What Does Free Trade Mean?

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Free trades for investment accounts is when discount brokerage firms offer no transaction fees for certain funds on a mutual fund platform. Be aware of internal expenses related to free trade funds with tips from a financial planner in this free video on investments.

Part of the Video Series: Investment Facts
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Video Transcript

Hi, there. I'm Cathy Pareto, the founder of Cathy Pareto and Associates, certified financial planner, here in Miami, Florida. In this clip, we're going to be talking about free trades. Now, I'm not talking about free trade in terms of economic principles. Let's focus this discussion on free trades for investment accounts. Many discount brokerage firms offer no transaction fee or free trades in their accounts if they get certain funds on their mutual fund platform. Be aware that free is not always really free. Sometimes the fund supermarkets, whether it's at TD Ameritrade or E*TRADE or Schwab, they actually have an additional internal expense associated with that fund, and oftentimes, in order for that fund to be listed on their free trades or no transaction fee platform, the company itself is getting a fee for that. So free is not always free. If you're going to buy a mutual fund, really evaluate what the internal costs are and don't get hung up on just what the acquisition or selling costs are of...a free trade is not always free. That's a little bit about that, and this has been Cathy Pareto in Miami, Florida.

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