State of Play: I'm kicking myself for not investing in the five companies I identified back in January and I can't do anything about it right now anyway, because I don't have a broker. So this post is about deciding on who to go with.
Some time back in the not to distant past I bought a copy of the Fin Review's Smart Investor magazine and it contained an Online Trading Supplement. As I am Virgo, I filed it in my filing cabinet, where it has been waiting for this day to arrive.
The supplement says there are 18 online brokers to choose from and suggests you consider how often you intend to trade (I'll be using a buy and hold strategy, so not often), whether you want to borrow money to invest (not yet), what securities you want to trade (just Aussie shares), whether you want research (yes, particularly broker/analyst, reports because I don't know where else you can get them from) and whether you want to pick up the phone or just go through the internet (the latter unless there is an emergency / breakdown of some sort).
My main consideration is price. The cheapest broker is Interactive Brokers (http://www.interactivebrokers.com.au/), but they are a USA based company who offers access to the Australian market. This makes me uncomfortable. They also don't provide analyst reports.
Bell Direct the second cheapest broker, at least at the levels I will be trading (ie around $1,000 per parcel, I know, pathetic but we all have to start somewhere), offer trades at $15 each and they provide analyst reports. However, you need to open an account with them and when you want to buy have enough money in the account to cover the trade when you place it (note, however, there is usually a delay between placing an order and the order being filled and a further delay before the order needs to be settled). As I'll be redrawing my investing funds from my home loan (I only have two accounts, an everyday transaction account and a home loan), this will mean I end up paying more interest on my home loan because of the days wasted transferring money from my home loan, to my everyday account to the trading account and then waiting for the trade to settle. The extra interest will cost me more than what I will save by using Bell Direct, so they are out.
It seems most of the "cheaper" brokers have catches, either you need an account with them or you actually pay a monthly fee and then a trade fee on top.
Commsec let you use any account and charge $29.95 or $19.95 if you have a CBA account (which I don't). NAB charge $29.95 but you have to use a NAB account. They have just sent me a brochure offering a rebate on up to $750 worth of brokerage if I open an account with them before 16 November 2009. So I could use a NAB everyday account linked to my home loan (which overcomes the extra interest issue) and save the brokerage in setting up my initial portfolio. The rebate period is limited to 60 days. Worth considering but I will wait till I'm ready to trade and if it is before 16 November will set up an account with them. Otherwise, will just stick to Commsec, the most used online broker, which appears to be because they are the only broker who realises need to make it easy for people to use.
Ok, decision made. Next post will look at Nomad's income statement.
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