It’s good to see Australia scooped some medals at the winter Olympics, but when it comes to investing in shares online, we take silver.
The number of online share investors in Australia leapt by 10% in the second half of 2013, and figures from researcher Investment Trends show 585,000 of us placed at least one share trade online during the period, up from 530,000 in June 2013. As a proportion of our population, that puts us second only behind the Singaporeans – the world’s keenest online share traders.
There are good reasons for the renewed interest in online share trading. Returns on cash deposits are low at present, and the Australian share market is looking healthy.
The S&P ASX 200 Index, which measures the performance of our top 200 listed companies, rose from 4,878 at the start of 2013 to 5,352 by the end of the year. As I write, the Index stands at 5,412. While past returns are no guide for the future, the general outlook for the economy is positive and this bodes well for the share market.
The beauty of online broking is that it makes it easy – and cheap, to invest in shares.
As a guide, CommSec, which has the lion’s share of the online trading market, charges brokerage from around $19.95. It’s possible to pay less – CMC Markets for instance, charges $11 per trade. This is far less than the transaction costs associated with other investments – like property in particular, where the costs to buy and sell can run into thousands of dollars.
If you’re thinking about investing directly in shares, brokerage isn’t the only thing to consider when selecting an online broker. Markets can move rapidly, and small savings on brokerage can be wiped out in a matter of moments in a market rush. If you’re new to shares, certain features are worth looking for.
First, consider the level of support an online broker provides. Many offer a phone help line, and even though your broker’s support team cannot – by law – provide tailored financial advice, they can walk you through the process of trading online. This can be a real confidence-builder when you’re starting out.
A reasonable level of investor education can be helpful too. There is no shortage of free information on shares though the key is accessing information you can easily understand that’s relevant to your needs. Some brokers offer online forums which can be especially helpful for investors to bounce ideas around.
Finally, look for a ‘platform’ that is easy to use. It’s what appears on your computer screen when you log onto your online broker, replete with various features and market information – and platforms can range from the simple to the highly sophisticated.
Most online brokers provide ‘demo’ sites that let you get a feel for a platform before you begin trading with real money. It’s worth having a go at a few of these to see which you’re most comfortable with. After all, you need to be able to respond quickly in times of high market activity and it can be frustrating to see share values rise or fall while you struggle to navigate an unwieldy platform.
The Australian Securities Exchange website is a handy source of information on shares and online brokers.