No matter what industry you're in, picking the right tools for your trade is essential. Trading shares is no different.
Whether you're trading for the long or short term, different online trading companies offer different packages to cater for all investors. Chances are if you're a seasoned investor, you stick with the platform you've traded with for years because you know the ins and outs of the software and what it can do in terms of research and analysis. However, even if you aren't weighing up your options, here are some of the pros and cons of Australia's best share trading companies.
Let's start with the big four. Most novice investors value familiarity, simplicity and convenience when they begin trading stocks. For that reason many will resort to their banks for trading accounts where they can seamlessly transfer funds in and out of their regular accounts. That's your first foolish mistake. According to an ASX share ownership study conducted in 2012, over 43% of Australians choose Commsec to reach their financial goals.
Making an individual trade of $2,000 using Internet broking through ANZ's (ASX: ANZ) E*Trade, Commonwealth Bank's (ASX: CBA) Commsec, Westpac's (ASX: WBC) Online Trading, or Macquarie Group Limited's (ASX: MQG) Macquarie Prime will cost you at least $19.95. That means 2% of your profit will pay for brokerage fees. National Australia Bank's (ASX: NAB) Nabtrade will charge you $14.95 for the same service although 0.11% of your trade value is the maximum you'll be charged by any of the big four with trades above $50,000.
It's never a good idea to sit and watch your portfolio every second of every day but if you like to, then live or dynamic data is what you need. Instead of watching 20-minute delayed stock pricings you'll need a broker that offers the service in their fees. Westpac and Commsec both offer live pricing for free but with E*trade and Nabtrade need you to trade at least once every quarter to receive it for free.
Don't go to your bank for advice until you've shopped around first. Boutique brokers are more likely to have attractive packages for smaller, newer investors. Shop around a little and you'll find CMC Markets, a more affordable option for smaller investors looking to get a taste of how the market operates. Trading at $9.95 saves you $10 when compared to the bigger banks, but it also comes with free information on every listed ASX stock and if you trade regularly enough, the dynamic data package is waivered.
If you want to diversify your portfolio and invest overseas, trading at $9.95 is Options Express, backed by Charles Schwab and Co, Inc (NYSE: SCHW). This company offers options trading even cheaper than stockbroking. With free streaming quotes, no account minimums, platform and brokerage assistance fees this company is starting to put more pressure on the big four to cut their pricing.
Foolish takeaway
If you're new to the market and want to dip your feet into investing, you're not going to be throwing thousands or even hundreds of thousands of dollars in. It is essential that you read the financial services guide (FSG) of the company you're looking to trade with and make sure you pay attention to any asterisks or symbols hidden in fine print. It's also important to know what you value most, brokerage fees, live data or information and analysis. Trading Australian shares has its limits, so it's important to remember many of the above companies are also capable of trading many favourite international stocks. Choosing the right tool can make easy work of investing.
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Editor's Note: We originally said CMC markets was a subsidiary of Commonwealth Bank. This was incorrect. We regret the error.
The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. Motley Fool contributor Owen Raszkiewicz does not own shares in any of the mentioned companies.
