Share Trading Accounts Australia

How to Reduce Online share trading fees

As with most things in life, it pays to read the fine print. When it comes to reducing your online share trading fees, following this basic rule of thumb is undoubtedly the best way to maximise your returns.

Online brokers, by definition, are discount brokers. They allow you to buy or sell shares without offering direct advice or recommendations, and because of this their brokerage fees tend to be lower than full-service, 'hands on' stockbrokers.

It costs nothing to open a basic online trading account with the major providers, however there are a few things you should look out for:

1. Compare brokerage rates

Some online trading sites advertise very low brokerage rates, but these are often a discount price for frequent trades. Compare brokerage rates across trading price brackets – e.g, from trades up to $10,000, $50,000, $100,000 etc. - as well as the charges relating to the number of trades made per month to determine which is the best deal for you. Don't just choose the online trader with the lowest rates, because if you're not an active trader this will often prove to be more expensive in the long run.

2. Beware of hidden fees

Check for hidden fees charges relating to extra services and transfers. These can include fees charged if you receive shares directly from a company in a privatisation, de-merger or share buyback, known as issuer-sponsored CHESS conversions. (CHESS stands for Clearing House Electronic Sub-register System, the Australian Stock Exchange's share transaction and settlement database). Hidden fees can also be charged for off-market transfers (sales based on unsolicited offers to buy your shares), fail fees (if you don't have the funds in your account to cover a share purchase, you may have to pay between $50 and $100 per day), and in some cases if you decide to change brokers.

3. Choose a Good platform to trade with

Choose a broker that offers real-time, automatically updated market data as part of their online trading platform. Some sites only offer 20-minute delayed updates, and some will charge a fee to access extra services such as live market data, research and charting tools. If you're not a frequent trader, however, then you may not need these extra services, or the monthly fees that many sites charge to use them.

As far as setting up an online trading account goes, the process is fairly straightforward. To start investing online, you need to open a bank account with the financial institution nominated by the broker. The funds from this account will be used to buy shares, and to keep the proceeds from share sales. To set one up, all you need to do is:

1. Verify you email address.
2. Add your standard details (name, phone number, address)
3. Add you Tax File Number.
4. Add your bank account details.
5. Send a copy of your bank statement to verify your identity and account details.

After that's done, money can simply be transferred from your bank account to your online brokerage account to purchase shares. If you sell shares, or want to remit some money, you can transfer it back to your bank account within one working day. You'll want to check with the individual site to make sure that these cash accounts are interest bearing.

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