Sep 202014
 

IG, one of the best-known spreadbetting and CFD providers, has branched out with a new execution-only stockbroking service. At present, the firm offers dealing in stocks listed in the UK, USA, Germany, Ireland and the Netherlands, with other international markets likely to be added in the future.

I’ve added a page with details of charges to the broker directory and also included it in the execution-only and international broker comparison tables. Overall, it appears to be a competitively priced service with a handful of particularly notable points: Continue reading »

Apr 092012
 

When you’re trading international stocks, it’s not only the charge for buying the shares that matter. The charge for buying the foreign currency the shares are quoted in can also be very significant.

At some stock brokers, this FX commission can be higher than the commission on stocks. And many brokers try to make their rates look better by hiding it deep in the small print or even not mentioning it at all.

This is particularly a problem in the UK, although investors everywhere should watch out for it. For example, take TD Direct Investing (formerly TD Waterhouse UK). It charges a standard rate of £12.50 per trade for international stocks. On an investment of £1,000, that’s a commission of 1.25%. But TD Direct will also charge up to 2% over the interbank rate for converting your currency – almost twice the headline stock commission.

To be fair to TD Direct, it displays its currency charges more clearly than many rivals. But while they may be transparent, they’re certainly not trivial. Charges like that will mount up pretty quickly, especially if you’re an active trader. So minimising your FX commissions is an important part of keeping your costs down and improving returns. Continue reading »

Should I use a foreign exchange specialist for currency conversion?

 FAQs
 

Investors often scrutinise a stock broker’s trading commissions very closely, but don’t think hard about other costs. That’s a huge mistake. You can end up paying a great deal more than trading fees when you’re investing in foreign shares.

One of the biggest yet best hidden costs are foreign exchange conversion costs. By that, I mean how much it costs you to buy foreign currency when your stockbroker settles a foreign share trade. Or what your bank charges to convert money and wire it to your overseas brokerage account.

In theory, these costs should be very low. Currency markets are highly liquid. The bid/ask spread in the interbank currency market is almost non-existent for major currencies. But financial institutions often stick a large margin on this when dealing with retail clients, figuring that most people don’t know what’s going on.

So it’s useful to know that FX costs can sometimes be cut dramatically. Doing so requires you to take control of what happens to your money and choose which firm you choose to do the currency conversion.

Let’s take a look at the details of how it works. Afterwards, I’ll run through a real example, and look at three risks to watch out for.

Continue reading »

What will my stock broker charge?

 FAQs
 

Comparing international stockbrokers can be difficult because their charges aren’t consistent. Some will charge flat fees, some a percentage of the trade value, some will impose administration fees, while others will charge an extra fee if you don’t trade frequently, and many other variations.

What’s more, the question of which broker is best depends on how these costs interact with how you trade. There’s no one answer to “which is the cheapest broker?”  – and in any case, cost is just one consideration along with quality of service and range of markets.

But it’s helpful to have a grasp of the different way that brokers charge and how a low headline rate can be offset through charges in the small print. So this article discusses some of the most common fees that are listed in the international stockbroker comparison table.

Continue reading »

How foreign currencies affect your investment returns

 FAQs
 

Imagine you’re looking at a fund that invests in Thailand. You’re a British investor and what ultimately matters to you is your investment return in sterling.

The fund has two share classes, one in sterling and the other in US dollars. You have a negative view on the dollar, expecting it to fall against sterling in the year ahead. Which of the fund’s two classes should you buy?

Many investors – even experienced ones – will say the sterling class. But in most cases, it makes absolutely no difference. You can pick either and you will end up with the same return in sterling terms.

If that’s not immediately obvious to you, you’re not alone. Currency risk of foreign currency-denominated funds is one of the most misunderstood parts of international investing.

The key point to understand is that the currency a fund is quoted has no impact on returns by itself. What matters is your domestic currency and the currency of the underlying assets that the fund holds.

In this article, I’ll demonstrate why that’s true – and explain why many funds still offer multiple currency classes anyway.

Continue reading »