If you're looking to start investing, then you're not alone. Online trading has grown in popularity in recent years, with easy-to-use platforms and transparent trading. Besides knowing the risks in trading, however, you should also be aware of the fees you will have to pay. While the advertised fees listed on many brokerages websites might seem marginal (less than 1% per transaction), not all are transparent. Moreover, these "hidden fees" could make or break your trading experience with a firm. Below, we break down all the fees you need to be aware of before you start investing.
High Platform Fees
Some online trading platforms will charge you a platform fee or custodian/custody fee. These administration fees give you access to the platform and are used for maintenance and improvement of the services. These can be charged monthly or annually, and billed every month, six months, or year. Platform fees can range from 0%-2% of the amount you hold in your account, depending on which platform you use. If a brokerage, like a bank, says they charge a lower or no fee, they might be raking in their profits through high commissions on your trades.
Commission Fees Per Trade and Per Stock
Online brokerages charge either "per-trade' or "per-share." The "per-trade' charges are generally more cost-effective for investors who won't trade as frequently since they only charge you once you make a trade. On the other hand,"per-share" fees charge you for every individual stock you buy. On average, online brokerages in Singapore charge S$10-S$25, or 0.08%-0.18% per trade. That being said, organisations like banks usually charge 0.18%-0.28% to trade, whereas non-banking institutions will offer a much more palatable 0.08%-0.12% per trade.
Average Fees Per Investment Bracket
Typically, the less money you hold in your trading account, the higher fees you might have to pay to make a trade. For instance, if you have less than S$50,000 in your account, then you will be charged an average of 0.062% more to make a trade than if your account has more than S$100,000.
Know How Much You'll Be Charged For Trading Internationally
Some brokerages might charge additional fees for trading on international stock exchanges. For instance, the average cost of trading stocks in the US-based stock exchange is 0.20% per trade, with a minimum commission fee of USD $15.73, compared to 0.17% per trade and a minimum of S$21.93 to trade stocks listed on the Singapore exchange.
Average Commission Fees Per Trade for Trading Internationally
However, there are some brokerages that will let you trade international stocks for very low fees. For instance, some that trade in specific markets, like the United States, charge S$0 per trade and don't require a minimum fee.
Data Analytics Tools
Online trading platforms can also offer research and analytics programs to supplement your investing through valuable insight and data tracking tools. Some platforms may charge you a set fee or percentage of the amount you hold, while others might make these services available for those who hold a certain amount in their account.
For instance, Saxo Markets offers data analytics packages depending on whether you invest in Stocks and ETFs, futures and options, or general news. Their real-time, Level-1 Professional data set costs S$15 per month, which totals to an additional S$180 per year. However, Saxo's Level-1 Private data is free for Singapore stocks and CFDs from January 1st until June 30th, 2021. If you don't plan to invest a lot of money or are not an active trader who needs to use real-time data, then you might not need to purchase these additional services.
Pre-Market and After-Hour Trading Fees
Some people might want to trade before the market opens or after it closes. This process can be quite popular for those who trade on the foreign exchange market or who trade futures, as the purchased assets and securities wouldn't reach maturation until the next day. Trading when the stock market isn't open can also lead to lower liquidity and less demand for a share you are selling, and higher price volatility. This means that you will face more risk, so it is generally inadvisable for beginners to trade when the market isn't open.
While not all brokerages include this option or charge for it, some may charge an additional fee for trading whilst their offices are closed. These fees can range from S$0 to less than S$1.00.
How to Reduce Your Trading Fees
To reduce your costs and maximise profit, you should be aware of brokerage fees and how much you have to pay upfront to use the brokerage. Generally speaking, the zero initial deposit trading platforms will charge higher transaction fees and also fees for additional services like research analytics tools, after-hours trading, etc.
In Singapore, many non-banking institutions in Singapore offer a low platform and trading fees with minimal hidden costs. To find the most affordable solution, you should compare individual firms based on your own selection criteria. Whether it be costs associated with trading, access to international markets, or financial products you can trade, finding the right brokerage will make your investing experience all the better.