Once upon a time, buying stocks was mostly reserved for the wealthy. Trade fees were sky-high, you’d need thousands of dollars to get started and the only real option was to hire the services of an expensive personal stockbroker.
Fast-forward a couple of decades and these days there are plenty of cheaper options to buy shares online. While online share trading platforms (AKA online brokers) are still technically “brokers”, you do all the buying and selling yourself but for a much lower price point.
In fact, there are so many options, it can be overwhelming to pick the right one. To help you better compare, here are some of the main features and costs you should be looking out for.
The broker fees
Fees can be vastly different from one broker to another. According to Finder research, the average trader (making 1–2 trades a week) could save approximately $1,048 annually in fees by switching to a different broker.
One of the most important costs to look at is the brokerage or commission fee. This is the fee you pay every time you buy or sell stocks and it can range from $0 to $40 a trade, depending on the broker.
The other cost to think about is any ongoing fees, such as monthly subscription fees or inactivity fees that may be charged if you don’t make enough trades in a month.
Remember, nothing is ever truly free in investing. So if your platform is charging $0 brokerage fees, look for other costs that might be less obvious.
Australian or global stocks?
Are you interested in buying Australian stocks like the Big Four banks and Afterpay? Or are you more about the US tech giants, like Facebook or Netflix?
Not all share trading platforms offer Australian shares and not all offer global or US stocks. Before you pick a broker, check out which markets it offers. Some, such as CMC Markets and IG offer stocks from dozens of countries around the world, while others like Bell Direct and eToro specialise in stocks from one country.
Beginner or pro?
Trading platforms range from super simplistic to very advanced.
If you’re just starting out, check whether the platform is easy for beginners to use. These platforms typically have a simple layout with a few basic “buy” and “sell” options, which is really all you need to get started.
Experienced investors will probably want a few more additional options. Trading platforms targeting active traders tend to be complex and offer dozens of trading options, such as charting tools, different stock order types (conditional orders) and news and analysis.
It might be tempting to try out a more advanced trading platform if you’re a beginner, but the high-level jargon can be difficult to navigate, making it all too easy to make a very costly mistake.
Trading or long-term investing?
Do you intend to trade multiple times a month or are you looking to make a couple of long-term investments each year?
There’s no strict definition, but traders typically buy and sell stocks quickly to profit from daily or weekly price fluctuations, while investors buy and hold stocks for the long term.
The main reason this matters in picking a share trading platform comes down to the fees. This is because some brokers charge higher fees the less frequently you trade and others charge inactivity fees if you make too few trades in a month.
Share trading or robo-advice?
Would you prefer to pick your own stocks or have an expert choose for you? If it’s the latter, you might want to consider a robo-advice or micro-investment platform.
Robo-advisors like Stockspot or Six Park offer investors a range of stock or ETF portfolios to choose from. ETFs are investment funds that hold hundreds or thousands of company stocks. So when you invest with a robo-advisor, you can invest in a whole bundle of stocks in one transaction.
Fund managers working behind the scenes manage these stock portfolios for you at fairly low rates, making it a less risky alternative to investing in the stock market. Plus, micro-investment apps such as Raiz or CommSec Pocket allow you to invest small amounts on a regular basis.
Traditional brokers vs trading platforms
Online platforms aside, it pays to understand where traditional broking fits in. Traditional full-service broker services still exist at financial institutions like Goldman Sachs, Morgans and Morgan Stanley. They’re still pretty pricey but they offer a few premium services such as tax reporting and advice to customers.
Typical customers of full-service brokers are those with large portfolios of stocks or SMSF holders. If you want to make a trade, you call up your broker to do it for you – and they’ll often charge $100 or more for the service.
At the end of the day, it all comes down to what type of investor you see yourself as. If you’re only intending to invest a couple of times a year, the broker fees and advanced features are probably less important.
For active traders, low broker fees and the list of tools that are available will be a priority. To compare fees and features, head to Finder’s online share trading comparison page.
Kylie Purcell is the investments editor at Finder.
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