Why do so many virgin share traders fail before they even start
Now listen!, I’m not trying to put anyone off here. I love being a virgin trader, but online brokers have got the whole deck stacked against you.
Why?
Well, I’m glad you asked. To begin with they are in business to make money from you and who can blame them. They have to make money from someone and believe me it is YOU. Yes, they are happy to give a bit of advice along the way, but you are the only one they can make money from so, be very careful.
The costs include:
- The commission for buying shares
- The commission for selling your shares
- The share price spread (in any other business that means the markup)
- In some cases an inactivity charge (usually quarterly) if you don’t use your account enough
- Often a managment fee (usually quarterly)
- If its an ISA trading account there’s, an administration fee
- Some like ‘Interactive Investor’ even charge you to apply a stop loss to every deal. Then after 90days if you have not sold your share, you have to pay again to reapply the stop loss.
- A charge for transferring a stock from your broker to another broker
- A dividend reinvestment charge
- An additional charge if you wanted to by or sell a share on another exchange like the NASDAQ
All of these various charges add up to a sizable overhead on each deal you make. This means that as soon as you press the buy button you have lost money. It’s a bit like buying a new car; the second you drive it out of the showroom it’s worth thousands less – instantly.
Trading shares is no different.
A lot of virgin traders forget to take these overheads seriously. Individually they may look small but they add up and the more trades you do the more the broker takes off you.
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