Sunday, July 22, 2007

ADA: Commissions Kill

Alternate Dimension Andy (ADA):

I have a math problem for you. Fun, huh?

Suppose you want to buy 100 shares of Horace's at market price, $10. How much will it cost?

As usual, whenever I ask a stupid fucking question like this, I'm trying to trick you into giving an obvious answer that is wrong. So, if you said, "Fuck you Andy, I'm not doing your math problem," you were right!

At first, it sounds like 100 shares that each cost $10 should go for $1000. But no, that would make too much goddamn sense. Instead, when you want to buy and sell shares of stock, there's usually an extra fee involved. This fee is called a commission.

Here's how it works. You call up your broker, Skeletor, and say, "Yo, dude, I AM IN NEED OF STOCKS PLEASE." And he's all, "I will hook you up." Skeletor looks at all the active trades going on at the exchange (probably the NYSE, in your case), finds someone selling the stock you want and handles all the bullshit that goes on with the trade. After some blackbox voodoo, you are the proud owner of the shares of your choosing.

But Skeletor does this for a living, not out of the goodness of his heart. I mean come on, he's fucking Skeletor for Christ's sake. So in addition to whatever you paid for the shares, Skeletor charges you an additional commission for facilitating the trade. These days, commissions for phone orders are usually in the neighborhood of $25 - $40 a trade.

It's super-sucky that this shit happens per-trade. I mean, if you wanted to buy those 100 shares at $10 every week, and the commission was $25, you'd end up spending an extra $1300 a year. Bullshit, I say!

But a-ha! The very same technology that makes this interwebal personal log ("ibalplog," I believe it's called) available to my millions of readers can be used to facilitate these trades. After all, the stock exchanges are all run by computers, and we don't need as many human eyes and pieces of paper to make trades happen. Computers handle it for us.

Nowadays, in addition to phone trading, you can also make your trades online, via an online discount brokerage. Usually, these charge more in the neighborhood of $5- $15 a trade. Skeletor is fucking pissed about this shit.

I'll talk more about these brokerages in another post, but here's a list (in no particular order) to peruse for the time being:
Skeletor hates them all.

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