Your broker is not your pal
Your broker is not your pal.
I hold part of my portfolio on an online broker called eToro. eToro is special among online brokers in that users can talk to each other through something called a News Feed.
In the news feed, you can find people sometimes complaining about the eToro platform. They accuse eToro of disabling certain functionalities temporarily or not having a stop loss option for cryptocurrencies.
They think that eToro does it so it can make money off its users. Whenever I see someone complaining, I tell myself “duh, isn’t it obvious?”.
I realize this can be a hard pill to swallow, but your broker is not your friend. Your broker can reduce commissions and make things easy for you, but in the end, they are a business. They need to manage risk and they need some way to make money. And more often than not, they make money out of you.
So what is a wise investor to do?
If you are investing, your objective is most certainly to make more money than you begin with. Paying fees goes against that objective, as it reduces future profits. Therefore, your objective as a user of a broker’s platform is to try to be smarter than your broker.
For example, in the platform I use, there are no commissions for trading stocks. As long as you are opening long positions with no leverage, you just pay the spread. On the other hand, crypto spreads are higher than I can tolerate, not to mention that there’s no stop loss. So I stay away from cryptos and trade stocks to my heart’s content (though there are other, better ways to invest than picking individual stocks).
If I wanted to trade cryptos, I would look for another platform where the spreads were to my taste, but I wouldn’t do it on eToro and then complain about it!
In the end, investing is a game of maximizing profits and minimizing fees.
Have you found any clever ways to minimize fees in your investments?
The Oracle of FI is a middle-class guy working as a software developer. His goal is to achieve full financial independence by the age of 40.
He started this blog in 2019 in order to share his tips and techniques on investing, saving money and making the most out of life.
He has a cat and lives in France.