1. The Hidden Costs: Brokerage Fees & Taxes
Your trading app shows a +0.5% return, so you sell feeling good. But when the settlement hits, you break even or even lose money. The culprit? Transaction costs.
- Buy commission: Paid when buying (often free during promotions)
- Sell commission: Paid when selling (varies by broker, ~0.015% to 0.198%)
- Transaction tax: Always paid when selling (domestic stocks ~0.18% to 0.23%)
- Capital gains tax: (International stocks) 22% on annual gains exceeding $2,500
For domestic stocks, prices must rise at least 0.2% just to break even.