How is it possible to make money with brokers fees?

Sand87

I was just playing about with the Virtual Trader platform on the Bank of Scotland website.

I bought some McDonalds shares and each trade has a 12.95 brokers fee.

If there's a charge when I sell it too then to cover that 25.90 the price is going to have to go sky high.

I don't get it.

ColdIron

If you only buy and sell £100 of stock that fee is a significant percentage as you say, 25.9%. If you buy £10,000 of stock then it's almost insignificant, 0.259%
Don't buy small amounts and certainly not frequently
NB don't forget stamp duty when buying

ChesterDog

You have just learnt the first lesson about investing in shares.

Watch out for the charges. Do whatever you can to minimise them and their impact.

Wait; that's two lessons, isn't it?

Ifts

Some execution only brokers like X-O.co.uk or SVS Securities charge less than £6 per trade.

colsten

Look at buying funds rather than individual shares, and buy them in a tax efficient wrapper (ISA, SIPP). You also have to watch the charges but your risk will be spread a lot wider and therefore likely to be significantly lower.

Shark

This is why 90+% of amateur traders lose money overall.

It is not a zero sum game with the crazy charges.

edinburgher

One area where active and passive investors can agree is the need to cut fees wherever possible

Rob_192

Sand87 wrote: »

I don't get it.

Sand87

There are numerous strategies which can be applied to investing in shares. You are looking at things purely from a short term 'trading' stance and you are quite right that there is going to have to be a significant increase in the share price for you to make any money, however contrast this to the way I and many others invest.

I buy shares as very long term investments and buy almost exclusively high yielding shares which I intend keeping for a very long time. An awful lot of companies pay dividends and it is primarily these which I am investing for.

My portfolio of shares currently yields about 4.7% and I really don't care what the share price does once I've bought the shares as I don't intend selling them. Capital gains are a bonus, but not much use unless you want to sell.

I always buy in tranches in excess of £1000, preferably £2000+ which make my dealing costs typically 1% plus the 0.5% stamp duty (which you didn't mention previously). Thereafter I have no fees other than a small platform fee, which given the value of my portfolio is very modest.

So for a one-off charge of say 1.5% (a lot less if you by in larger tranches) you can then just sit back and collect the dividends. It's obviously not without risk which is why I'm well diversified, but I must stress it's a long term investment strategy.

If you want to make money by simply trading short term then you either need to be very clever or very lucky, preferably both.

R

Linton

I wouldnt buy shares in less than £2K amounts to ensure costs are more or less irrelevent. As well as luck/skill to make a profit trading you also need significant amounts of money. It would be highly risky to just trade one share say.