When an investor purchases or sells shares of stock, the price paid may include two components: the cost of the shares and any fee charged by the brokerage firm that makes the transaction. This fee is called the commission.

Online brokers have been caught in an all-out price war lately. Many major♉ ꦇonline brokers offer zero commission trades on stocks, though most charged a commission for trading mutual funds.

Most 澳洲幸运5官方开奖结果体彩网:full-service brokers charge 1% to 2% of the total p🙈urchase price, a flat fee, or a combination of both, for stock purchases. They offer investors financial planning an♈d investing advice as well as making transactions for clients.

Understanding Share Prices

The price of ꦅa share of stock is determined in one of two wa♐ys:

Newly-issued stock shares can be purchased only on the primary market for a non-negotiable price set by the company that issues them. For example, a young company that decides to go public to raise money may determine that $15 is a fair price forཧ its shares. It issues a predetermined number of shares at this set price for a limited amount of time. Most of these shares will be purchased by large institutional investors and insiders and will then be resold on the open market.

This is an 澳洲幸运5官方开奖结果体彩网:initial public offering (IPO).

Those early buyers will theওn list most or all of their shares on the open market, where anyone with a brokerage account can buy and sell them. At tha🀅t point, the shares will rise (or fall) to the level that investors consider to be their true value.

That is the so-called secondary market made up of stock 🍨exchanges such as the New York Stock Exchange and the N🎃asdaq.

For as long as the company remains public, investor sentiment and market psychology will determine the stock price from minute t♛o minute.

Broker Commission

The second component of a share purchase price is the broker commission, if any. Individual investors may buy and sell stock through an online broker or a full-service broker while larger 澳洲幸运5官方开奖结果体彩网:institutional investors may work with an investment bank.

Full-service brokerage fe✤es vary from broker to broker. Some charge ꦑa flat rate, or a nominal rate per share, while others may charge a percentage of the total trade value, and some charge a combination of both.

As noted, many online brokers have dispensed with fees ဣfor buying and selling stock shares and exchange-traded funds in this highly competitive envir♌onment. They may charge fees for other transactions, including purchases and sales of mutual funds, bonds, and futures. Most also now offer premium services such as personal financial advice and customized portfolios for a fee.

Example of Share Purchase Fees

Assume an investor w♋ants to purchase 100 shares of stock in company ABC. This is a listed company, not an IPO, so the shares must be purchased on a stock exchange for the current market price of $20 𝓡per share.

If the iꦜnvestor uses an online broker, the price will be $2,000. If a full-service broker is used, there will be a fee of 2% of the total trade value, with a minimum commission of $50. The total price of the shares alone is $20 * 100, or $2,000. The commission is $2,000 * 2%, or $40. Since the commission rate is lower than the minimum, the online broker charges the flat $🦂50 brokerage fee, bringing the total price of the share purchase to $2,050.