The term “free” has always been a relative one. Rrom, there’s no such thing as a free lunch, to free gift with purchase, or interest-free for one year – they all have a catch, and none are what they seem to be upon closer examination.
Free, it seems, usually isn’t quite free at all. Unless you’re talking about free online stock trading, and, in that case, you only plan on making a handful of trades going forward.
Then, it really could be free.
But probably not.
Is it Free, or Is It Marketing?
Some online brokerage firms entice new investors with the offer of free trades. Not unlimited free trades, but the first 10 to 25 trades, even 100 trades if you look hard enough. Once the free trades have been used, you’ll pay the same per-trade fee that other customers pay, usually in the neighborhood of $5 each – no matter the size of the trade – which, in comparison to the commission rates of as little as ten years ago, is almost free, relatively speaking.
To get those free trades one needs to open an account and make an initial deposit. From there your account will be coded for the free trade offer, and you simply make your trades without the use of special discount codes or other one-off identification.
Once your free trades are used up you need do nothing to maintain the account, but you’ll be paying the going rate when you do.
Is There are Downside?
Or are these free trades just what they seem to be? The answer is yes and no.
The promised number of trades will be free of fees or commissions, as promised. But… any cash balance in the account, which traditionally earns interest at a competitive rate of return, will, in this case, likely do so at a reduced rate.
Where other online brokers might be paying 3 to 5 percent on cash balances, your limited free trade account may only pay 1 percent. And if you are one of those low volume traders drawn here precisely because you feel you may never reach your free trade limit, then your chances of having idle cash are larger than most.
You may do better, if the dollars are sufficient, to put your money somewhere that pays a higher rate of return.
In that sense this issue is like any other in the investing world – it requires a little digging. Free, where money and business is concerned, has always had an agenda, and with online stock trades, the agenda is simple, yet there.
