What investing costs
Five bucks can be a big fee.
Say a broker charges A$5 each time you buy. On a small purchase, that A$5 takes a much bigger bite than it does on a larger one.
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Five bucks can be a big fee.
Say a broker charges A$5 each time you buy. On a small purchase, that A$5 takes a much bigger bite than it does on a larger one.
A$100 trade: A$5 on A$100 is 5%. That fee comes out of your money before the investment price has even moved.
A$1,000 trade: A$5 on A$1,000 is 0.5%. Same fee in dollars, much less as a percentage.
Main point: A $5 fee takes a much bigger bite out of a $100 purchase than a $1,000 one.
See how trade size changes the fee.
The brokerage stays at A$5. Move the amount you’re buying and watch what percentage the fee takes up.
This example only compares the fee percentage. It doesn’t mean bigger or less frequent trades are always the better choice.
“Free brokerage” doesn’t always mean free investing.
A platform might charge A$0 to buy certain shares or ETFs. That’s worth knowing, but it’s not the whole cost.
Read the whole fee schedule.: There can still be ongoing fund charges, foreign exchange fees and a bid-ask spread, which is the difference between the price buyers offer and sellers ask. Some platforms also charge account or custody fees.
Look beyond the big number in the ad.
Before comparing platforms, make sure you’re comparing the same sort of purchase.
Overseas trading: Buying overseas can involve currency conversion and extra trading costs.
How often you trade: Buying more often can mean more transaction fees. But waiting to invest also has trade-offs.
Fund costs: Even if brokerage is cheap, some funds charge ongoing management fees.
Main point: Look for brokerage, currency conversion and ongoing fund fees. The headline price may leave things out.
Look at the full bill.
A cheap-looking trade can end up costing more once you add the other charges.
Compare dollars and percentages: A dollar fee can be small or large depending on how much you invest.
Check more than brokerage: Check all trading costs and ongoing fund fees, not just brokerage.
Main point: Check the full cost in dollars and percentages, not just the advertised brokerage.
What to remember
A low advertised brokerage fee doesn’t necessarily mean low overall costs. Check the full cost of trading and owning the investment.
When comparing platforms or ETFs, look for brokerage, ongoing fund costs, currency conversion charges and buy-sell spreads.
General education only. Examples are simplified. Investments can lose value.