What Are Brokerage Fees, And How Do They Impact Investors?


In the world of share market apps, brokerage fees lurk like shadows. They’re ready to snatch a portion of every transaction, and unsuspecting investors are often helpless when defending themselves. This is why brokerage fees are often seen in a negative light by new investors who only seek to maximize the returns on their investments.

But what are brokerage fees?

Brokerage fees are charges levied by financial institutions or trading platforms in exchange for their services and assistance in felicitating the trade of financial securities. Depending on the online trading platform or the financial institution, brokerage fees may vary depending on the investment method and the type of investment product.

It was back when the concept of stock trading apps was introduced to the public, the idea of brokerage fees picked up momentum. It was considered a straightforward profit-making strategy where developers would directly gain profits in exchange for having people use their trading platform. However, with increasing competition amongst apps to acquire the title of the best trading app, stock market apps had to level up their business model to attract more traders to their platform. The result? Brokerage fees are on the verge of diminishing for certain products or services!

What impact does it have on the investors?

Brokerage fees can have multiple impacts on investors and their investment strategies. Straightforwardly put, they may discourage new investors from stepping in and exploring the stock market, since new investors are likely to have limited financial resources to devote to stock market trading. The discouragement may even trickle down to seasoned investors who prefer short-term trading. This could happen because short-term investors would have to sustain small expenses over each order they make, increasing the overall cost they put in the stock market. Sometimes, the overall cost of trading can be more or equal to the total amount invested, leaving investors with net-zero profits. Short-term investors may be compelled to hold their shares longer than initially intended, causing major disruptions to their planned strategies.

How to shield yourself from brokerage fees?

The answer lies in step one – choose the right trading platform and be aware of all the charges. Before you invest or open Demat account, take ample time to research the stock market app’s fees and its reputation in the market. Nowadays, opening a trading account has little to no commission fees. Keeping that in mind, be aware of platforms that request you to pay extra in exchange for basic services.

Choose a share market app that offers a transparent breakdown of all the fees they charge from you. Apart from brokerage fees, other types of payments, such as GST, interest charges, and others, may increase your overall investment cost.

In summary, brokerage fees are commission charges levied on investors by financial institutions or trading platforms in exchange for their services. They can significantly impact investors by discouraging them from following their predicated investment strategy or may dispel them from investing. A good way to shield yourself from brokerage fees is by choosing an investment platform that offers transparent pricing and zero brokerage fees for basic services. Please note that there may be other fees involved for trading that may increase your overall cost of investment.