Another cost when investing overseas
Your article Buying overseas stocks: A Eureka guide failed to mention another expense in buying overseas shares: the exchange rates the banks offer.
I recently opened an account through OptionsXpress. They require that I send monies from an account bearing my name and matching my account name with JP Morgan in New York.
That day the official exchange rate was one Australian dollar to $US94 cents. My account is with Westpac, they only offered me US90.4c (minus A$20 transaction fee).
Ozforex was offering US93.4, however JP Morgan wanted an account in my name, not that of a third party, so I decided that it was not worth it, being 5% down before even buying the shares.
The same thing happens with tourist coming to this country. The banks take 5% plus just to change currencies. And the tourist industry quietly accepts this. When are they going to lobby the government for a better deal?
David Gilmour’s response: Thanks for your letter. You make a fair point as this is another consideration for investors if they have to move money from different accounts.
However, the only fees the larger brokers charge when you trade internationally are embedded into the spread on wholesale exchange rates – they aren’t exchanged at retail rates as with tourists.
CommSec charges 25 basis points (a basis point is 1/100th of 1%), while Westpac charges 50 basis points.
And, as I said in the article, these higher costs shouldn’t deter you from investing offshore given the benefits from diversifying your portfolio and the potentially greater returns from overseas shares.
Puzzling over eServGlobal’s price fall
I have invested in a few of your small cap recommendations – selectively! I am puzzled by eServGlobal (ESV). Could you comment as to why the price has fallen –-is there something deeper going on or just the market/computer guys driving it down?
Brendon Lau’s response: I don't believe anything has fundamentally changed for eServGlobal but there are rumours in the market that a large shareholder is looking to sell around 10 million shares. This is the most likely reason for the share price weakness.
Voting on Woodside’s Shell buyback
Do you have a view on whether we (a SMSF in pension mode) should vote in favour of the Woodside Petroleum (WPL) buyback (Shell transaction)?
Editor’s response: Thanks for your question. While Eureka Report hasn’t directly recommended what action Woodside shareholders should take in regards to the buyback of Shell’s stake, John Abernethy and John King have been critical of the deal. See Woodside shareholders lose to Shell and Is Woodside on the government’s agenda?.