What is a commission in the context of investing?

• A. A service charge assessed by a broker or investment advisor in return for providing investment advice and/or handling the purchase or sale of a security
• B. A fee charged by a bank for maintaining your checking account
• C. A penalty paid for early withdrawal from a retirement account
• D. A discount offered for bulk stock purchases

Answer: (A)

In investing, a commission is the fee a broker or investment adviser charges for providing investment services and for executing a trade or handling the purchase or sale of a security. This fee is how the broker earns money for giving you access to the market and, if applicable, advice you receive about the trade. It’s distinct from other costs like bank charges for maintaining a checking account, penalties for withdrawing from a retirement account early, or bulk-purchase discounts, which aren’t commissions. Commissions can appear as a flat per-trade fee or as a small percentage of the trade value, though some platforms now offer zero-commission trades for certain securities. Understanding this helps you compare potential costs across brokers and make more cost-effective investing decisions.