see what else is out there if you have been using the same broker for a long time. It is okay to stay with your current broker if you discover a lower-cost one who doesn’t provide the same or more services than you already have.
You can never go wrong by looking for alternatives or even trying them. Perhaps you will be fortunate enough to find a broker offering no-fee trading, a trend gradually gaining popularity.
Use promotions to offset fees
Some online trading platforms and brokerages offer signup bonuses and other deals that provide free crypto coins.
You can use this to reduce the impact of fees on your portfolio balance.
Some platforms can offer up to $6 in bitcoin when you open an account or receive $30 for making a minimum transaction after linking your bank account.
Get strategic with your transaction types
Being strategic is another effective way to lower trading fees.
For instance, if you choose to leave a particular trade, like cryptocurrency, and require fiat dollars from the transaction, you may be able to exit the crypto investment with minimum costs by exchanging it for another currency or investment.
Some exchanges may charge deposits into your digital wallet, and conversion fees from, for example, fiat currency to bitcoin may apply.
Avoiding overtrading is another strategy to save trading costs. This usually occurs when you attempt to make up for lost deals by trading repeatedly.
Even when transactions are profitable, you might pay more in large commissions, which can wipe out your profits. In some cases, you might be better off waiting for long-term, larger rewards rather than scalping.
Your trading account size and style are crucial factors to consider when deciding. It is easy to believe that doing more can earn you more money and success. Unfortunately, this kind of thinking can be detrimental and cost you money when trading.
Knowing how to reduce trading commissions can assist you in realizing the full potential of your assets.
Before beginning any trading plan, you should always account for trading fees to better understand what to expect and optimize your ROI.