Cheapest Online Trading

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Category: Online Trade

As with many aspects of modern life, the internet has made things faster and cheaper. Generally speaking, dealing in paper share certificates will be significantly more costly than with electronic ones floating around in the ether. Also, it's difficult to get hold of them these days. The traditional method was to charge a fixed percentage of the transaction amount. However there are a growing number of ‘flat fee' brokers who charge a set amount regardless of deal size. Here you pay the company for holding the shares for you. Not every company charges this. With those that do, check out whether it's a fee per share, or fee per account, incorporating all shares.

Don't fall for the headline prices; brokers have a number of techniques to make they look artificially competitive. Low commission, high annual charge. It's common to offer an enticingly low commission, while earning the money through high subscription charges. Transfer fees if you switch. Almost every broker will charge a fee, possibly £20 per stock, for moving your shares to another broker. This means once you're with a one, you're effectively trapped. Free intro deals.Ultra cheap or even free dealing for a short period when opening an account is common. It means the broker is usually guaranteed management fees plus full price commission when you sell so cheap intro-offers may cost more in the long run.

While most special intro offers are naff due to the ‘total transaction cost' being higher, sometimes it will work in your favor. If you were about to buy a large number of shares and there's a ‘first two months' free trading offer, then if the company has no annual management fee and its ‘sell' cost is lower than £14, grab it. While you may like the idea of pieces of paper for your portfolio, when it comes to selling them, the prices hurt. Abbey's Share dealer Paper Certificate Trader account, which allows trading of paper shares, costs a whopping £22.50 per share online and £25 per share over the phone.

Transferring them to an electronic account will save you cash. Luckily with paper shares almost all electronic brokers let you transfer them in for free. Therefore, it's actually a question of who's cheapest to hold and sell the shares. It's likely your existing broker will charge you to transfer the shares to a new broker, usually more than wiping out the gain from moving. However some brokers are willing to foot the bill if you transfer your custom to them. The cheapest that does is Self trade; it will compensate you for up to £100 for the costs of moving. Its own costs are a £41 annual fee and £12.50 flat rate.