Pretty cheap to trade these days—$7 or whatever. Costs less than lunch. Some online brokers will give you the first 50/100/200 trades free. What a deal!
But there are consequences.
Have you ever gotten nervous about one of your positions, sold out of it, then watched helplessly as it shot up 40% in six months?
Chances are you are overtrading. And that’s one of the most common mistakes investors make, especially with ETFs.
High Commissions Are Better
I’m going to say something truly radical: high broker commissions are better.
Let me give you an example. You buy 2,000 shares of XYZ at $20 a share, paying a $7 commission. It goes up to $40/share. Hooray! But then it goes down to $30/share.
You panic and sell it, paying a $7 commission. It then goes up to $80/share. You cry yourself to sleep on your big, fat pillow.
What if your commission structure was not $7 per trade, but $.07 per share?
In this case, you would have paid a $140 commission to sell your shares of XYZ.
Would it have prevented you from selling it? Maybe!