In today’s technologically connected world, it’s quicker, easier and cheaper than ever before for Kiwis to buy and sell shares in New Zealand and international companies via online stock brokers. However, that doesn’t mean it’s free.
You’ll still need to pay a brokerage fee whenever you place a trade to buy or sell shares, so it’s worth your while to shop around for the online share trading platform that offers the lowest brokerage fees.
But which online share trading platforms offer the cheapest brokerage? Read on to find out.
What's in this guide?
- Open a share trading account
- What are brokerage fees?
- How much will I need to pay for stock brokerage?
- Which provider offers the cheapest brokerage?
- How much will I need to pay for international brokerage fees?
- Special offers
- Are there any other fees when trading shares?
- How do I compare cheap stock brokers?
- Want to learn more about share trading?
Open a share trading account
What are brokerage fees?
A brokerage fee is what your stockbroker charges for executing a buy or sell transaction. In other words, every time you buy or sell shares through your online share trading account, you’ll need to pay a specific amount to the broker for the privilege of using its services. This fee is based on the size or value of the trade, and could be a flat fee or an amount calculated as a percentage of the transaction value.
Brokerage fees are one of the largest expenses associated with online share trading and can have a big impact on the affordability of your investments. If you’re a frequent trader and you’re paying a brokerage fee of $30 every time you buy or sell a parcel of shares, this can quickly add up to a substantial amount and eat away at your trading profits.
That’s why it’s essential for anyone thinking of getting started in the sharemarket to compare brokerage fees charged by online share trading platforms and shop around for the cheapest option.
How much will I need to pay for stock brokerage?
Brokerage fees are far from identical from one provider to the next, so it’s important to compare fees across a number of share trading platforms before you open an account. Some providers have simple fee structures and others have quite complex arrangements, but charges usually vary based on the size or value of the trade.
Different brokerage fees often also apply to phone trades and other unique trading options, so it’s worth reading the fine print to find out how much extra it’ll cost every time you make a trade.
Which provider offers the cheapest brokerage?
The online share trading platform offering the cheapest brokerage depends on the value of your trade, how many trades you place each month and whether or not you place phone orders.
With this in mind, it’s important to consider your trading habits when comparing brokers, as this can have a huge impact on the cost of each transaction. You’ll need to take into account not only how often you trade but also the size of the trades you place. If you like the convenience of placing trades over the phone, you may also want to look for a provider that doesn’t charge extra for phone orders.
How much will I need to pay for international brokerage fees?
The brokerage fees for shares listed on overseas exchanges are typically more than what you’d pay for NZX-listed stocks and they differ depending on the country of choice.
In addition to a brokerage fee, you’ll typically need to pay an exchange fee to convert your New Zealand dollars into the overseas currency. This is usually calculated into the exchange rate and is referred to as the ‘spread’ – it’s the difference between the base exchange rate and the rate you’re actually being offered. The higher the spread, the higher your fee.
For example, if the broker has a spread of 0.6%, the exchange rate you’ll receive for international transactions is calculated as the best available offer at the time of execution plus a spread of 0.6%, which the broker collects.
From time to time, some online share trading providers will offer special deals to help you save on brokerage fees or possibly avoid them altogether.
Other providers also offer brokerage fee rebates for frequent traders. For example, if an account holder makes more than a specified number of trades per month, such as 30, all the brokerage fees payable for those trades may be refunded to their trading account at the end of the month.
Such offers can help you improve your bottom line when trading shares online, so it’s worth keeping an eye out for any brokerage deals and discounts.
Are there any other fees when trading shares?
While brokerage fees are the major cost you need to consider when comparing share trading platforms, you should also be aware that other fees may apply. For example, you may need to pay a monthly fee to become a premium member of a share trading platform. This could allow you to access dynamic market data, the latest market news and analysis, or perhaps stock research and recommendations.
You should also be aware that brokerage fees vary across international stock exchanges, so the fee for buying shares on the NZX may differ from the brokerage charged when you buy shares through the New York Stock Exchange, for example.
Read the terms and conditions of an online stock broking platform to find out what those ongoing fees are and how they will affect you.
How do I compare cheap stock brokers?
As well as brokerage fees, there are several other features you should compare when choosing an online share trading platform, including:
It’s also important to compare whether there are any ongoing fees you will need to pay to maintain your account, such as a monthly management fee or a fee to allow you to access dynamic market data. In addition, remember to check whether special options such as stop loss orders or phone trades attract extra fees.
Compare the number of global markets each platform allows you to access to buy and sell shares. In addition to the NZX, many providers also allow you to trade on stock exchanges in New York, London, Tokyo and many other countries around the world.
In the fast-paced world of share trading, accessing up-to-date market data could be critical to the success of your trades. Check whether you will be able to access static, live, dynamic or real-time data, and whether this attracts any extra fees.
Compare the options each provider offers for placing buy and sell orders. Can you place limit and market orders? Are stop loss orders available to help you minimise investment losses?
Ease of use
Try out any share trading platform you are considering using to work out how easy it is to use on a daily basis. Most providers offer free demo accounts to help you sample their services.
As well as an online platform, can you place trades over the phone or on the go using a smartphone or tablet app? Also consider whether the trading system is a web-based platform or whether it requires you to download any software.
Make sure you can easily contact the share trading platform provider if you ever have a question about your account or a problem with a trade. Look for phone, email and live chat support, as well as online learning centres and education tools.
By considering all of the above factors, you should be able to find the best cheap stockbroker for your online share trading needs.
Want to learn more about share trading?
Check out our comprehensive guide to share trading here.
More guides on Finder
Investing in biotech stocks
What to consider before you invest in biotechnology companies.
Artificial intelligence stocks
You might think that AI is just something you’ve seen in sci-fi movies, but it’s slowly working its way into our day to day lives. Find out how you can invest in it.
Coinbase IPO: How investors can get in before it lists
Derivatives exchange FTX is offering investors a way to speculate on Coinbase’s launch value through its CBSE product.
How to buy Robinhood stock when it goes public
Here’s everything we know so far about the Robinhood IPO.
How to buy Briscoe Group shares (BGP)
Step-by-step instructions to help you invest in Briscoe Group shares on New Zealand’s Exchange.
How to buy Tilt Renewables shares (TLT)
Your simple, step-by-step guide on how to buy TLT shares on the NZX.
How to buy Pacific Edge shares (PEB)
Your easy-to-understand guide to buying Pacific Edge shares on the NZX.
How to buy Mercury shares (MCY)
Your simple, step-by-step guide to investing in Mercury shares on New Zealand’s Exchange.
A snapshot of women and money in 2021
From investing to property, Finder takes a closer look at women and their finances as part of International Women’s Day.
How does the ‘world’s first’ Bitcoin ETF work?
The Purpose Bitcoin ETF (BTCC) has started trading on Canada’s Toronto Stock Exchange. Here’s what you need to know.