How much is the vigorish in the stock market?

External question — Personal Finance Stack Exchange Author: kingrulezzz Original post: https://money.stackexchange.com/questions/131956 License: CC BY-SA 4.0 — https://creativecommons.org/licenses/by-sa/4.0/ Adaptation: HTML converted to plain text; contact email addresses removed. When I do sports betting and the moneyline is -110, 110, I must win at least ~52.4% of the time to break even. The 2.4% goes to the bookmaker as their vigorish (or "rake", or "juice"). My stock broker says that stock trading is free. How can this be? Logically, they must somehow be getting some vigorish to keep their lights on. How much is the vigorish in the stock market? And what is the minimum percentage of stock bets I have to win in order to break even?

External answer — Personal Finance Stack Exchange Author: Pete B. Original post: https://money.stackexchange.com/a/131957 License: CC BY-SA 4.0 — https://creativecommons.org/licenses/by-sa/4.0/ Adaptation: HTML converted to plain text; contact email addresses removed. You are applying the model of sports betting, to something that is in no where related or similar to sports betting. It is very difficult to know where to start, because you have such a fundamental misunderstanding of what it means to be an investor or even a speculator. About the closet thing to a "vig" is the commission one pays to trade an instrument or the fee one pays when using an ETF or mutual fund. But even that is far from accurate. Think about this: The Lakers won the 2020 NBA championship. Nothing will ever change that. You could have bought Apple last week at 122. During that time and now you could have sold as low as 120.38 or as high as 125.05. Those are two very different events and barely scratch the surface at the differences. You might be tempted to think "so stocks are all about timing". Not at all. A much better winner is the guy who bought five years ago, paying 23 and only paying the "vig" once and still holding the stock today. He has several advantages: He does not have to worry about timing (which is impossible to get correct consistently) He can concentrate on his career or business, earning more to have more money to invest He pays less commissions He does not incur taxable events Those kinds of things are not applicable to sports betting. And in my opinion the 5 year Apple investor loses to someone who invests in a boring old S&P500 index fund. Does sports betting have a way to "bet" money with no insight or intelligence and consistently earn about 10% every year? The stock market does.

External answer — Personal Finance Stack Exchange Author: Bob Baerker Original post: https://money.stackexchange.com/a/131959 License: CC BY-SA 4.0 — https://creativecommons.org/licenses/by-sa/4.0/ Adaptation: HTML converted to plain text; contact email addresses removed. Fidelity, Schwab, Vanguard, et al make billions of dollars per year from investors from: Net interest income Mutual fund and ETF service fees Financial planning Sale of annuities Managed money When major discounters eliminated commissions last year, for Schwab, commissions made up something like 5% of their revenues so elimination of commissions wasn't a terrible hit to their bottom line. OTOH, it was something like 35% for Ameritrade and that led to their merger with Schwab. A security's bid/ask spread would be akin to the rake in sports betting. However, its size varies as does the size of a round lot wager because stocks have different prices. Therefore, you can't make a comparative calculation such as with a simple sports bet. In addition, with sports betting, the size of the rake is known as well as the payoff of the bet so you can calculate a required win rate. With stocks, the size of the win is variable so the required win rate is a moving target. If you win large, your win/loss rate can be much lower and conversely, much higher if you have some sizable losses. This further prevents determining a break even win/loss rate.