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Understanding the Costs of Investing

We like all like the idea of earning money with investing. Choose the right investment, and you could find an improvement in your financial situation. You don’t even have to make big gains in a short period of time. You can engage in dollar cost averaging [3], or choose an investment that is likely to do well over time. No matter how you invest, though, there is always a cost. You have to pay to play.

Whenever you buy or sell an investment, someone else is involved in the transaction. This means that you can expect to pay fees. You can’t completely avoid investing fees, but you can look for funds, or look for online brokers [4] and others who offer lower fees. Every time you pay a fee, you are eroding your returns, so keep that in mind.

Common Investing Fees

Whenever you invest, you can expect to pay fees. You can find information about the fees charged in a prospectus, or an online brokers web site. Ask your broker for a complete fee schedule so that you can determine what services are costing you. If you are choosing an online broker, you can use the handy brokerage comparison tool [5] from Bankrate. Here are some of the more common investing fees:

In addition to broker fees, you should be aware of other costs that might come with investing. If you see capital gains [6], you will need to pay taxes on your earnings. Depending on how long you have held the investment, you will either pay according to whether you have long-term gains, or short-term gains. Before deciding on an investment, or on a broker, do you research and be aware of the costs.

(Photo: bfishadow [7])