Depending on the amount of money being invested, brokerage fees can form a large part of the overall share trading experience. With around 6.4 million Australians owning shares directly in 2020, attracting the custom of online share traders can be big business for brokerage houses. It is a competitive marketplace and investors are befitting from better – and cheaper – online share trading platforms. Canstar analysis reveals a decrease in trading costs of up to 12.9% over the past five years across the platforms surveyed.
A majority of the platforms will tier their fees based on the size of the trade or the trade value. The chart below illustrates the current average brokerage costs per size of trade in dollar terms.
|Trade Value||Average Brokerage 2021|
Source: Canstar. Based on the average brokerage fee for one trade a month on platforms considered for Online Share Trading star ratings in 2021.
Related article: The Cheapest Online Share Trading Platforms
Weighing up the cost
The cost of brokerage is a fundamental element of online share trading and the good news for consumers is that the average cost per trade continues to fall for both high-value and low-value trades alike.
As the table below details, the average cost of placing a $100,000 trade has fallen by an average of just over $4.62 over the past five years, representing a decrease of 4.79%. The cost of placing a $5,000 trade has also fallen – more modestly in dollar terms (a $1.52 decrease) but more substantially in percentage terms (a 8.34% decrease).
|Trade Value||Average Brokerage 2016||Average Brokerage 2021||Change in Average Brokerage over five years*||Brokerage Cost as a % of Investment|
*Based on the average Online Brokerage Fee of the platforms considered for Online Share Trading star ratings in March 2017 and August 2021.
As the table illustrates, the biggest percentage discounts have been in the area of smaller-value trades. This is great news for Casual Investors, because when you’re only investing a small amount, the fee represents a much higher percentage of your investment.
If you invested $1,000 for example, in 2016, you would pay on average a $17.97 fee representing a 1.79% cost of trade. With average brokerage dropping to $15.64, your cost of trade is now less than 1.56%. This reduces the amount by which your investment has to grow in value before you break even.
Different investor profiles will also face varying levels of fees based on how much and how often they invest. For example, Casual Investors don’t face an ongoing fee. But the Trader profile does pay an ongoing fee and it can be quite high, because they are making 30 or more trades per month so their activity actually does require quite a bit of platform involvement.
Don’t forget the features
Brokerage isn’t the only factor to consider when deciding on a platform. While brokerage costs are always a relevant issue when choosing a trading platform, consumers also need to bear in mind their volume of trades, their personal experience, and which platform features may be relevant to their needs.
Read our article on what investors should look for for further guidance and compare online share trading platforms on our website, or view a snapshot below, to find out which trading platforms offer outstanding value for money.
Originally authored by T.J Ryan.
Compare Online Share Trading Accounts with Canstar
If you’re comparing online share trading companies, the comparison table below displays some of the companies available on Canstar’s database with links to providers’ websites. The information displayed is based on an average of six trades per month. Please note the table is sorted by Star Rating (highest to lowest), followed by provider name (alphabetical). Use Canstar’s Online Share Trading comparison selector to view a wider range of online share trading companies. Canstar may earn a fee for referrals.