What a trade really costs
A trade costs more than the commission. Add the spread, the currency exchange and, in some countries, a tax.
Four costs
The commission is what the broker charges per order. The spread is the gap between buy and sell prices. Currency exchange costs something when you buy in dollars with euros. Some countries add a small tax on buying shares.
Currency adds up
A broker that converts at 0.5% takes €5 on a €1,000 buy in dollars, and again when you sell. A fund listed in euros does the exchange inside the fund at bank rates, usually for much less.
Taxes on buying
France and Italy tax buying shares of their larger companies, a fraction of a percent each time. Funds are usually exempt. Your broker’s cost report shows it as a separate line.
Small orders, big share
A €10 commission is 0.1% of €10,000 but 2% of a €500 order. Twelve €500 orders a year at €10 each cost €120, 2% of the €6,000. With fixed fees, fewer and bigger orders cost less.
Cost reports
EU rules make brokers show costs before each trade and in a yearly report, in euros and as a percentage. Read it once a year: it is the clearest picture of what investing costs you.
Key takeaways
- Commission, spread, currency and tax: four costs, not one.
- Fixed fees weigh most on small orders.
- Your broker’s yearly cost report shows them all.