It's taken a while, but finally Commsec has slashed the brokerage fees for trading international shares from A$65 to US$29.95 for trades valued between US$5,000 and US$10,000.
At the current exchange rate of around US 72 cents, it still means investors wanting to buy US shares will have to fork out around A$41.60 per trade. If the trade size is over US$10,000, the online broker will slug you 0.31%.
Commsec – owned by the Commonwealth Bank of Australia (ASX: CBA) – has been slow to offer cheaper international trading but may have had its hand forced by one of its big bank competitors. National Australia Bank's (ASX: NAB) NABTrade offers trading in international securities for A$19.95 for trades valued between A$5,000 and $20,000.
Westpac Banking Corp (ASX: WBC) still wants to charge US$57.95 (or more) per trade for US securities including a whopping US$115 or 0.9% if investors wanted to buy shares in companies listed on the New Zealand exchange.
Like Westpac, Australia and New Zealand Banking Group's (ASX: ANZ) E*Trade, is still behind the eightball, charging A$59 for trades up to A$10,000.
Those brokerage fees are hefty when you consider Options Express charges $14.95 for trades of between 1 and 1,000 international or Australian shares. Interactive Brokers charges a fixed fee of US$0.005 per share – so buying 1,000 shares worth US$25 would cost you just US$5.00.
With fees like the big four banks charge, it's no wonder so few Australians invest overseas. Or perhaps the lack of franking credits and high dividend yields puts many retail investors off investing in international shares.
But that really is a blinkered view.
US Exchanges have around 5 times more companies listed than the ASX, not to mention hundreds of different types of Exchange Traded Funds (ETFs), plus access to invest in the likes of Google, Amazon, Apple, Microsoft, Mastercard, Warren Buffett's Berkshire-Hathaway, IBM, Facebook, Johnson & Johnson, Wells Fargo, eBay, and Coke to mention but a few.
Investing directly in international shares also adds diversification to your portfolio. Should the Australian dollar fall further, the value of your shares will rise (in Australian dollars) – even if the US dollar share price stays flat. Should the Aussie dollar rise, you have the opportunity to buy more shares at a cheaper price (all other things being equal).
Foolish takeaway
Commsec could cement its leading market share if the online broker offered competitive brokerage rates and fees for international trades. The recent reduction is a step in the right direction, but unfortunately not enough to tempt me to use Commsec to buy overseas shares.
