Investors need to remain aware of the costs charged by stockbrokers and transfer agents in order to know not only how much profit or loss is realized per trade, but also for federal tax purposes in determining basis or the cost value of an asset. Stockbrokers charge different rates for different services, and costs vary from one firm to another. For example, a discount broker generally charges less per trade than a full-service broker, corresponding to services offered. A brokerage defines its own method of charging fees.
Calculate stockbroker costs for an agency that charges a straight per-trade fee by multiplying the brokerage charge by the number of trades made. For example, suppose on Monday you make seven trades and the broker charges a flat-rate fee of $10 per trade. Regardless of the number of shares that change hands, the total stockbroker costs would be seven trades multiplied by $10 per trade for a total of $70.
Figure per-share fees based on total shares traded per day, regardless of the number of transactions that take place. For example, suppose you make seven trades of 1,000 shares each and the broker charges 2 cents per share. Calculate the total costs by multiplying seven by 1,000 by $0.02. In this example the stock broker cost for the day would equal $140, because 7,000 shares times $0.02 equals $140.
To calculate costs when the stockbroker charges a combination fee, you simply use both methods of figuring. Suppose a broker charges an upfront fee of $8 per trade, plus a penny-per-share commission. If you make seven trades and 1,000 shares of stock are involved in each transaction, the total stockbroker costs for the day would equal $126. This is figured by multiplying the number of trades (seven) by the per-trade fee of $8 plus adding the per-share fee of $0.01 times 7,000, the total number of shares.
Suppose the stockbroker charges a flat rate of $25 for the first 1,000 shares and 2 cents for each share more than 1,000. If you make seven separate trades of 1,000 shares, the cost would simply be seven (trades) times $25 each for a total of $175.
- Brokerage fees vary depending on the services used. In some firms, the price charged depends solely on the number of shares traded. Broker-assisted trades generally always carry an additional fee as does the issuance of paper certificates. Knowing beforehand what the broker costs will be helps to plan trades accordingly, reducing the profit lost to fees and commissions.
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