Cost of buying shares in Australia vs internationally

Thinking of investing in ASX v.s. NASDAQ or NYSE? Here are the basics you need to know.

For many new Australian investors, the first step to building a portfolio is picking shares from the ASX, your local stock market. While supporting Aussie companies is a great starting point, some people may seek investment globally for greater growth opportunities. We all remember the skyrocketing Tesla share price or the GameStop rally in 2020/2021 – and there is no doubt that the U.S. markets are on top of the list to capture growth for many.

Source: All of the World’s Money and Markets in One Visualization, April 2020. https://www.visualcapitalist.com/all-of-the-worlds-money-and-markets-in-one-visualization-2020/

 

With technology readily at people’s fingertips, there are now minimal barriers stopping you from investing globally. We’ve gone back to basics so that you can have a holistic view of how much you could be paying when investing in ASX vs. International Exchanges like NASQAD & NYSE.

Brokerage fees

Most things products come with fees, trading financial products are no different. A brokerage fee is charged by a broker every time you buy or sell, on the market.

Currency Conversion fees

We all know buying things overseas incurs a cost, and the same principle applies to investing in international shares that are not priced in Australian dollars – you pay a small fee for the conversion.

Conversion fees can be charged differently. Some brokers charge the fee on every transaction – buy or sell. As an investor, it is better to only be charged once when moving AUD to USD, and trade from the USD in your account. As a general rule of thumb, the fewer fee-charging events, the more you save.

Currency fluctuation can be in investors’ favour when investing overseas. For example, Sarah purchased Apple shares and chooses to sell when she thinks the time is right. It happens that at the time of sale, AUD is worth less than USD at the time of purchase. Then Sarah collects the difference, in both Apple’s share price and the increased value of the USD.

Account fees

The common fees on investment accounts by different brokers can include:

  • Management / Platform fee – This is a fee for the service of maintaining your account and is usually a static amount. Similar to the ‘annual fee’ on credit cards.
  • Custody fee – It is the cost paid to a broker to hold an investor’s international assets. The custody fees are usually in the form of a percentage over assets under management.
  • Inactivity fee – An inactivity fee is one that is charged by a broker to clients for not actively trading.

What you need to be aware of

Depending on your investment strategy, it is important to consider the fee structure when choosing your broker. Don’t look at only one aspect of the cost, try to take your own circumstances into account including how much would you invest and how often you would trade. Considering your time horizon and risk profile can be largely beneficial for your investments locally and overseas.

Cover image source: NataliyaBack/Shutterstock.com


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