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Things Your Online Broker Might Never Tell You

By Jamie Richardson | January 7, 2019

If you maintain an investment account outside of your company's retirement plan, you probably do so through a major brokerage. Most Americans have IRA accounts for their online trading endeavors, but there are some important things to know that your broker may hide in the fine print that can actually add up quickly.

Inactivity Fees

Whether you are buying penny stocks or trading blue chips, many brokers require that you maintain a certain number of trades per month, quarter, or year. If you don't meet these requirements, you could pay an inactivity fee. This fee generally ranges anywhere from $50 to $200. Be sure you look at a broker's fee schedule and search for an inactivity fee before signing up. You may see that a great sign-up bonus provided by that new broker is designed to make sure you keep trading with them to avoid hefty fees. These inactivity fees may have a balance requirement associated with them too.

Switching Brokers Is Easy

An online trade broker wants to keep your business for the money they earn on executing your trades. They count on you not being willing to move accounts since that used to involve tons of paperwork. However, in today's online environment, applications are completed online and money transfers can be done in just a few days. Any broker that is not meeting your needs can be given the boot after you find a new online trading platform. Don't be afraid to switch if you find a broker that offers better trading options or lower fees.

Robo Advisor Might Benefit You

Robo-advisors are a new addition to the financial market that manages money via a computer algorithm. These services typically charge a small fee for using the service and trade using low-cost exchange-traded funds (ETFs). Betterment and Wealthfront are the two most popular robo-advisor apps. If you're using your online broker to trade ETFs already, you might consider one of these robo-advisors to reduce your costs.

Commission Free Trading

Most online brokers charge a commission fee per trade, but not all of them do. Robinhood offers commission-free trading on tons of stocks and recently added the ability to buy cryptocurrency to its platform. Robinhood doesn't provide any robust research tools, but for the newbie investor looking to get into the stock market without a lot of overhead, it's perfect.

You Could Be Liable for Fraudulent Access

The Electronic Funds Transfer Act establishes that a user’s liability for a stolen debit card is limited to $50 as long as the theft is reported within two business days. Online brokerage accounts do not have the same sort of protections. Most online brokers will reimburse their customers who experience fraud, but they are not required to do so. Your online brokerage information must be protected with the same vigilance that you would protect your online banking information. If the account holder is deemed negligent and complicit in the compromised account, such as through clicking a phishing link, you could be liable for your losses. You should be aware of a broker's policies towards fraud before signing up. t in the compr

Jamie is a 5-year freelance writer who enjoys real estate. He is currently a Realty Biz News Contributor.
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