← Stocks · lesson 5 of 12
By the end of this one you'll know what a broker is, why you need one to buy stocks, and the quiet ways a 'free' one still gets paid.
A broker is the licensed middleman that actually places your stock orders, because regular people can't walk onto the exchange and start trading, same as I can't show up at a packing plant with one calf. The sale barn is the perfect picture: it connects my animal with a whole crowd of buyers, handles the paperwork, and takes a cut for the trouble. Most stock brokers in the US now advertise $0 commissions, a commission being a fee charged per trade, but hear me, the barn never works for free. They earn in quieter ways: a tiny gap between the price you buy at and the price you'd sell at, interest on cash sitting in your account, and fees for extras like moving your account somewhere else. None of that makes brokers crooked, the sale barn earns its keep too. It just means you read the fee page the same way you'd ask the barn its cut before you back up the trailer.
Same lesson, told by a hundred dollar bill. Tap to walk it one step at a time.
In this example an old fashioned broker charges $5 per trade, so from $100 only $95 actually buys shares, and selling later costs another $5. A $0 commission broker lets the whole $100 in, but there's a spread, which is that gap between prices: in this example shares cost $10.
02 to buy and fetch $10.
00 if sold, so buying and instantly selling $100 worth would hand back about $99.
80.
Small numbers, but now you know where they hide.
The mom group chat is on fire about a trading app that charges zero dollars per trade. One mom swears free means free, another says nothing is ever free, and now they're tagging you like you're the judge. Your youngest is asleep on your arm and you've got one thumb to answer with.
Pick your move. Then peek at the other roads if you're curious.
A broker is the middleman that places your trades, and even the free ones get paid in quiet ways worth knowing about.