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The Real Costs of "Fee-Free" Investing

6 min readCompound

Key takeaways

"Fee-free" investing doesn't exist — a broker that charges no trading commission earns money in other ways, and those hidden costs can exceed traditional commissions.

How a broker earns without commissions

There are four main revenue sources for "fee-free" brokers:

Example: A "zero-commission" broker charges a 0.5% forex fee. With regular monthly purchases of CZK 3,000, you pay CZK 180 per year in conversion costs alone — more than a fixed commission of EUR 1 per trade.

How spreads work when buying ETFs

For large ETFs on major exchanges, the spread is typically very low — around 0.01–0.1%. For less liquid instruments or outside core trading hours, the spread can widen significantly. This is why buying during active exchange hours (typically 09:00–17:30 Central European Time for European exchanges) pays off.

Non-trading fees — the ones we overlook

Withdrawal fees (usually EUR 1–5), inactivity fees (if you don't trade every quarter), paper statement fees, or phone order charges — these accumulate and can be a more significant cost than actual trading commissions. Check your broker's fee schedule and compare it with alternatives in the guide how to choose a broker.

How to compare correctly

Instead of comparing commissions, compare the total cost profile for your specific scenario: how often you buy, in which currency, what amounts, and whether you plan to make withdrawals. Apply the same logic to thinking about costs as a whole — don't ignore any layer.

FAQ

How does a broker make money without charging commissions?

Primarily through the spread (difference between buy and sell price), forex fees on currency conversions, and various non-trading fees for withdrawals, inactivity, or account maintenance. Truly free doesn't exist.

What is payment for order flow?

A practice in which a broker routes client orders to a market maker in exchange for payment. Banned in the EU since 2026. It led to a potential conflict of interest — the broker could prefer a market maker that paid it, rather than the one with the best price.

How wide is the spread on ETFs?

For large, liquid ETFs on major exchanges, typically 0.01–0.1%. For less liquid funds or outside core trading hours, it can be significantly wider. Always buy when the relevant exchange is open.

How do I find out the real costs of my broker?

Download the full fee schedule (not just the commission overview) and calculate your typical annual costs: forex fees × number of purchases + non-trading fees. Only then compare with alternatives.

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