Your guide to getting started in international share trading.
While you can trade shares in Australia, the global market is just a click away with plenty of options for the enterprising investor. One of the biggest misconceptions standing between Australians and this global market is the idea that it’s hard to access and that it’s only for experts. In truth, the global market is a lot like anywhere else, and trading there isn’t that difficult once you know how.
This guide will explain what to look for in an international share trading account, how to open one and what to do with the account once you’ve opened it. Read on to learn more, or start with the basics of share trading if it’s all new to you.
Trade international shares with one of these brokers
To open an international share trading account you will generally need to:
- Be 18 or over
- Have an Australian address
- Have a mobile number
You will typically need to provide:
- Personal photographic identification
- An Australian business number (ABN) and/or tax file number (TFN) if applicable
Westpac makes the requirements clear.
Before you open an international share trading account:
- Choose your account. All the “big four” Australian banks have general purpose international share trading accounts available. Simply going with what’s offered by your current bank, and taking advantage of the convenience in doing so, may be a good option, particularly for beginners.
- Confirm and make sure you understand your account’s fee structures, which markets you can access, what your obligations and requirements are and how to manage funds and make trades.
How to open an account
- Read up on the fees, markets available and other applicable information. This should be available to you before you open an account. Think about what kind of trades you’ll be making and consider how much it will cost in fees and other expenses.
Commonwealth Bank shows you their brokerage fees and other costs for different regions before you sign up.
- The easiest option may be to open an account with your current bank. Compare the rates offered by the big banks to see if your bank is a good option for you and decide whether you’ll go with them or a different provider. If you already have a bank account with that provider then you can usually sign in with that. If not, you will have to open a new account.
As with Commonwealth Bank, you will need to choose what type of account to open.
- Choose whether you’ll be trading as an individual, with a joint account (for example, with your partner), as a company or organisation or on behalf of a trust.
NAB explains what different account types are used for.
- When you sign up, you’ll need to provide all the usual details including name, address, date of birth and email for confirmation purposes. Because it’s a new account, you’ll also need to select a password, and because it has income and tax implications you must provide details of your income and occupation.
Along with your personal information, you are required to disclose the source of your income and the origin of your financial standing, as pictured on the Westpac signup form.
- After you’ve provided your personal details, you’re up to the account set-up stage. This involves providing the details of your linked bank account, setting up financing options if applicable and choosing from the various options that may be available.
Westpac makes the three steps clear for you.
- Once you’ve confirmed everything and double checked your details, you’re ready to start trading.
Already have a share trading account?
Usually providers will require that you open one account for local shares and a separate account for international shares. If you already have a local account, you can open an international one in just a few quick steps.
For example, with CommSec, login to your account, click on Portfolio > Offers and Apply > Applications > Add a new international account > Apply Now. Then simply choose the account you wish to link the international trading account to and submit your application.
How to start trading
Once you’ve set everything up, you can trade online through your new international share trading account. Expect to see a dashboard with features such as current share prices and changes over time and options to buy, sell or research. With the big banks and other trading accounts geared towards beginners, you may find tutorials and introductory material to help acquaint you with the available features.
Consider this checklist before you start trading:
- Find out how to compare share trading accounts to get one that’s right for you.
- Understand the tax implications, and potential benefits, involved with trading.
- Take the right steps to ensure your security and the safety of your investments.
When trading shares, you can choose to do it domestically or internationally.
Trade shares listed on Australian stock exchanges. Trade within certain business hours and access only Australian investment options, which make up about 2% of the global market.
Australian stock exchanges include the Australian Stock Exchange (ASX), National Stock Exchange (NSX) and Chi-X.
Trade shares from global markets around the world 24 hours a day, subject to local market hours, including big global brands and household names. Gain access to more options, but also experience more risks and challenges.
International stock exchanges include the New York Stock Exchange (NYSE), London Stock Exchange (LSE), the National Association of Securities Dealers Automated Quotations System (NASDAQ) and many others.
Compared to domestic trading, there are both advantages and disadvantages to trading shares internationally.
- Gain access to a wider variety of investment options.
- An internationally diversified portfolio can help protect you from the downturns of the Australian market.
- You can trade 24 hours a day rather than only within set business hours.
- Exchange rates can fluctuate and can significantly hurt (or help) your return on investment.
- Liquidity may be an issue. The actual value of your shares depends on how much you can sell them for. When trading internationally, there may be a smaller number of different interested parties and you might have trouble finding a buyer.
- Foreign policy can affect your returns. It’s possible that changes to another country’s foreign policies, local instability or other issues can impact the value of your investment in ways beyond your control. This is a largely uncontrollable risk.
- Taxation and related issues may be more complicated when trading international shares.
There are many different account options to choose from, and it’s worth comparing them like you would any other financial product. Consider:
How much commission does the account charge for the execution of a trade? There may be flat rates, percentage rates or even no brokerage fees at all.
Access to markets
Which international markets does the account let you trade on? The big ones are the US markets like the NYSE and NASDAQ, which most providers will allow you to you access, but not every account will let you trade everywhere in Europe and Asia.
How long does it take for a transaction to be executed? Timeliness can be important when trading internationally.
How big is the buffer? International share trading accounts will often have a buffer in place to protect the provider from currency fluctuations while the trade clears and to ensure that they don’t lose money on routine trades.
How much of a cut does your provider take? When converting currencies, the provider may take a cut in the form of a percentage fee on currency converted. With big trades this can be a significant amount.
Does the provider charge any fees for opening an account with them? The benefits they offer may not always be worth it.
What investment research tools are available? Are you seeing real time market information or is there a delay? Are the research tools free to use or do they cost extra? It’s a lot easier to buy low and sell high when you’ve done your research, rather than relying on luck alone.
Customer service and access
Does your provider have a share trading mobile app, or desktop access only? Can you contact the provider outside of business hours? What are your options for getting in touch with them? Are they known for being helpful or not so much? When you open an international share trading account you’re using a service and you should expect a certain level of customer assistance.
Do you have to spend more than you want, or not as much as you want? One of the main restrictions to look out for when choosing an account is the presence of limits, which may be minimums or maximums that apply. You may not be able to make trades above or below a certain dollar value.
Compare international share trading accounts and start thinking about which features are preferable for you.
Making big trades? Look for lower exchange rates, research tools that allow you to make more reliable investments and flat broker fees rather than percentage rates. Where applicable, it may be worth accepting higher flat fees in exchange for lower percentage rates. Avoid low maximum limits which might constrain your trading.
Making a lot of small trades? You may want to avoid flat fees that take a big chunk out of the potential profits of each trade and stick to percentage rates that will cost you less. Low maximums are less of an issue, but high minimums might be a problem.
How will you diversify your portfolio? Not all accounts will give you the same options. Plan what kind of trades you want to make and consider whether a given account will let you trade CFDs, whether you can trade ETOs and/or ETFs and if you are able to do forex trading through the same platform.