So I got an email from Zecco.com today saying that they have officially gone live with their new stock trading platform which is offering $0 commission on trades! I am a bit hesitant to transfer money to them because I was taught by my high school coach, "there is no free lunch". But these guys are backed by some serious players, so it's probably worth a try, and their business model actually does make a bit of sense: No advertising costs, make money on margin accounts, cash balances, etc.
This is an interesting move in the world of self-serve Internet trading because for many small investors, paying the usual ~$10 trading fee inhibits you from making small trades just for fun. Not that you should trade just for fun, but part of investing in stocks is the fun factor, the excitement of watching a stock tick up and up... or the dread when it does the reverse. But that is just human nature, taking risks is built into our brains. Now say you just wanted to put $1000 into some stock, at $10 per trade, you will spend $20 in commissions (one for buy, one for sell), that's 2% of your money gone right off the bat! Now that is NOT fun. What if you just wanted to put $500 in, that's 4% gone, so now you're stock has to have an extra 4% gain just to break even.
Zecco really has the chance to change the industry and the potential to do very well, essentially tapping into the long tail of the stock trading industry. Unless of course everyone else follows suit and starts offering free trades, then Zecco might be in trouble.
