Trade is often perceived as a liberal activity that requires no fees. But this is not the case, because trading is above all a financial activity. In fact, when you invest in financial products, you may be charged different types of fees. These have a significant impact on the final return on your investment. The amount of the fees varies depending on the products you trade as well as your broker. Discover in this article the different fees you will face.
At Forex, fees are kept to a minimum. This is one of its main advantages. If you invest in this market, you only have to pay the commission to the broker. The commission represents the difference in quotation between the buy price and the sell price for a currency pair. The difference occurs at the fourth decimal place in the quote and translates into pips. Depending on the chosen broker and the traded currency pair, the number of pips between two quotes (the spread) may vary. It is possible that it is fixed or variable. Once set, the commission to be paid will always be equal to the same number of pips. On the other hand, when it is variable, you risk paying a high commission at certain times of the day. Note that the final commission costs will also depend on the number of units traded and leverage.
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Fees on Contracts for Difference CFDs
As for CFDs on indices, currencies and commodities, the fees you have to pay first are also related to the spread. For share CFDs there are no spread fees. But when you buy or sell, you have to pay transaction fees. This sum corresponds to a percentage of the position value. It usually has a fixed minimum amount, which varies depending on the country you are trading in. For intraday trading, no additional fees are charged. Also, if you keep your position open for more than 24 hours, reover comes into play. And that every day. The relic amount will depend on the type of CFD you are trading. For example, the amount of the currency CFD will depend on the difference in lending rates between the central banks linked to each of the currencies that make up the pair.
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You may also pay fees related to the type of account you have. If it is a PEA or securities account, you will likely be subject to custodial fees and account maintenance fees. For life insurance policies, you may also be subject to different types of fees such as arbitration fees (they relate to the arbitration contract), administration fees and payment fees. In addition, the amount of fees and their application will depend on the broker you choose to trade. It is for this reason that it is recommended to read the conditions of each of them carefully before deciding. It is also important to note that depending on the account you have, the gains made may be subject to income tax, not to mention social security contributions.
Costs in connection with the collective investment
This part is very important for you if you decide to invest in a collective investment like SICAV, FCPI etc. Actually you have to pay entry fees and exit fees. The first must be paid when you sign up for the investment. As for the second one, you have to pay them in case of redemption of your units. In addition to these costs, it is also possible that you pay a performance fee. In this case, the management company would have exceeded the return forecasts. Before investing, you should be sure to consider the impact of these fees on your final return.