One of the annoying things about selling a stock is that you usually don't get to keep all of your sale proceeds. In most cases, there is a cost involved in selling stock. In some cases the cost can be quite expensive. In addition to the actual fee you have to pay to execute your stock trade, you have to factor in ancillary costs such as taxes.
Finding a firm with low commissions is one way to sell your stock cheaply. Full-service brokers such as Merrill Lynch are usually the most expensive option, often charging hundreds of dollars per trade. Online brokers typically charge less than $10 per stock trade, and they usually display their commission rates prominently on their websites. In terms of straight commission cost, online brokers are almost always a cheaper way to sell stock than a full-service broker.
For active traders, a fee-based account can let you sell your stock more cheaply. Under a fee-based option, you pay an annual fee to the firm based on the size of your account, typically one to two percent of the total value of your account. You pay this fee regardless of how many trades you make. If you buy and sell a lot of stocks, your average cost per trade might work out to be a pretty low figure.
Advice as Cost Savings
If you are a novice at stock trading, the extra commission you have to pay a full-service broker might end up saving you money in the long run and making your stock trades effectively cheaper. A highly skilled financial adviser can suggest a good time for you to sell your stock, possibly earning you more than enough to offset the higher commission. For example, if your stock is going up rapidly, an astute adviser can hold your trade until he believes the stock will peak. If you had sold the stock earlier on your own, you might have paid less commission but would have earned less money overall.
Saving on taxes can make the total cost of your trade go down as much as saving on commissions. The IRS levies a capital gains tax on stocks sold at a profit. As of 2011, the tax rate for most trades held over a year was 15 percent. The short-term rate, for trades of one year or less, was the same as the ordinary income tax rate. Therefore, if you are in a higher tax bracket, a short-term trade could cost you as much as 35 percent in federal capital gains taxes. If the holding period on your stock is approaching one year, you can end up saving as much as 20 percent of your profits by holding on to the stock until you cross the one-year threshold. Another way to lower the cost of taxes on your stock sale is to sell other stock at a loss. You can use this loss to offset your gains on a dollar-for-dollar basis, thereby reducing your potential tax bill and effectively selling your stock more cheaply.
After receiving a Bachelor of Arts in English from UCLA, John Csiszar earned a Certified Financial Planner designation and served 18 years as an investment adviser. Csiszar has served as a technical writer for various financial firms and has extensive experience writing for online publications.