To play the market, deal yourself in

Online charges are falling and it's becoming easier for individual investors to buy or sell shares electronically

Melanie Bien
Thursday 22 September 2011 08:15

Buying and selling shares has never been easier. The growth of online share dealing is making it simple for everyone to invest - from regular traders to those who just want to dabble in the market with a handful of shares.

Buying and selling shares has never been easier. The growth of online share dealing is making it simple for everyone to invest - from regular traders to those who just want to dabble in the market with a handful of shares.

Competition between firms offering online trading means costs are falling considerably. There are 30 online stockbrokers in the UK, processing 15 per cent of all share deals. More and more brokers are finding that customers prefer electronic dealing: Charles Schwab Europe has 135,000 online accounts in the UK, accounting for 80 per cent of its business. "The preferred way to deal these days is on the web," says Jane Drew at Charles Schwab. "People are getting more used to the technology; some will continue to want to use the telephone, but they also want the option."

Those who realise that investing in equities is one of the best ways of providing for the future also want to do it quickly and cheaply. But is online trading as easy as it seems?

A recent survey from online broker E*Trade reveals that half of us don't know where to start when it comes to share dealing. It can be confusing but there are a number of internet sites to guide you through the process. Stockacademy's site gives in-depth tutorials, while E*Trade offers a wealth of information for first-timers and active investors. If you are unsure about something, you should be able to find the answer without having to approach a broker.

Alternatively, if you want to talk to an expert, many sites have 24-hour helplines. Stocktrade has a Call Back service whereby customers can receive a call from an operator at a convenient time. If they prefer, customers can use Stocktrade's LivePerson, which lets them enter a chat-room environment and hold an immediate electronic conversation with a member of Stocktrade's support team.

Most online brokers give free access to real-time prices, stock market news and price charts. Some charge a subscription for additional services.

Once you decide to trade online, you can either email your dealer who will place your order for you, or opt for real-time trading which you do yourself through the automated stock market dealing system. The price at which you can complete the deal appears on the screen for 15 to 30 seconds, giving you time to accept or decline the offer.

When choosing an online broker, make sure it offers all the features you need. Switching accounts between brokers can be costly and time-consuming, so it's important to get it right first time. Check you can deal in all the shares you want; not all brokers allow you to trade Alternative Investment Market stocks, for exam-ple. If you want to trade shares on other markets than London, you also need to choose carefully: eCortal gives access to nine markets including London, New York, Frankfurt and Paris, while Sharepeople gives you the option of investing in London and America from a single account.

Some brokers allow you to set a price limit at which you buy or sell the stock. This is useful if you have an exact price in mind but haven't got the time to monitor the stock all day. Other accounts let you place orders when the market is shut, so you can make decisions in the evening or at weekends.

The settlement period on an account is also important. This is the amount of time it takes to get your cash once you sell any shares. It can vary from one to 10 days, which will add up to a fair bit of interest if you are dealing with a lot of money.

Most brokers compete aggressively on charges, so you should pay a lot less than in the past. It is worth looking beyond the introductory perks used to lure new customers as higher charges further down the line may not be so attractive.

DLJ Direct has an introduc- tory flat fee of £5 a trade for the first 50 days. Charles Schwab offers free dealing for 30 days. Those opening an account with Self Trade before 18 December pay no trading commission for a month.

After an introductory offer, brokers either charge commission or a flat fee per trade. DLJ Direct charges 0.75 per cent commission, subject to a minimum fee of £14.95 and a maximum of £37.50. If you regularly trade large quantities of shares, paying a flat fee rather than commission will work out cheaper. Charles Schwab's charges start at £12 and go up to £50 for all deals over £20,000.

Watch out for account administration charges or quarterly handling fees. DLJ Direct levies neither but Charles Schwab has a quarterly management fee of £1 per holding, with a minimum charge of £5 and a maximum of £30.


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