MEPX
Chapter 5 of 12All chapters
  1. 1What a share is
  2. 2Exchanges and brokers
  3. 3How a price is set
  4. 4Order types
  5. 5What it costs
  6. 6Reading a company
  7. 7Dividends and returns
  8. 8Indexes and funds
  9. 9Risk and diversification
  10. 10Market cycles
  11. 11Psychology and mistakes
  12. 12Learning further

Chapter 5 of 12

What it costs

The fees, spreads and taxes that eat returns.

Visible and invisible

Commission is the visible cost, and many brokers now charge none. The spread, currency conversion and the fund fees you hold are the ones that pass unnoticed.

  • A commission-free broker still earns from the flow, usually through the spread.
  • An annual fund fee is charged every year, so a small difference compounds.

Tax

Profits and dividends are usually taxable, and the rules depend entirely on where you live. Tax-advantaged accounts exist in most countries and are worth understanding before the first trade.