Brokerage Fees Hurt Your Compound Interest Potential

Do you like being charged brokerage fees? I didn't think so. Are you charged an annual fee just to use your brokerage company? I believe it! If so, kick them to the curb and sign up for one who does not charge an annual fee. Brokerage companies that charge annual or quarterly fees can absolutely ruin your Roth IRA Stock portfolio potential gains and dividend payment returns.

Well, you are most likely charged a brokerage fee each and every time that you purchase stock, right? These fees may range from $7.95 to $19.95 in some instances, depending on which brokerage firm that you use. These fees hurt your ability to grow your dividend stock portfolio into a money making income machine. You not only take a financial hit when you are charged a brokerage fee but you also lose money on the interest that could be compounded on that $7.95 to $19.95. Here is a quick analysis to show you what I'm talking about:

Let's say you purchase stock each week, once a week. That's $7.95 per week. 

$7.95 x 52 weeks in a year = $413.40 x 30 years (i.e. 2012 to 2032, typical working career) = $12,402.00 in fees!

If you had invested those funds (aka fees) into Johnson & Johnson (stock ticker JNJ), with an average of 3.48% dividend yield you would have all of those fees, $12,402.00, in your Roth IRA stock portfolio and also all of those dividends paid based off of that $12,402.00 reinvested!**


**Current principal of $7.95, annual addition $413.40, years to grow: 30, interest rate 3.48%, compound interest: 1 time annually at the start of the compounding period).
Additionally, these figures do not even include whether JNJ increases in value or not. Just think of all the money left on the table in fees, fees, fees!

That being said, here are four ways that I try to avoid brokerage fees, or greatly reduce my exposure to those pesky FEES!

1) Sharebuilder by ING. I am not being paid to talk about this company. They are just fantastic. They offer a $4.00 weekly, bi-weekly, monthly, yearly Automatic investment plan. Each investment occurs every Tuesday and hey $4.00 is better than $7.95!

Click HERE to learn more. 

2) DRIP - Dividend Reinvestment - A DRIP is an excellent way to increase the value of your investment. Most DRIPs allow you to buy shares commission free and at a significant discount to the current share price. Great video from YouTube below.

3) Charles Schwab ETFs -  I am not being paid to talk about this company. They are just fantastic too! Schwab offers $0.00 online trade commissions through their Schwab Accounts.

Click HERE to learn more and hear about ETFs from the man himself below!

4) Direct Stock Purchase Plans - Click on the links below and read up on how to buy stock FEE FREE! You probably won't hear about these plans from your stock broker! Enjoy!

American Stock Transfer and Trust Company

Computershare Direct Stock Purchase Plan

Computershare No Purchase Fees

Charles Schwab ETFs are simply the best!

If you want to diversify your Roth IRA stock portfolio real quick and real easy then Charles Schwab ETFs are the way to go. Their ETFs offer low expense ratios and $0.00 online trade commissions. Each ETF includes international and domestic stocks, as well as bonds. Injecting your Roth IRA with these bad boys will clearly instantly diversify your portfolio and save you alot of time and effort. Now of course ETFs come with their own baggage. Just like most brokerage-made ETFs their small cap, large cap and international/emerging market stock selections may have similar companies included into each, however Charles Schwab has done a better job at this. Their Domestic and International equity ETFs range from $22 to $30 per share, so this is great if you only have $25 dollars to spend per month in the market. I know that may sound like chump change to some, however being a "Common Man" such as myself it is sometimes hard to muster up additional funds on a month to month basis. Again, as previously stated in my blogs, it is key to invest as much money as you can because alittle money saved today can turn into major bucks during your retirement years. Please click on the link below to learn more about Charles Schwab's ETFs. I own no vested stake in Charles Schwab. I am simply reporting on how easy it is to diversify your portfolio with their ETFs and happen to believe that they have the ETF game on lock down! I hope you had a great investing day! Take care.

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