Free Trading Commissions

Q My brokerage has just announced that online stock trades will now cost $0. Is that sustainable? — H.R., Pawtucket, Rhode Island

A It certainly can be. Once a brokerage has its trading technology set up, it doesn’t cost a lot to execute trades.

Keep in mind, too, that trading commissions are not the brokerage’s only source of income. Like banks, brokerages get a lot of money from “net interest” — the difference in the interest rate they pay customers for cash deposits and the interest rate they earn when they invest customers’ cash. They also collect interest when investors borrow funds with which to buy stocks (“on margin”). Many brokerages these days are also generating income via asset management — offering research and advice to customers.

Then there are fees: These include fees for “account maintenance,” paper statements, inactivity or when you buy or sell mutual funds. There’s also income to be collected from the difference, or “spread,” between a stock’s “bid” price (what an investor is willing to buy the stock for) and “ask” price (what a seller is willing to sell it for).

Q Are Social Security benefits going up much in 2020? — C.L., Portland, Oregon

A The cost of living adjustment (COLA) for Social Security in 2020 is 1.6%, considerably lower than 2019’s 2.8% increase. With the average monthly retirement benefits check recently at $1,475, a 1.6% increase will mean $23.60 more per month, or about $283 more annually. It’s not a lot, but in retirement, every little bit can help.

You can learn more about Social Security and how you may be able to increase your benefits by searching for the terms “Social Security” and “Motley Fool” in Google.

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