Key Takeaways
- Brokerage firms have recently stopped charging fees for stock trading, in an effort to attract more millennial investors.
- These fees were never very high to begin with, so this shift is more a change in principle than anything else.
- Investors who decide to take stock trading into their own hands may want to give some consideration to whether they have the necessary knowledge and experience for it.
“OK, boomer.” You’ve likely heard this phrase and seen its memes, especially the one with Chloe Swarbrick, member of the New Zealand Parliament, who said it in response to heckling she received from an older colleague. Those two words speak to the shift in generational attitudes and are a clear indication that millennials don’t plan on doing things the same way generations before them have.
This generational shift is happening in all areas, including money. In particular, there’s a stock-trading app called Robinhood, which charges no trading fees. They were embraced by millennial customers, and major firms took notice. A few months ago, huge discount broker Charles Schwab eliminated their trading fees. Many other large custodians followed suit.
On the face of things, this seems like a really good thing. Reducing costs, eliminating fees…what’s not to love? Well, it’s important to note that these fees were never very high to begin with—we’re talking $5 or so per trade. So before we get carried away, we need to recognize that this was a minor change that was really more a change in principle, setting a standard for how things will be done in the future.
Nonetheless, for some investors, this elimination of fees may be the encouragement they need to start stock trading on their own. We’re currently experiencing a bull market and trading is increasing. Right now, individuals who are buying stocks and seeing gains may be feeling pretty confident about their choices. Unfortunately, it’s when a bear market hits and the market goes down by 30%, 40%, those same investors start to realize they might not be as skilled as they thought they were.
Being a stock trader takes experience and understanding, especially when the market declines and it becomes a whole different ball game. It’s something boomers have seen happen time and again. So, be careful not to jump in with both feet and avoid taking unnecessary risks just because those trading fees have been eliminated. Consider your financial future and remember that, just because brokerage firms are advertising “zero fees,” it doesn’t mean stock trading is easy. Until next time, enjoy.
