Brokerage costs for Australians investing in international shares – Canstar

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What brokerage fees you can expect to pay when trading international shares and how you can save with a 5-Star rated platform.

Trading international shares can come at an additional cost to investing domestically, but the benefits of accessing a wider selection of investment options can often outweigh these costs.

Compared to other share markets around the world, the Australian Securities Exchange (ASX) is relatively small, with a large exposure to the financials (e.g banks) and materials (e.g mining) sectors.

At the time of writing, these two sectors account for over 50% of the S&P/ASX 200 index (in terms of market capitalisation), while a smaller sector such as information technology only makes up around 2%.

So, an Australian that wants to directly invest in a technology company, for example, might consider investing overseas, where there would be a wider selection of companies to choose from.

An overseas market such as the NASDAQ in the US, where information technology is a dominant sector, would provide many more options for a technology investor, with the likes of Google (Alphabet), Apple, Facebook, Amazon and many more to choose from.

Having a mixture of shares from around the world can also lower investment risk, because the portfolio is spread throughout different economies. This is known as geographical diversification.

For investors that enjoy trading both day and night, another possible benefit of investing internationally is you’re not constrained by the ASX’s trading hours.

Nevertheless, it’s important Australian investors are aware of the additional costs and risks involved with trading assets overseas.

Currency conversion fees, foreign security custody fees and different taxation rules need to be taken into account. It’s also worth noting foreign policy can have an impact on your returns.

Then, of course, there are brokerage costs, which are the fees charged by trading platforms and stockbrokers to conduct the transactions between buyers and sellers. These fees can significantly vary between countries and online share trading platforms.

But as Canstar’s research shows, Australian investors can potentially save on brokerage by investing in international shares through a platform that offers outstanding value.

There were three 5-Star rated platforms in this year’s inaugural International Share Trading Star Ratings. Read more about each of these outstanding value platforms .

International brokerage costs: How you can save

Canstar’s research for its first ever International Share Trading Star Ratings analysed the cost of brokerage on trading stocks in the US and the UK via the 11 rated platforms.

Eight of the 11 platforms rated were provided by Australian banks – ANZ, Commonwealth Bank (CommSec), National Australia Bank (nabtrade), St George Bank and Westpac.

The other three were provided by overseas-based trading firms that offer services in Australia – IG Markets, Interactive Brokers and Saxo Capital Markets.

The research found that compared to a domestic trade, the average brokerage costs of these platforms were over twice as expensive for trades in the US and the UK.

The average brokerage cost for a $15,000 trade in Australia worked out to be $21.92, while the same value trade in the US and UK was $45.10 and $48.35 respectively.

It is worth noting there is a much bigger gap between the minimum and maximum brokerage costs between platforms on a $15,000 trade in the US and UK compared to a trade in Australia.

This large gap in costs suggests it pays to shop around for an international share trading platform in Australia.

Canstar’s International Share Trading Star Ratings can help with that.

Brokerage Fees for a AUD$15,000 trade Minimum Maximum Average
Domestic brokerage* $9.50 $33.00 $21.92
UK Brokerage** $10.02 $97.50 $48.35
US Brokerage** $2.72 $97.50 $45.10

*Source: Canstar’s Online Share Trading Star Ratings, 2017. Domestic brokerage is based on a single trade of AUD$15,000 as provided in the audits received by Canstar from each provider in the Online Share Trading Star Ratings. Any minimums, maximums and averages shown above have been calculated based on products included in the 2017 Online Share Trading Star Ratings. All values are displayed in AUD.

**Source: Canstar’s International Share Trading Star Ratings, 2017. Any minimums, maximums and averages shown above have been calculated based on a single trade of AUD$15,000 in each specific market. All brokerage fees were converted to AUD using the average exchange rate from the past six months at the time of the rating and displayed above in AUD. For providers that calculate brokerage based on number of shares the average brokerage from three hypothetical share prices ($20, $50, $150) and the equivalent number of shares for a AUD$15,000 trade is used.

As you can see below, the average brokerage costs of this year’s three 5-Star rated platforms were significantly lower than the average costs of all the platforms included in the 2017 rating.

Brokerage Fees for a AUD$15,000 trade Average 5-Star Average
UK Brokerage** $48.35 $13.34
US Brokerage** $45.10 $5.91

**Source: Canstar’s International Share Trading Star Ratings, 2017. Any minimums, maximums and averages shown above have been calculated based on a single trade of AUD$15,000 in each specific market. All brokerage fees were converted to AUD using the average exchange rate from the past six months at the time of the rating and displayed above in AUD. For providers that calculate brokerage based on number of shares the average brokerage from three hypothetical share prices ($20, $50, $150) and the equivalent number of shares for a AUD$15,000 trade is used.

Compare International Share Trading Platforms

Why is the brokerage so much cheaper on some platforms?

According to Canstar’s Group Manager for Research and Ratings, Mitch Watson, the cost difference largely comes down to the style in which brokerage is charged.

“In the US, the 5-Star rated platforms charge on a per-share model, whereas bank-run platforms operate under a similar brokerage model to their domestic side where it is charged on a trade value basis,” Mr Watson said.

“Depending on the share price, the former model does provide a cost advantage which may only be disadvantageous when the share price is extremely low.”

Let Canstar help you save on brokerage

In judging the ratings for international share trading platforms, Canstar takes brokerage costs and other fees into account. Be Canstar sure about your trading platform by looking at the 5-Star rated platforms from Canstar’s database, and see if they meet your specific trading needs.

Compare International Share Trading Platforms

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