The Advantages and Disadvantages of Using Non-Bank-Based Brokerage Accounts for Your Stock Investments

With so many brokers in Singapore, choosing the one that suits your requirements can be a daunting task. Choose the wrong one, and you may be left paying more than you need to or end up with a platform that is not able to execute all your trades. Because of that, I thought it would be useful to go through some of the more common brokers in Singapore and assess each of their advantages and disadvantages.

In the first article of this series, I looked at banks brokerages in Singapore. I concluded that Standard Chartered had the best online trading platform among them. In this article, I will look at other online brokerages.

Online brokerage accounts

Some brokers that fall under this category include Interactive Brokers, OptionsXpress and TD Ameritrade.

Advantages of online brokerages

  • Better platform than banks

The online international brokers pride themselves on having the best platforms for traders and investors alike. They are usually more complex than the bank platforms but have a much larger range of functions.

  • Lower fees

In general, online brokerages charge lower fees. They provide much more competitive rates than the banks. Some can go to as low as just $1 per transaction.

  • Portfolio analysis

Many of the online brokers provide in-depth portfolio analytics. They can help you track your returns, both time- and money-weighted and compare your performance against the benchmark.

Disadvantages of online brokerages

  • Monthly activity fees

Some online brokerages may require you to rake up a certain amount of transaction fees each month. If you fall below a certain rate, they may require you to pay a monthly activity fee.

  • Cannot use to buy Singapore Stocks

Some international online brokers are not allowed to let Singaporeans trade in Singapore stocks.

  • No local offices to turn to for help

Most of the international brokers do not have a local presence. If you need help, the only option is to make an international call or sought help over their online help desk.

My recommendation

If you are interested in investing in overseas stocks and are going to make at least three or four transactions each month, then using an international online broker is perhaps the better option than a bank brokerage.

This is because the lower transaction fees can help you save more over the long term.

Among all the providers, I believe that Interactive Brokers has probably one of the best platforms available. Its platform permits margin trading and has a portfolio analysis tool that tracks your performance against the index. Furthermore, their transaction fees are only 0.05% of the transaction amount or a minimum fee of $1.

However, they do charge an activity fee and have a minimum deposit requirement of US$10,000. Therefore, you should only choose them if you have a high transaction volume each year.

The Foolish takeaway

Choosing the right broker can help you save money. Even a few dollars a month in savings can add up to quite a lot over the long-term. Because of that, we should take our time to assess the options available to us. Hopefully, these two articles have given you a clearer idea on the differences between each broker and which best suits your needs.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice.