Bull market boosts trading online
Recent big gains have been a shot in the arm for at-home investment, says John Kavanagh.
The recovery in the share market over the past year has prompted a flurry of activity in the online broking sector, where several players have updated their offers or launched new ones in a bid to catch the eye of investors coming back to the market.
Last month, Commonwealth Bank launched a new service, MyWealth, to complement its market-leading CommSec service. Late last year, National Australia Bank overhauled its online broking business and relaunched it as nabtrade. The highly rated service, Bell Direct, is adding a new "dynamic" trading facility to its service. And Westpac Online Investing will upgrade its research offering in May.
Researcher Investment Trends estimates that there are 550,000 active online share investors in Australia. CommSec is the market leader, with a 49 per cent share, followed by ANZ's E*Trade (which has a 17 per cent share) Westpac Online Investing (8 per cent), nabtrade (5 per cent), Bell Direct (5 per cent) and CMC Markets Stockbroking (4 per cent).
After watching the market recover in 2012, investors have started getting back into it this year. The head of Westpac online investing, James Staltari, says share trading volumes on the Westpac site are up 40 per cent this year.
Georgina Rosos, a Brisbane nurse, has turned her attention to the share market in the past year. For the past six years Rosos and her partner had been putting all their savings into extra mortgage repayments and super fund contributions, but last year she decided she would start building a share portfolio.
When she has accumulated about $1000, Rosos tops up one of her stock holdings or looks for a new one. Investing in small parcels in this way, she is a very cost-conscious investor who looked for an online brokerage with low fees. She is a Bell Direct customer.
The new kid on the block, MyWealth, has been designed for self-directed but relatively unsophisticated investors. It gives them access to their cash and investment accounts, a simple approach to investing, access to a community of investors and a financial news and market update service. The MyWealth "community" will connect through forums, chatrooms and webinars.
Stephen Karpin, Commonwealth Bank's executive general manager for equities margin lending, says investors should find it easier to get started in MyWealth than they might in CommSec, which has a lot of inactive customers. "Customers who start with MyWealth may move to CommSec as their interest in investing deepens," Karpin says.
National Australia Bank new online broking service, nabtrade, offers sharper pricing and new functions. The bank says it is built on a new platform that is integrated with the bank. This will allow NAB customers to move their money "in real time" and allow the bank to provide a wider range of services when customers log on for a trading session.
Nabtrade's general manager, Nathan Walsh, says "investors are looking for a better research offering, both in terms of the breadth of the research and also ease of use". Nabtrade carries research from a number of sources and also has what it calls a "smart consensus", where researchers consolidate the data to provide consensus recommendations.
A tool called global scanner allow investors to set up their investment objectives and have the system search for investment opportunities based on those objectives. The system also has tools that allow investors to track their total asset position across multiple accounts and tools for stock comparison.
Simon Restifa has been investing in shares on and off for the past 12 years. He likes to time his entry, buy cheap stocks and (hopefully) sell them when they have made their gains. Restifa, 33, a Sydney property development manager, is on the sidelines at the moment. He prefers resource stocks; he bought a lot of stock during the financial crisis and has sold most of his portfolio. He is waiting until he thinks resource stocks will have their next run.
Restifa is a nabtrade customer. He says he chose the broker by default; he had a NAB cash account and it was convenient to establish a broker account with the same organisation.
He does his initial research by reading newspapers and other news sources. Once he has identified a stock he might invest in, he uses the tools on his broker site to do more detailed research. He says nabtrade has pretty good depth of information.
Two years ago E*Trade launched a tax reporting service that gathers together trading records and capital gains and losses in a form that can be used to complete a tax return. ANZ's head of online and direct markets. Matthew Loughnan, says this has been a very popular feature. E*Trade has enhanced the service with a premium offering that allows investors to create scenarios before they trade, so they can calculate the tax outcome of their buy or sell.
In an online investor survey conducted last year, Investment Trends found that Bell Direct got the highest ratings for value for money, customer service, education materials and company research. CommSec got the highest rating for its mobile phone app.
Bell Direct's chief executive, Arnie Selvarajah, says the large institutions have the advantage of being able to package a bundle of banking and other service into their online broking offerings but Bell Direct has a "single-minded focus".
Selvarajah says investors have access to a wide range of stock research, market analysis and news from a variety of sources. What they want is to have access to relevant information quickly.
"Our dashboard is contextualised so that they only see material that is pertinent to stocks in their portfolio or on their watchlist. What is on their screens is relevant to them at all times," he says.
Later this year Bell Direct will launch a new dynamic trading service. Dynamic trading systems are similar to those that the professionals use - the screen is constantly updated with price changes and company news.
Westpac's Staltari says customers are asking for more comprehensive and higher quality information and research. At the moment Westpac Online Investing offers a basic level of news, economic reports and stock research for all customers, and a premium service for $20 a month. In May it will offer a new free service in a more personalised form, with customers able to specify their areas of interest.
Staltari says investing in overseas stocks has always been a very small part of the market but he has noticed a pick-up over the past couple of years, prompted by the strong Australian dollar.
Westpac has expanded access to overseas markets and now offers trading in 30 securities exchanges. Most of the buying is household names listed on United States markets.
Top 6 online brokers Online brokers are rated good or very good by 72% of traders, with 3% rating them poor or very poor.
What it’ll cost you
CommSec offers a discount for customers who have linked accounts. For "preferred" customers, who use a Commonwealth Direct Investment Account or a CommSec margin loan, brokerage is $19.95 for a trade with a transaction value of up to $10,000. The charge is $29.95 for a trade with a transaction value of between $10,000 and $25,000. For trades of more than $25,000, the cost is 0.12 per cent. For non-preferred customers brokerage starts at $29.95.
MyWealth brokerage rates are the same as CommSec's discounted rates.
E*TRADE charges $19.95 on the first share trade each month on transactions worth up to $5000, $24.95 on transactions worth between $5000 and $10,000, $29.95 on transactions worth between $10,000 and $28,000, and 0.11 per cent on higher values. On the second and all subsequent trades each month, E*TRADE charges $19.95 on transactions worth up to $18,000 and 0.11 per cent on higher values.
nabtrade charges $14.95 for online trades, with a transaction value of up to $10,000, $29.95 for trades worth between $10,000 and $27,227.27, and 0.11 per cent for larger trades.
Bell Direct charges $15 for a share trade with a transaction value of up to $10,000, $25 if the transaction value is between $10,000 and $25,000, and 0.1 per cent for larger trades. After the first 10 trades each month, brokerage drops to $13 or 0.08 per cent (whichever is higher), and after 30 trades the rate drops to $10 (or 0.08 per cent).
Case study - Georgina Rosos
Georgina Rosos' experience as a nurse in the intensive-care unit of a Brisbane hospital has made her realise how unpredictable life can be. She has always wanted to have a good savings buffer in case the unpredictable happens.
Rosos and her partner bought their home six years ago and have been diligent about making extra repayments to reduce the debt as quickly as possible. She has also made extra payments into her superannuation fund.
Rosos, 31, invested in shares when she left university but made poor stock choices and lost money. She considers herself fairly conservative about financial matters, and her partner even more so, and she gave the sharemarket a wide berth after her early experience.
But in 2012 she took another look and decided she would commit some of her savings to building a stock portfolio.
"This time around I decided I would look for reliable companies that operate in sectors that would continue to operate normally if there is economic disruption. I guess you call them staples," Rosos says.
In the past year she has bought five stocks, which are "doing well", and is considering her next move. She is considering Ansell (working in a hospital, she sees how many gloves people go through), Metcash and retail property trust group BWP. Rosos does as much of her own research as she can. She gets the Scott Pape newsletter and relies on investment magazines and some of the research provided by Bell Direct, her broker.
Rosos picked her broker on price. "Brokerage cost was a big thing for me because I invest in parcels of around $1000. I was at CommSec but changed to get a lower-cost service."