Archive for the tag 'Online Brokers'

Don’t let the broker break you

Posted by virgin trader on July 29, 2009 under Online Brokers, Share trading for beginners, share dealing tips

There are loads of online brokers to choose from offering a whole host of different sorts of trading products, but beware, choose your weapon carefully. As a virgin share trader like myself, I would suggest a basic share dealing account and a self-selecting ISA account. Plain and simple. Leave the more exciting and dangerous trading activities for further down the road to market trading wisdom.

There are two main types of broker: ‘advisory‘ and ‘execution only‘ brokers. As the names suggest an advisory broker will give you advice on what stocks to acquire and sell, an execution only broker gives you no advice but will execute the buy and sell order on your behalf. I chose the ‘execution only’ route for my share-trading journey.

At first glance they all seemed to offer the same sort of service, the only real difference was price. However beware! It is important to check for any hidden costs. Several had trade commission offers, but on closer inspection these depended on a minimum number trades per quarter.

Most of the brokers I came across had annual management fees, and account inactivity charges.  Dealing fees were usually between £10.00 and £12.50 per trade whether it is a buy or a sell. There is also stamp duty to pay on trades at (0.5%).

A couple of online brokers had sign up deals such as ‘your first 10 trades free‘, but as we all know, or should, free does not infact mean free at all. Free usually means until we get your direct debit setup and start sucking the money from your account then what a surprise it is not free anymore.

E*TRADE were particularly expensive on additional hidden extras. Although the dealing fees were £11.50 they also had management charges, inactivity fees, as well as minimum monthly trade allocations. It all adds up to an unnecessary overhead to have to cover on each trade just to break even. (www.etrade.co.uk)

The Share Centre was very reasonable at £7.50 per deal with no inactivity fee. They did have a £2.50 quarterly administration fee. (www.share.co.uk)

For example if you buy 500 shares of company A at £1.00, your costs for this deal would be:

Cost of the shares
£500
Dealing commission (1%, or minimum charge of £7.50)
£7.50
Stamp Duty (0.5%)
£2.50
Total cost
£510

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Where the hell do I start?

Posted by virgin trader on July 21, 2009 under Share trading for beginners

For any virgin share trader the sheer amount of information out there on the internet is enough to make you turn to drink. So where the hell do you start?

There are forums, financial blogs,  get rich quick sites, bulletin boards, feed sites, statistical data sites, spread betting sites by the hundreds, all trying to get you to sign-up to something that will make you gazillions by the time the coffee is ready.

I realised the first step is to get cynical and quick. Take most of it with a massive pinch of salt then pick up a good book on trading for beginners, sit back in a comfortable chair and begin to get a grasp of the basics. Then, at least,  you will be able to make sense of the market jargon.

Yes, I know there are hundreds on books on said subject, so is it out of the frying pan into the fire? All I can say is that, luckily, I was recommended a couple of books by a friend who is a financial journalist (I can hear you saying ‘who would trust a journalist?’ Good point; and he is not rich. Another reason to doubt his opinion). Anyway, I quickly read Investors Toolbox and The Naked trader and I already feel confident enough to turn the computer back on again.

Brokers

Now that I feel I understand some of the ground rules, the next step is to look for an online broker. To start trading you need a broker and there are loads to choose from.

As I am a UK based virgin trader I began looking close to home. Here are a few of the brokers I checked out:

  • www.tdwaterhouse.co.uk
  • www.etrade.co.uk
  • www.stockbrokers.barclays.co.uk
  • www.iii.co.uk (interactive Investors)

In the end I chose ‘Interactive Investor’: the language was simple and straightforward, no jargon, and they outlined their offer clearly upfront:

  • £10 flat fee for real-time UK trades with no inactivity penalty
  • £15 flat fee for US and European trades
  • Trade Shares, Investment Trusts & ETFs
  • FREE transfer of share certificates
  • The iii.co.uk website also has a wealth of useful market information about trends, sectors, hotspots, new issues and more.

I am now set up with a free account and ready to roll.  But not yet. I still have much to learn before I press any sort of ‘Buy’ button.

m

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