Like a unicorn or Shangri La, the true picture of the smart investor is sometimes hard to define. It’s true that some people are lucky but, by and large, most people who are successful in the market do their homework and analyze the stocks, period. Regardless of what kind of investor you are or want to be, there is one practical lesson that can help you maximize your returns: a penny saved is a penny earned. That is why smart investors will ensure that they don’t give away more money than necessary to their brokerages.
Surprising Extras
Some brokerage firms will try to find any way to get you. In the times of competitive markets and low commissions, individual investors should ask themselves how brokers make their money. Large corporations are under constant pressure to help improve the bottom line, and as a result they have introduced new types of fees for individual investors. It is important to read over your account agreement and fee summaries to make sure that none of these fees takes you by surprise. Here are some to look out for:
* Inactivity fees – These you have to pay if you don’t execute enough trades on your account during a set time frame.
* Transfer fees – These fees are meant to discourage you from jumping around from broker to broker.
* Account maintenance fees – These fees are placed on certain services, and are designed to reduce customer requests that require tasks that expend the broker’s resources, such as searching for historical data, maintaining records and mailing statements.
* Minimum equity requirement fees – Some brokerages charge clients who don’t maintain a minimum balance, which can consist of cash and/or securities.
Although these fees are not broadcast when you first open an account, they can, after a couple months, cause significant damage to you portfolio.
For instance, by missing your minimum equity requirements you can be charged close to $20 every quarter. This sum might not seem very large, but $80 a year adds up to the equivalent of a $1,000 bond paying 8% interest. Some of these charges are easy to avoid, but you need to be aware of them. If your brokerage account balance is below the equity requirements and you are carrying balances not being used for anything in other accounts, all you have to do is transfer them over for the duration.
