OFFSHORE BROKERS CUT THE COSTS

If you want to invest directly in international shares you may be better off using the platform of an overseas-based trading firm offering services in Australia.

Analysis by Canstar on a $15,000 trade found domestic platforms were almost twice as expensive for trades in the UK and US.

Canstar recently awarded five-star international share trading ratings to IG Markets, Interactive Brokers Australia and Saxo Capital Markets. None of the top-performing domestic brokers, mostly bank owned, received a five-star rating for trading offshore.

Canstar’s Josh Callaghan says the fivestar international platforms charge on a per share basis rather than the trade value basis used by domestic brokers. “That means you are more likely to get better value on high-priced shares such as Alphabet and Amazon.”

International brokers also tend to offer more favourable exchange rates, says Callaghan. He recommends that investors check whether they can hold funds in multiple currencies when trading international equities to better manage the currency risk.

Ongoing fees are another thing to watch. “If you’re the sort of investor that’s looking to buy and hold, ongoing costs aren’t your friend,” says Callaghan. It can be worth paying a bit more in the initial transaction fee to avoid it being eroded by ongoing fees.

The Australian market is attracting more global companies. For example, Japan’s second largest online broker, Monex, wants to challenge the dominance of the big banks. It says its economies of scale allow it to lower brokerage costs, with trading in US markets starting from $US9.99 ($12.80).

While existing brokers may charge on the trade transaction plus the exchange rate, Monex says it only charges a comparatively low fee per transaction.

To see more on Canstar’s research go to canstar.com.au/international-sharetrading/canstars-top-internationalshare-trading-platforms.

For more on investing in international shares see moneysmart.gov.au/investing/shares/international-shares.