Effect of trading fees imposed on all stocks and bonds

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
Locked
Topic Author
dave_k
Posts: 339
Joined: Sat Dec 26, 2015 8:25 pm

Effect of trading fees imposed on all stocks and bonds

Post by dave_k » Mon Jun 24, 2019 3:30 pm

Let's say that everyone was required to pay a fee on all stock and bond trades (for example, a 0.5% fee on all stock trades, and a 0.1% fee on all bond trades), and that ETFs and mutual funds holding those assets had the fees imposed or passed through. How do you think that would affect the markets and investor behavior?

To keep it actionable: Would you change anything you're doing, or your expectations of future returns?

To keep this from being political: No discussion of whether or not it's a good idea, or who might impose such a fee, etc.

My initial thoughts: The direct effect on Boglehead style buy and hold investors would appear to be limited, but it would add costs to rebalancing, and it could have a significant impact on other investing activity, and make the markets less efficient. I might move my AA somewhat more toward bonds if the fees were significantly lower for them, and I would expect future returns to stocks to be reduced more than bonds.

livesoft
Posts: 68016
Joined: Thu Mar 01, 2007 8:00 pm

Re: Effect of trading fees imposed on all stocks and bonds

Post by livesoft » Mon Jun 24, 2019 3:33 pm

Doesn't this already happen in Europe? Aren't those "stamp fees" what you are talking about?
Wiki This signature message sponsored by sscritic: Learn to fish.

Topic Author
dave_k
Posts: 339
Joined: Sat Dec 26, 2015 8:25 pm

Re: Effect of trading fees imposed on all stocks and bonds

Post by dave_k » Mon Jun 24, 2019 3:35 pm

What are the fees in Europe and what effects do they have (what if they were removed)?
What if it were to happen in the U.S.?

User avatar
vineviz
Posts: 5370
Joined: Tue May 15, 2018 1:55 pm

Re: Effect of trading fees imposed on all stocks and bonds

Post by vineviz » Mon Jun 24, 2019 3:39 pm

livesoft wrote:
Mon Jun 24, 2019 3:33 pm
Doesn't this already happen in Europe? Aren't those "stamp fees" what you are talking about?
In the U.S., the SEC already levies a (small) transaction fee on exchange-traded equities. Most people don't even notice.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

User avatar
nisiprius
Advisory Board
Posts: 39105
Joined: Thu Jul 26, 2007 9:33 am
Location: The terrestrial, globular, planetary hunk of matter, flattened at the poles, is my abode.--O. Henry

Re: Effect of trading fees imposed on all stocks and bonds

Post by nisiprius » Mon Jun 24, 2019 3:47 pm

I take it people don't remember the bad old days before fixed commissions were abolished in 1975. Hint: it was very exciting when "discount brokerages" began charging "only" $29.95 for a trade.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

User avatar
whodidntante
Posts: 6374
Joined: Thu Jan 21, 2016 11:11 pm
Location: outside the echo chamber

Re: Effect of trading fees imposed on all stocks and bonds

Post by whodidntante » Mon Jun 24, 2019 3:48 pm

We might learn a lot about the nature of the stock market, how asset prices are supported, and why. Or maybe there are other variables that we wouldn't be able to control for.

Topic Author
dave_k
Posts: 339
Joined: Sat Dec 26, 2015 8:25 pm

Re: Effect of trading fees imposed on all stocks and bonds

Post by dave_k » Mon Jun 24, 2019 4:19 pm

nisiprius wrote:
Mon Jun 24, 2019 3:47 pm
I take it people don't remember the bad old days before fixed commissions were abolished in 1975. Hint: it was very exciting when "discount brokerages" began charging "only" $29.95 for a trade.
I was only a few years old, so I don't remember :)

That's punishing, especially for small trades, but what if it was half a percent no matter the size?

Broken Man 1999
Posts: 3162
Joined: Wed Apr 08, 2015 11:31 am

Re: Effect of trading fees imposed on all stocks and bonds

Post by Broken Man 1999 » Mon Jun 24, 2019 4:56 pm

Easiest way to avoid such levies is to minimize trades.

Nice thing about Vanguard is such activity is in their DNA.

Broken Man 1999
“If I cannot drink Bourbon and smoke cigars in Heaven than I shall not go. " -Mark Twain

jbranx
Posts: 1544
Joined: Thu Feb 09, 2017 6:57 pm

Re: Effect of trading fees imposed on all stocks and bonds

Post by jbranx » Mon Jun 24, 2019 6:00 pm

{Topic is locked--discussing proposed legislation is off topic} Rule 4: "Note that discussions of proposed laws or regulations are prohibited."

rules#rule-4a

Politics and Religion

In order to avoid the inevitable frictions that arise from these topics, political or religious posts and comments are prohibited. The only exceptions to this rule are:
Common religious expressions such as sending your prayers to an ailing member.
Usage of factual and non-derogatory political labels when necessary to the discussion at hand.
Discussions about enacted laws or regulations that affect the individual investor. Note that discussions of proposed laws or regulations are prohibited.
Proposed regulations that are directly related to investing may be discussed if and when they are published for public comments.

User avatar
LadyGeek
Site Admin
Posts: 56942
Joined: Sat Dec 20, 2008 5:34 pm
Location: Philadelphia
Contact:

Re: Effect of trading fees imposed on all stocks and bonds

Post by LadyGeek » Mon Jun 24, 2019 6:30 pm

In today's news: Bernie Sanders wants to make Wall Street pay off the US's $1.6 trillion in student debt, June 24, 2019.

To explain further, this forum is focused on investing that is directly actionable to personal investors. We don't hold debates on conjecture.

The whole point of the policy is to (1) eliminate contentious disagreements that result from these discussions and (2) keep investors from making bad decisions. Proposed legislation changes many times between the time it's introduced and signed into law.

The disagreements will indeed occur, which is more work for the moderators and results in locking the thread. See: Yellen: "We're taking a look at negative interest rates."
Wiki To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.

Locked