Wall Street is constantly telling you how “This or That” company has the lowest fees. Or, here’s one of my favorite, “get your first 100 trades for free.”
100 trades, Free?
C’MON MAN! Who are they kidding?
Do some simple math here. If you bought 100 shares of a $40 stock you’d spend $4,000. Or if you sold it you’d collect the same $4,000. Do that 100 times and you would have moved over $400,000 worth of stock.
So, you mean to tell me that a Wall Street firm is going to trade $400,000 worth of stock for you for FREE?
Have you ever read the fine print about these “no fees” or “lowest fees in the industry” claims?
If you haven’t, then hold on…you’re in for a shock.
But first, let me ask you a question. How does anyone (especially Wall Street) make money without charging fees?
Seriously, anything and everything you buy or consume has some sort of profit attached to it. If it didn’t then the sellers of it would be out of business soon.
So, let’s take a closer look at those who claim to have the “lowest fees.” Namely ETF managers.
Most of the ongoing management fees for ETF’s are low. They range anywhere from 25 to 150 bps (bps means basis points or ‘beeps’…25 basis points = ¼ of 1%. 150 bps = 1.5%)
However, if you take time to read the fine print (most people don’t) your eyes will pop out of your head.
Case in point: An ETF can have a “holding company” that buys stocks for them. The “holding company” buys a stock for, let’s say $1.00. Then sells it to the ETF for $1.03.
You just got jammed for a 3% mark-up.
Do you wanna know more???
Click (HERE) to see.