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Doing nothing saves trading costs which are a major drag. The standard advice for equities investors (at least in the UK) has been to invest in tracker funds f

Doing nothing saves trading costs which are a major drag. The standard advice for equities investors (at least in the UK) has been to invest in tracker funds for a very long time. it is possible to beat the market. Many years ago I double my money in approx an year - but I invested heavily in I had been covering as a analyst (one of my previous careers) until immediately before. I am more cautious now.

matwood 2y ago
Trading fees are at or near zero in the US now unless you mean capital gains.
- graemep 2y ago
  Not what I meant, but capital gains are another issue, but I am not in the US. In the UK we pay a 0.5% tax on ever transaction and often around £10 per transaction, so its quite substantial. I should probably have said costs, not fees. How much are total costs in the US? If you trade frequently even low costs add up. If its 0.1% and you trade monthly it ends up being 1.2% over the course of an year.
  - matwood 2y ago
    10+/trade is going back to the early 2000s for the US. Now it's effectively 0 for most common trades. Here is Schwab for example: https://www.schwab.com/pricing https://www.schwab.com/pricing If someone is a big options trader they can probably find a better per contract price out there.
    - graemep 2y ago
      How do they profit? There must be a cost somewhere? Another reply mentioned spreads - still a cost (you lose money when you trade).
      - matwood 2y ago
        AUM, managing high wealth clients, running their own funds with expense ratios (also some of the lowest in the industry), uninvested cash, etc... Retail trading is commoditized now. Anyone who really cares about spreads will be using limit orders. Otherwise you're talking about pennies on highly liquid shares. The fact that we're even discussing the possible spread differences between market makers shows just how commoditized retail trading has become.
      - varelse 2y ago
        [dead]
      - thefreeman 2y ago
        the sell order flow to market makers who gobble up the other side of bad retail trades
        graemep 2y ago
        Which means that your cost is market maker's spreads instead of fees. Still a cost to you.
        kortilla 2y ago
        Nope, this is one of the counterintuitive things about people paying RH for order flow. Market makers can offer tighter spreads when they know it’s a pool of dumb money.
        graemep 2y ago
        tighter spreads are not zero spreads
        kortilla 2y ago
        What’s your point? The spreads are tighter than you would get on the open market. NBBO requires that if there is something better that Robinhood gives it to you.
  - wil421 2y ago
    All the major US brokers started doing free trades for stocks and etfs. For Vanguard, most of the index expense ratios are really low, like %.05 percent, but that’s not a trading fee.
    - AdamN 2y ago
      Even for paid transactions that typically give better pricing (IBKR Pro), the prices are extremely cheap.
    - 4ndrewl 2y ago
      How do they make money from you as a customer?
      - matwood 2y ago
        You can Google it, but AUM at scale means .03% is a significant amount of money. There's also uninvested cash that the broker can invest in t-bills and take the spread.
        4ndrewl 2y ago
        Thanks for the lmgtfy :) I bet the uninvested cash product drives some weird incentives - kpis around increasing ratio of sells to buys and increasing pain around removing cash.
      - tim333 2y ago
        Quite a lot of customers either have cash sitting in the account which they make interest on, or have margin debt which they charge for.
        4ndrewl 2y ago
        Interesting, thanks. For a minute I was expecting someone to say "ads"
      - jkolio 2y ago
        Front-running your trade.
- ifwinterco 2y ago
  You also pay a spread every time you trade, especially if you're using a retail brokerage like robin hood that sells order flow to market makers. It doesn't show up anywhere in your statement, but it's a real trading fee nonetheless, so it's still better not to trade too much
  - kortilla 2y ago
    Retail is offered tighter spreads because it’s safe to assume they have no edge at scale.
- maest 2y ago
  You pay the spread and you also have impact in the market.
  - intuitionist 2y ago
    If you’re trading US large-cap stocks at low frequency these are not really material costs for even a wealthy retail investor. Certainly not next to taxes.
    - eru 2y ago
      The spread is a material cost, but the market impact is negligible for retail investors, yes.
- WalterBright 2y ago
  The explicit fees are near zero, but if you watch your trade you always get an adverse price.
  - pxx 2y ago
    what are you talking about. you're not going to fill worse than nbbo

matwood 2y ago

Trading fees are at or near zero in the US now unless you mean capital gains.

graemep 2y ago
Not what I meant, but capital gains are another issue, but I am not in the US. In the UK we pay a 0.5% tax on ever transaction and often around £10 per transaction, so its quite substantial. I should probably have said costs, not fees. How much are total costs in the US? If you trade frequently even low costs add up. If its 0.1% and you trade monthly it ends up being 1.2% over the course of an year.
- matwood 2y ago
  10+/trade is going back to the early 2000s for the US. Now it's effectively 0 for most common trades. Here is Schwab for example: https://www.schwab.com/pricing https://www.schwab.com/pricing If someone is a big options trader they can probably find a better per contract price out there.
  - graemep 2y ago
    How do they profit? There must be a cost somewhere? Another reply mentioned spreads - still a cost (you lose money when you trade).
    - matwood 2y ago
      AUM, managing high wealth clients, running their own funds with expense ratios (also some of the lowest in the industry), uninvested cash, etc... Retail trading is commoditized now. Anyone who really cares about spreads will be using limit orders. Otherwise you're talking about pennies on highly liquid shares. The fact that we're even discussing the possible spread differences between market makers shows just how commoditized retail trading has become.
    - varelse 2y ago
      [dead]
    - thefreeman 2y ago
      the sell order flow to market makers who gobble up the other side of bad retail trades
      - graemep 2y ago
        Which means that your cost is market maker's spreads instead of fees. Still a cost to you.
        kortilla 2y ago
        Nope, this is one of the counterintuitive things about people paying RH for order flow. Market makers can offer tighter spreads when they know it’s a pool of dumb money.
        graemep 2y ago
        tighter spreads are not zero spreads
        kortilla 2y ago
        What’s your point? The spreads are tighter than you would get on the open market. NBBO requires that if there is something better that Robinhood gives it to you.
- wil421 2y ago
  All the major US brokers started doing free trades for stocks and etfs. For Vanguard, most of the index expense ratios are really low, like %.05 percent, but that’s not a trading fee.
  - AdamN 2y ago
    Even for paid transactions that typically give better pricing (IBKR Pro), the prices are extremely cheap.
  - 4ndrewl 2y ago
    How do they make money from you as a customer?
    - matwood 2y ago
      You can Google it, but AUM at scale means .03% is a significant amount of money. There's also uninvested cash that the broker can invest in t-bills and take the spread.
      - 4ndrewl 2y ago
        Thanks for the lmgtfy :) I bet the uninvested cash product drives some weird incentives - kpis around increasing ratio of sells to buys and increasing pain around removing cash.
    - tim333 2y ago
      Quite a lot of customers either have cash sitting in the account which they make interest on, or have margin debt which they charge for.
      - 4ndrewl 2y ago
        Interesting, thanks. For a minute I was expecting someone to say "ads"
    - jkolio 2y ago
      Front-running your trade.
ifwinterco 2y ago
You also pay a spread every time you trade, especially if you're using a retail brokerage like robin hood that sells order flow to market makers. It doesn't show up anywhere in your statement, but it's a real trading fee nonetheless, so it's still better not to trade too much
- kortilla 2y ago
  Retail is offered tighter spreads because it’s safe to assume they have no edge at scale.
maest 2y ago
You pay the spread and you also have impact in the market.
- intuitionist 2y ago
  If you’re trading US large-cap stocks at low frequency these are not really material costs for even a wealthy retail investor. Certainly not next to taxes.
  - eru 2y ago
    The spread is a material cost, but the market impact is negligible for retail investors, yes.
WalterBright 2y ago
The explicit fees are near zero, but if you watch your trade you always get an adverse price.
- pxx 2y ago
  what are you talking about. you're not going to fill worse than nbbo