Monday, January 5, 2009

Cheapest brokerage fee will cost you MORE ?

The cheapest brokerage fee to trade a stock in KLSE (MY) I can find is from Jupiter, offering 0.05% with a minimum of RM 8.

Normal online trade brokerage fee is 0.42% with a minimum of RM 12.
Jupiter also offers 0.2% with RM 12 minimum for non cash up front account.

click on image to view larger table

You may think since 0.05% and RM 8 are both the lowest, then picking this type of account will definitely save more ?

Well, lets see ...

If your average trade size is RM 1,000 then you would be paying RM 8 each time, equivalent to 0.8% and not the said 0.05%. Guess what, 0.8% is also much higher than 0.2% and 0.42% isn't it ?

In order to enjoy the said LOW brokerage fee, you will need to calculate the minimum trade size needed.

For 0.05% and RM 8, it comes up to RM 16,000 !! If you never trade up to that amount in every transaction, you actually NEVER enjoy the 0.05% brokerage rate AT ALL !!

So if you want to save in brokerage fee, which account type will you get ?


Wai Keat said...

who know maybe there are ppl who trade at 16k per trade? is there?

TheCurious said...

I believe what Michael's message in this post is that "Compare by (realistic & practical) numbers, not the rate", right?

Good ... and more on "the other side of the coin" matters pls... haha...

Michael Tsen said...

WK: 16k per trade yes, actually if you trade 16k, you can earn by one tick ... which is crucial for intra-day traders. That is also why they don't give margin in this account and require upfront deposit.

TC, darn I knew I shouldn't publish these posts too frequently ... old reader is catching up with the old trick ...

TheCurious said...

Nope, Michael, it doesn't matter. The important point here is to expose the naked truth of financial in various matters /applications/fields. You know your readers appreciate that!

Anonymous said...

I'll second to TC, MT you should be proud of what you have published and the decisions made by seeing the increase and frequent of readers. I'm happy for ya.
Not sure about the new readers, but aparently your old readers love your "naked" blog pretty much.

Kaki said...


You are the most ORIGINAL writer/blogger on Personal Finance I have seen. You are THE ONE that I've been searching for. Everyday I question all the "good" financial(eg insurance) products that are being offered and you dissected thru them just the way I like it.

Keep up your good work. I really appreciate your straight-to-the-point and simple approach.

Michael Tsen said...

thank you kaki, your comment could be the best achievement of my 2009 effort :D

17 Feb is Human Spirit Day

Anonymous said...

Actually it's the wrong perspective to calculate only the min trading size. Let's think about what happen if you trade less than $16k with jupiter? trading $4k or more and charged $8 fee, it's 0.2%; trading at $1.9k or more and charged $8 fee it's 0.42%. Compare that to 0.2% at $6 and 0.42% at $2.8k of other brokers, jupiter is still cheaper. in short if your trade size is more than $4k, it's the best deal.

Michael Tsen said...

valid comment. However finding the 'cheapest' broker really doesn't mean much.

at the end, all it matter is how much do you have now and how much can you earn from your capital. Variating your cost without following minimum trading size will only keep one NOT knowing his real 'cost'.

which is exactly why many junior investors 'feel like' earning a lot but actually not.

Anonymous said...

stupidest discussion ever
simply because the comparison used is not even a comparison to begin with

if my trades were 16k, i would still pay rm8
can the other 2 go lower than rm12??
what crap is this?

Michael Tsen said...

$8 is still lower than $12 yes, this article was just to bring out the concept of "minimum optimize trading size" = MOTS