Charles Schwab Lowers Costs for Stock Trading—But Should You Trade More?

Well, here we go again! Charles Schwab just dropped a bit of a bombshell for traders: they’re hopping aboard the unlimited commission-free trading train. Yes, you read that right—no more nickel-and-diming (or, let’s be real, $6.95-and-diming) you for every stock, ETF, or options trade you click through online. (Okay, options aren’t totally “free,” there’s still a 65-cent fee per contract, so don’t get too comfortable.) Schwab is basically playing catch-up with Interactive Brokers, who were only trying to keep pace with the zero-commission craze that Robinhood Markets kicked off. (As for Schwab, their PR team is keeping mum, so don’t hold your breath for a quotable soundbite.)

Josh Rowe-Heupler, an analyst at Magnify (the financial comparison website—you know, the place where people go when it feels like everyone’s suddenly a day trader), chimed in: “What’s most significant is Schwab’s scale. This will pressure other large brokerage firms to reconsider and potentially reduce their fees as well.” No kidding! When the big fish start swimming in the free pool, everyone else in the pond takes notice.

Of course, this isn’t all rainbows and dollar signs. Schwab watched its own stock dip almost 10% after waving goodbye to commission revenue. “Hey investors, please don’t panic,” they probably wanted to say—but investors clearly missed the memo. Still, Schwab’s pain was nothing compared to the competition: TD Ameritrade’s shares nosedived 22% and E*Trade lost 18% of its value. (Ouch.) In the aftermath, TD Ameritrade said, “Fine, us too!” and matched Schwab’s shiny new pricing.

THE DANGERS OF ‘FREE’ TRADING

Let’s pump the brakes for a second. Quincy Krosby, chief market strategist over at Prudential Financial, put it perfectly: Schwab’s move is really just the cherry on top of a ten-year trend sundae. Technology keeps chipping away at ancient barriers—making financial markets easier, faster, and “fancier” for regular folks like us. Suddenly, the complex toys—the ETFs, options, even those intimidating leveraged ETFs—are not just for the pros. They’re basically gift-wrapped and handed to your average at-home investor with a wink and a grin.

Here comes the “but”—and it’s a big one. Sure, you’re saving on transaction costs, but commission-free trading is like an all-you-can-eat buffet: just because you can grab a third plate of shrimp, doesn’t mean you should. Those old-school commissions and confusing trading tools actually acted as guardrails, especially for folks prone to, say, “YOLOing” all their savings on penny stocks or risky derivatives. Without those speed bumps, traders (especially rookies) might feel a dangerous urge to dabble in stuff like leveraged ETFs—think of these as investments on energy drinks. Krosby says, “If your bet’s right, the payoff can be impressive. But if you’re wrong, losses can be just as significant. There’s a good, bad, and ugly side to this.” Preach.

And don’t think you’re safe just sticking with bland, broad-market ETFs. The psychological pull of $0 commission can tempt even the calmest investor into a flurry of ill-timed trades. Market timing sounds easy when you’re playing with pretend money, but every study under the sun (and there are a lot) shows that real-life market-timers usually underperform the market by a percentage point or more every single year. One bad decision and bam!—you’ve lost way more than a trade commission ever could have cost you.

Rowe-Heupler made a pretty apt metaphor for all this: Think of investing like driving back in the day. Once, tolls were everywhere—now they’re rare, and everyone thinks the road is wide open. But just because the speed limit is gone, should you really be flooring it to 160 miles per hour without knowing how to handle the curves? (Spoiler: probably not.)

So Should You Trade Like There’s No Tomorrow?

Here’s the million-dollar (commission-free!) question: Now that you can trade stocks and ETFs all day long without the in-your-face reminder of a “fee”, should you? Well, do you eat cake for breakfast just because it’s in the fridge? For most folks, probably not (at least, not every day). It’s tempting to up your trading game, but experts still agree—your best bet is to stay patient, stick with your investing plan, and resist the urge to overtrade just because it’s “free.” After all, the house always wins when you’re making decisions based on excitement rather than strategy.

In short: Charles Schwab and its online stock trading rivals have ushered in a bold new era of commission-free trading, putting powerful tools in the hands of every investor. Just remember: whether you’re playing with ETFs, options, or stocks, the biggest fee might be paid with your discipline rather than your dollars.