Call My Broker

It is my sincere hope that, when you call your broker, Jordan Belfort (played by Leonardo DiCaprio) from the highly entertaining Wolf of Wall Street, is not at the end of the line – Image may be subject to copyright.

Most people own shares indirectly through their superannuation or, perhaps through investment platforms such as Raiz – this is a good place to start. Slack Investor would like to make the case for moving onto the next investment step and getting a broker for yourself. These days, a broker is usually an online platform that organizes buy and sell orders for shares and other financial bits.

It brings me shame … but Slack Investor doesn’t just have just one broker … I have three! This might seem a tad excessive – most people only need one and I thought I might share my experience with all of them to help you choose the right one for yourself. If you are serious about investing, you need a broker- Even Dilbert has a broker!

With acknowledgment to Scott Adams – whose everyman Dilbert brings joy to the tedium of the office.

Getting a broker involves as much effort as getting a bank account – an associated trading account is usually required to store your cash when setting up. Most of this can be done online but there are a few identity checks to go through. I have set out below my experiences with my brokers – this is not a complete comparison and a good overview of recent offerings can be found at Best Online Brokers Australia for 2020. This field is rapidly changing with a move towards “zero brokerage” by some new players e.g. etoro. It is always a good idea to research the total costs for each of the new offers as there are often hidden fees such as “withdrawal fee”, “holding fee”, “inactivity fee “, etc. My experiences below might give you an idea on what to look for in your broker.

Commsec

commsec logo

Commsec was my first broker and it is the “gorilla” – It is Australia’s largest retail share trading platform and backed by the Commonwealth Bank. I use Commsec for my super fund trades.

Good things: A great trading platform with easy access to recent sales, buy/sell spread and research. One of the best thing about Commsec is that you can make a trade with zero money in your trading account and have 2 days before trade settlement to transfer your funds to your trading account. I have often sold a share and on the same day bought another share with the funds required covered by the previous sale – this gives great flexibility. Other than brokerage, there are no other fees for ASX shares.

Things that annoy me: The brokerage, this is on a sliding scale and range from $10 for a $1000 trade (1.0%) through to $19.95 for a $10000 trade (0.20%). Because most of Slack Investor’s trades are over $10000, I was pleasantly surprised to find that for the last financial year, my total Commsec costs were only 0.13% of trade value.

SelfWealth

Thumbnail icon for SelfWealth

SelfWealth is a much smaller trading house and has won Money Magazine’s “Cheapest Online Broker” award for the last three years. I use this for my own name accounts and was drawn in by their headline fixed price trades of $9.50 – no other fees.

Good things: A very cheap trading rate – my costs for 6 trades in the last 12 months amounted to 0.08% of trade value.

Things that annoy me: The SelfWealth trading platform is not as good as Commsec’s and transfers to and from the trading account are terribly slow. This is annoying as they don’t allow trades till there is money in the trading account. So, before I act on a trade I must first move money into the SelfWealth trading account – this may be days after I first see a trading opportunity!

Saxo Markets

Saxo Markets is a broker that I have only recently signed up with as my SMSF manager (esuperfund) required me to go through Saxo if I wanted to own overseas shares. Total costs will depend on how much you trade … but after the smooth Australian experience, the cheap trading fee is complicated by Currency Exchange fees, Inactivity fees and Holding fees. For the past year, my costs add up to 0.42% of trades.

Good things: The ability to buy other international stocks. Many other brokers also offer this.

Things that annoy me: The fees of course … and the confusing trading platform. I wouldn’t use these jokers if I had a choice. Particularly when there are cheaper ways to access the US market.- Stake has a similar currency conversion fee to Saxo without the multitude of other costs.

Stock broking expenses compared to Real Estate

Slack Investor stock broker transaction fees range between 0.08% and 0.42% of trade value – and I’m leaning towards Commsec as my favourite broker on a costs vs features basis. If I was just starting out, maybe SelfWealth, or one of the zero brokerage platforms – but watch out for other fees!

I might have had a little whinge about broker fees … but let’s just have a reality check with another common investment commodity where there are costs involved – Real Estate.

I have recently bought and sold a house and the transfer costs are relatively staggering.

When selling a house (Agent Fees, Conveyancing Fees, Advertising, Govt fees,etc), my transaction costs were 2.7%. When buying a house in Victoria, excluding loan costs, (Stamp duty, Land Titles, Conveyancing) the costs worked out to 5.8% of the purchase price.

Transaction costs are just part of investing, but it is no wonder that Slack Investor is attracted to the lower fees, simplicity and transparency of share trading over property trading. However, the volatility of shares I find testing at times.

Is it safe to come out now … and May 2020 End of Month Update

Viktor Bulla’s photograph of the “Pioneers of Leningrad” in a defense drill, 1937, showing the well equipped youth ready for anything … taken 4 years before the horrific Siege of Leningrad– From rarehistoricalphotos.com

This striking image of Leningrad children in their gasmasks has left a haunting impression on Slack Investor. The 900-day siege of the Russian city during WW2 claimed the lives of 800000 civilians – Many of the photographed children would have been involved.

Not trying to draw any parallels, but it is true to say that we are all a bit apprehensive about how to deal with this new post-lockdown world in Australia.

The number of fatalities for COVID-19 is still shocking and it is causing great hardship in many lives. In perspective though, the “big Daddy” virus is the 1918 Influenza where nearly a 1/3 of the world’s population was infected and global deaths amounted to almost 50 million people.

Given sufficient leadership (are you listening Donald and Boris!) the world will eventually see this COVID-19 off – like it has with all previous past viral outbreaks.

Slack Investor does have a furrowed brow about the whole world economy thing. Even bevore COVID-19, China’s economy was shrinking – and has now tanked.

From bbc.com

Although China is expected to recover later this year, things don’t seem so good for the moment. The International Monetary Fund (IMF) are describing it as the worst economic downturn since the Great Depression. It is tough to provide forecasts for this event and, as a retired meteorologist, I feel for my economy forecasting brothers and sisters. They predict both advanced and developing economies are expected to show signs of life in 2021.

World economic growth projections by the International Monetary Fund (IMF) World Economic Outlook April 2020

No country is spared in this global crisis, in particular, nations with weak health systems, and more limited funds to provide support will struggle.

Slack Investor will leave the big world predictions to others and continue tinkering in a small way with his portfolio. What is obvious is that companies reliant on tourism, travel, hospitality, and entertainment for their growth are in big trouble. Emerging market and developing economies face additional challenges as they will find it harder to find investors to fund their projects in this climate.

This is not advice, but I will sell off my shares in emerging market ETF VGE and the Malaysian property trust UOS and buy some ETF’s such as NDQ or QLTY. I have had second thoughts about selling down my overweight position on CSL . This company continues to grow – and I just love owning it. – I would have topped up my holding this week as it is currently slipping in price to below $280 – but it is already a big chunk of my Portfolio.

May 2020 – End of Month Update

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Governments around the world have been mostly doing their job responsibly and adding stimulus to the world economies in these troubled times. In response to this, the Federal Reserve bank of Cleveland have stabilized the probability of a US recession within the next year at 19.4% (below Slack Investors threshold of 20% – so stop losses on index stocks are in hibernation). There has been some real optimism in the markets with further big monthly rises in all followed markets ASX200 +4.2%, FTSE100 +5.4% and S&P500 +7.6%.

The rise in the ASX200 has Slack Investor back into the market with a weekly change in momentum of the weekly charts signaling a BUY. It’s all a little bit crazy … but I am back to all IN! The 11-Period Directional Movement Index (ADX) change of greater than 0.6 is used as the momentum indicator for entry with the complexities of this process explained on the Resources page.

Weekly chart of the ASX200 Index showing the weekly price ranges and the three lines of the directional movement system for momentum trades below – incrediblecharts.com

All Index pages and charts  have been updated to reflect the monthly changes – ASX IndexUK IndexUS Index.