2. Broker Basics: How to Choose the Right Broker for Your Needs

Bryce: [00:01:12] Welcome to Get Started Investing feed, a podcast giving you all the fundamentals you need to feel confident to start your investing journey. There is no jargon and no B.S. Over three episodes, we're going to be doing a Broker Basics series with superhero. We've crowdsource questions from the Equity Mates community and included some of our own will be covering the fundamentals of brokers, choosing the right broker for you, making a trade and managing your portfolio. This is the one stop shop for all of your broker questions. And we've brought in the expert from Superhero to help us through it all. But firstly, as always, I'm joined by my equity buddy Ren. How's it going? [00:01:49][37.0]

Alec: [00:01:50] Bryce very excited for this episode, very excited for this series. But this I think this episode, episode two, is going to answer probably the most common questions. If Brokers' is the most common theme of questions we get the most common question in that theme is, you know, which ones right for me and what should I think about when choosing the broker? Because the best thing about investing in 2020 is there's heaps of options out there. The old cheaper than our parents had to, you know, what they had to choose from. And they all offer, you know, pretty good technology and access. And so the question then becomes, how do I navigate it and how do I decide which ones? Right. And by the end of this episode, you'll have all the information you need to do that [00:02:35][44.3]

Bryce: [00:02:35] and to help us through it all. We are lucky enough to be joined again by founder and CEO of super hero John Winters. [00:02:40][5.2]

John: [00:02:41] Welcome. Thanks for having me. [00:02:42][1.2]

Bryce: [00:02:42] Last episode is a success. [00:02:43][0.9]

John: [00:02:44] Good to be good fun. [00:02:44][0.7]

Speaker 4: [00:02:46] Now to go. [00:02:46][0.6]

Bryce: [00:02:47] Well, keep it basic, but yeah, there are a number of key fundamental I guess factors to consider, two of which are close to our heart. Well, one of which being fais big policy here at Equity [00:02:59][11.5]

Speaker 4: [00:02:59] Mates had very high stakes. [00:03:01][1.9]

Alec: [00:03:02] I phase paperwork not as big a factor when choosing a broker but superhero, doing some things about getting rid of paper. [00:03:09][7.2]

John: [00:03:09] So trying to get rid of the printer in the office. [00:03:11][2.0]

Speaker 4: [00:03:12] Yeah, I don't [00:03:14][2.0]

John: [00:03:14] really know what to do with paper when it gets into us. [00:03:16][2.0]

Alec: [00:03:16] Yeah, yeah, yeah. Do a Bryce does it. [00:03:19][2.8]

John: [00:03:20] Yeah. [00:03:20][0.0]

Bryce: [00:03:20] Yeah. I actually try and send it back. [00:03:21][1.7]

Speaker 4: [00:03:23] Return to sender. Yeah. I got an unwanted. Yeah. [00:03:26][3.6]

Bryce: [00:03:28] So in this episode we're going to be covering off all of the factors to consider when choosing the right broker for you. But before we do, I guess let's start higher level and understand a little bit more about the differences in brokers. So are all brokers the same? [00:03:46][17.9]

John: [00:03:47] Good question. I think I think the question should be, what are the brokers actually trading in? What markets or what investments can you access through those brokers? And that's where I think there is a difference. So if you if you. Said, is there a difference between ASX listed share brokers? There's not a huge difference. It's really when you start looking at other investment products like CFD, some of the synthetic investment options that are out there now. [00:04:19][31.6]

Alec: [00:04:19] John, I would ask you to explain what CFD are, but I'm not even going to because don't trade them. That's just Equity Mates policy number four, don't try and say Afterpay is [00:04:30][11.1]

John: [00:04:31] very I think the quick two cents worth. I think CFD are effectively just gambling. It is gambling on share prices, however. [00:04:39][8.4]

Bryce: [00:04:41] As a beginner, you will come across platforms that offer CFD and access to the Australian stock market, so it is important to recognise when you're signing up what you're getting yourself into. Yet if you do see the acronym Safdie [00:04:56][14.2]

John: [00:04:57] state, you know, [00:04:58][0.8]

Alec: [00:04:59] we should maybe we should say the reason that we say this is because you can lose a lot more money than you put in. [00:05:04][4.9]

John: [00:05:04] And it's and some of the CFD broker websites do point that out on the website. And it does say that that over 75 per cent of people do on certain websites. It says that that people lose money when trading CFD [00:05:19][15.5]

Bryce: [00:05:20] and using that figure out that is that [00:05:21][1.6]

John: [00:05:22] is that is it. Yeah. Yeah. I wouldn't mention the company, but they are it is like a casino and the house is designed to win. So they take the other side of your trade. You're not actually buying a share, you're just buying a synthetic investor. Yeah. So, yeah, I agree. Stay away. So that that is the key difference with with brokers. Make sure you are setting up an account with a broker to invest in the things that you want to invest in. So that's that's shares ETFs. It's not it's not synthetics like CFD own or options options a little bit different. Some online brokers offer those some some don't. But it is important to see what what what securities are on offer when you're setting up an account. [00:06:11][49.0]

Alec: [00:06:12] I think, yeah, you can live a long and happy investment life and you can make plenty of money, never worrying about options, futures, CFD and stuff to [00:06:21][9.1]

John: [00:06:21] knock out [00:06:21][0.2]

Alec: [00:06:22] warrants, which if you don't know what they are. We interviewed John on the main Equity Mates podcast feed and you can hear his story of investing in turbo knock out warrants during the GFC. [00:06:32][10.0]

Speaker 4: [00:06:33] But specifically right now, [00:06:37][4.3]

John: [00:06:38] it didn't end well. Don't don't don't invest in those areas. [00:06:41][3.0]

Alec: [00:06:43] So the we've just touched on the the difference, I guess, in terms of what products brokers offer. One thing that we often like to talk about and I'd like to get your thoughts on is around people, I guess, get paralysed by this choice and they feel that they need to find the perfect broker. You know, you've got to find the one that's right for you from the very beginning. Do you think that's the right way to approach choosing your broker? [00:07:08][24.8]

John: [00:07:09] What's the definition of perfection, I guess, is the question, you know, what is it? What is let's [00:07:14][5.8]

Alec: [00:07:15] let's get philosophical. [00:07:15][0.3]

John: [00:07:17] What is the what is what is that? What is that perfection you're looking for? Is it user experience? Is it the products that you can invest in? Is it the different markets you can invest in Iowa, Chartist and you want, you know, fancy charts? I, I don't think you're going to find a one stop shop where you find absolutely everything you want. You may find a broker that has the charting software that you want built in, but the user experience might not be very good. You may find a cheaper broker, but you can't invest in what you want to invest in. So there's there's there's going to be sacrifices you're going to have to make across everything across all different type of brokers. So I think you can always change. Yes. Well, so I think start with one. Once you get familiar with investing in the whole concept and you know how to place ETrade and you know what you would invest in, I think you can always you can always sort of trade up. You can change, you can move. And it's not an expensive process. Maybe a bit of a hassle. [00:08:19][62.7]

Alec: [00:08:20] Well, that's the thing. I mean, I've changed four times in my investing career and I still have all those brokerage accounts open and I have shares in them. But it's just like as new entrants come to market. Yeah. You know, it's easy to sign up. [00:08:36][15.3]

John: [00:08:36] It's not like refinancing your mortgage. You have to go through a whole process. You really just needed in a way you go. [00:08:43][6.2]

Alec: [00:08:43] Yeah, and I mean, the only thing is if you're if you have a broker platform that charges like a inactive fee or something, you need to be mindful of that. But otherwise, if there's no cost to just walk away from an old broker and leave those shares there and move to a new one, it's it's an easy switch. And it's one I've [00:09:03][20.3]

John: [00:09:03] never really understood the whole inactive fee thing. Yeah. Yeah. What if you don't have cash in your account [00:09:08][4.4]

Bryce: [00:09:08] or if you don't want to try that actively. [00:09:10][1.5]

Speaker 4: [00:09:11] Yeah. Yeah. What happened to [00:09:13][2.4]

John: [00:09:13] buy and hold [00:09:13][0.3]

Bryce: [00:09:14] on. Ah. [00:09:14][0.2]

Alec: [00:09:15] So I think we can safely say the superhero does not have the [00:09:19][3.6]

Speaker 4: [00:09:19] right to say so. [00:09:21][1.8]

Bryce: [00:09:21] I think the key takeaway from that really is don't let the choice overwhelm and paralyse you and prevent you from getting started. There are a number of factors that we will go through very shortly that you can consider and prioritises what may be the most important and then look for a broker that satisfies that, not all of them. And then as you progress as an investor, it's easy to change and find brokers that suit your investing style as you go on the same as Ren. I've changed a number of times. I do transfer my shares as I go. If I feel like that broker has exceeded, you know, the old, which is easy to do. [00:09:59][38.5]

Alec: [00:10:00] Yeah, I think I should probably do that. I might get you to talk me through it. [00:10:03][3.3]

Speaker 4: [00:10:03] That been Covid is [00:10:07][3.7]

John: [00:10:07] just filling in a form [00:10:07][0.6]

Speaker 4: [00:10:08] really. [00:10:08][0.0]

Alec: [00:10:08] That's that's it. And as long as if it's an online form I'll fill it out. [00:10:12][3.5]

Speaker 4: [00:10:12] Otherwise I'm not technically. I know it's not. Yeah it's not yet anyway. [00:10:16][4.0]

Bryce: [00:10:16] All right. So we should move on. [00:10:18][1.6]

Alec: [00:10:18] We should, we should don't let perfection be the enemy of the good. Just get started out to catch cries. We just got to strive, [00:10:24][5.9]

John: [00:10:25] strive for perfection. Settle for excellence. Are they. [00:10:27][2.7]

Alec: [00:10:28] They might have to add that to the stable, of course. So I think this episode, we're really going to talk about the key factors, the I guess maybe let's start with an overview and then we'll go deep on the major ones. So at a high level, what are some of the key factors that an everyday investor should be considering when weighing up the choices of brokers? [00:10:52][24.4]

John: [00:10:54] So I think that the first one should be whether you want advice or not, if you're a data investor, really you're looking at price, that's got to be that that's going to be the first thing because you're buying whether you're buying Afterpay, Zippel, BHP, those are the shares that you're buying, whether you're a full service broker, you're at COMSEC superhero or so forth. They're all the same shares. You just need to really decide if you want to speak to someone and get advice on the purchase or if you just want to execute your trade based on the research that you've done. So I think price and fees should be the first cab off the rank when you're looking for a broker, the next one would be what you want to invest in. So are you looking for are you looking solely to trade on the Hong Kong Stock Exchange? Then you're obviously going to need to do some homework around what what you want to invest in. But if you want to invest in Aussie shares in ETFs, the process shouldn't be an extensive one. It shouldn't be a barrier to entry. You should be able to pick up, you know, who who trades on on the Aussie market relatively easy, easily. And and, yeah, that that shouldn't be a barrier to entry other than other than fees and the markets that you want to trade on. I think it really comes down to personal preference. It comes down to the user experience and how you want to engage and interact with with the platform that you've selected. And, you know, we say we you know, we're trying to move away from the old school way of online broking, which is, you know, a spreadsheet on a website. We're trying to we're trying to do do things in the New World Way where, you know, people have become accustomed to using Uber and and Netflix and Spotify and they understand these new tech platforms. And it's we believe only only now are you starting to see that across financial services. So it comes down to personal preference around the user experience and the and the level of detail around, you know, research and financial information and charting and things. I think that that would be sort of the last thing that you'd be considering. [00:13:05][131.5]

Bryce: [00:13:06] So we'll jump in to them in a second. The next question then is, is there a minimum that I need to sort of save up to get started with my investing through brokers, does that change depending on a full service broker and online like superhero? [00:13:23][16.4]

John: [00:13:25] Yeah, yes. I think the the online brokers. You really. You really need to start with a significant amount of capital, if you're investing a thousand dollars with the full service broker, your costs are going to be over 10 percent of the trade. You know, they're charging 100, 125, Dollars minimum just to place a trade or a percentage based amount. So you would need 100K plus to to really make it worthwhile. Most online brokers are around 500 bucks as a minimum superheros, 100 Dollars, so you could start with 100 bucks, you could actually put in a market order and buy one Afterpay share, which I think is pretty cool. OK, it looks pretty. It's getting like you want to get started. You want to start small. You just you just want to you know, I think it's I think it's awesome. We do we see people come on and buy one Afterpay share. Yeah. Which is which is great because the other option, the only other option that they've got in the investing world would be to go to a to a raise or a spaceship and a spaceship Voyager and and, you know, do some sort of micro investing through a managed fund. So we were trying to get that that investing journey started earlier. Yeah. So I think I think that that's obviously a key consideration. So the full service broker, you need a substantial amount of capital online. You can start really small. [00:14:50][84.7]

Alec: [00:14:50] Yeah. What happens if so? Afterpay is just under 100 hundred. So I assume it's with the five dollar brokerage, it's over 100. You can buy it. What happens if Afterpay drops? And I Bryce doesn't like hearing that sentence, but what happens if Afterpay falls? Can you sell it for less than one hundred. Yes, you [00:15:06][15.7]

John: [00:15:06] can [00:15:06][0.0]

Alec: [00:15:07] call. So should we get into those factors in a little bit more detail and I think we're going to talk about these factors generally because there are there are obviously a number of players out there, and we might mention some of them as we go. But I think the important thing to note is that these players are constantly changing. There are new entrants to the market. One of them sitting right here with us today, but also the existing players are constantly updating what they're trying to do and they're trying to compete. And so I think we're going to keep those factors pretty general. And then, you know, I think the purpose is these factors in mind when you're doing your own research and you're Googling, because if you're listening to this in 2021, 2022, you know, further down the line, the players may have changed. But the fact is, one of the factors will be evergreen. So let's start let's start with the big one that you mentioned. And the number one policy here at Equity Mates is way high phase. So let's talk about costs. How should you think about the costs of brokers? And I think importantly, we've touched on brokerage, the cost to buy and sell. But what other costs should we be thinking about? [00:16:19][71.9]

John: [00:16:20] Well, we touched on in a show we did activity face inactivity fees. I think that the cost when it comes to trading shares is really like the headline cost is, is brokerage. There shouldn't really be too many other costs other than that. [00:16:35][14.5]

Bryce: [00:16:35] And to be super basic, what is brokerage? [00:16:37][1.9]

John: [00:16:38] Brokerage is the fee that you get charged when you transact, buy or sell, buy or sell. So with with most brokers, there's there's a minimum amount and then there's a percentage over. If it goes over that amount with superior, that five bucks and there's a couple of other guys doing that, five dollar trades as well as a flat fee trades. [00:16:59][21.5]

Alec: [00:17:00] And just to just to put some to like put an example there that that might be a big bank. If you're trading up to ten thousand dollars, it might charge you, let's say, 20 dollars a trade. But then if you charge if you trade over that ten thousand dollars or if you buy 20000 dollars worth of shares, then it's a percentage. [00:17:21][20.4]

John: [00:17:21] So maybe point two of a percent. So if you traded 20 grand, they charge you 40 bucks. [00:17:26][4.4]

Alec: [00:17:26] Yeah, but with superheroes, I can charge I can trade a hundred thousand or one hundred thousand dollars and it's just [00:17:32][5.8]

John: [00:17:32] five dollars for us. Yeah. [00:17:33][1.0]

Alec: [00:17:33] Yeah. Not bad [00:17:34][0.7]

Speaker 4: [00:17:36] face time. [00:17:37][0.6]

John: [00:17:40] So other than other, other than that transaction or that brokerage fee, they shouldn't, they shouldn't be a huge amount about the costs. There are significant fees charged by the ASX to display data to display share prices in real time. So there's a favour for delayed data so you can get a 20 minute delay. Data on your trades still happen in real time, but you're trading off all the data. There's significant charges for life data. And we've got an account that you can you can pay for for life data. The moment it's all free in 2022, you're probably going to have to pay for it, [00:18:17][36.8]

Alec: [00:18:18] which is standard for a lot of brokers these days that they have some subscription form or something where form of subscription will get live data. [00:18:24][6.8]

John: [00:18:25] Yeah, so. So ours is as a little bit different. We we offer full consolidated tax reports and portfolio performance reporting as well. And it's nine dollars a month. But you could go to some of the big banks. They charge between 40 and 100 dollars a month for just for life data access. So it is important to look at at what those fees are. And if you need life data, if you're if you're going to come on and just say, I want to buy 100 bucks, I want to buy another one Afterpay share, it's it's probably not necessary to have paid for live data for that because, you know, whilst, of course, you care about the price, you buying it and whether you're buying it at one hundred two point ninety three cents versus one hundred two point ninety seven cents, it's probably not going to really move the needle in the scheme of things. Yeah. So, yeah, you need to consider what how active you're going to be and what what you're going to do on the once you've got an account. But I'd say that those are those are the other fees that you'd need to consider. But other than that, there's not there's not a there's not a huge amount of cost involved. [00:19:31][65.9]

Alec: [00:19:31] Now, you say that you shouldn't there shouldn't really be any other costs involved. But unfortunately, some of the brokers out there, there are other costs involved. So I think it's worth us just covering of other fees that you may have to watch out for. Things like the inactive fee that we spoke about, there are subscription costs, which we've talked about. Some brokers have just general things like account fees or, you know, if you don't, it may not be inactivity, but it's like if you don't do X number of trades in a set period of time, there's additional fees as well. So. I think whatever broke you signing up with go read the PDS or go to the face section of the website, because sometimes I like to slip a little face in. [00:20:17][45.7]

Bryce: [00:20:18] And that just comes down to your understanding of how often you think you're going to be buying and selling. And then you can make the decision from the I guess the flow in question, John, is if brokerage and is the most important factor, the question is why is that important? What impact does brokerage actually have on your individual returns for the stock that you bought? And I guess more generally, your overall portfolio returns. Yeah. Does it have an impact? [00:20:47][28.9]

John: [00:20:48] Absolutely. It has an impact. All faiths have an impact on on your investment returns. And to give you the simplest idea, if we just if we just keep using the one Afterpay share as the [00:20:56][8.7]

Speaker 4: [00:20:57] example, [00:20:57][0.0]

John: [00:20:58] if you if you bought one Afterpay share for one hundred and two dollars and you bought it through a superhero, it would be five dollars brokerage. So effectively the cost of your share was one hundred and seven dollars. So it needs to go above one hundred and seven dollars before you start making money. If you did that through another broker. Let's say they charge you twenty dollars. You need Afterpay to go to an all time record high of one hundred and twenty two dollars for you to break. Even so that's that's the difference. That's where it becomes really important. And that's where that's where the whole online and full service comes into play as well so that it comes back to the fees and fees. Impact your performance. [00:21:40][42.2]

Bryce: [00:21:41] Hmm. If you bought it for through a full service broker for one hundred and twenty five dollar fee, you would need it to double in price. [00:21:48][6.8]

Speaker 4: [00:21:49] Yeah, I they probably [00:21:51][2.2]

John: [00:21:52] wouldn't even take the order to [00:21:53][1.1]

Speaker 4: [00:21:53] be avin. [00:21:54][0.3]

Bryce: [00:21:55] And I mean that, that in its simplest form shows how significant the impact of fees can be. And time after time, you know, we'll have the community say, you know, I've just bought these stocks, but it's saying that I'm down. Why am I actually lose money on this? And you must consider that brokerage is included and wrapped up in the price that you pay for that. So once you thought you bought it one hundred and two, it'll probably say in your brokerage account, average price, one hundred and seven or whatever it may be, it's taken into account the brokerage that you've hired. [00:22:29][33.8]

Alec: [00:22:30] Yeah, and I think one last thing that we should talk about when it comes to face, when we're talking about brokerage, the one off costs, the costs when you buy and sell, which is a little bit different to some of the other fees that we're talking about for things like ETFs or managed funds that are charged annually. Yeah, yeah, yeah. So, you know, if you're if you're a buy and hold investor, you're you're not going to be paying that fee regularly. If you're trying to time the market and trade daily, then those costs really start to add up. [00:23:04][33.8]

John: [00:23:04] Yeah, absolutely. [00:23:04][0.3]

Bryce: [00:23:06] So moving on to the second factor that is really close to our hearts here at Equity Mates. And that is all about access. You mentioned it before, John. Their access can mean a couple of different things, but the world is globalised now. The companies that we like investing in aren't necessarily available on the Australian Stock Exchange. So can you talk us through what access means and why? It's important, [00:23:29][23.3]

John: [00:23:30] I guess access to global markets or to to global investments is is becoming more and more important. The world the world is getting smaller and and people do want to invest in the Teslas and Apples and Amazons of the world. So there's there's a big decision to be made, whether you do it through an ETF, whether you get broad exposure to all of the US tech stocks, all of the Asian tech stocks as a basket. That you don't need Internet and international account for or do you want it like direct exposure to those shares? And I reckon it's kind of cool to be able to own Apple. Yeah, and I own Tesla, [00:24:11][41.1]

Alec: [00:24:13] so it must be nice. [00:24:13][0.8]

John: [00:24:18] That's not advice, by the way. And, you know, and I reckon there's a number of people who would be and I would do it, too, would be buying those some of those big tech names really just as you know, to say, hey, I own a bit of that, but they've been standout performance for a long time. So access is important in terms of international shares. Typically very difficult to get into from Australia, and there's all sorts of complicated tax regimes and things in place at stake, as is obviously the sort of the newcomer to the to the market and has really broken down some of those barriers to access international shares or US shares. You can trade them through some of the big bank brokers, through some of the other the other expensive. Yeah, it is expensive. It's difficult to get accounts set up as well. It's just it's just complex. It shouldn't be so hard. So, yeah, I think I think the the rise for the rise in demand for international is is strong and I think it will continue. And it's yeah. It's important to do your homework there as well. [00:25:26][68.8]

Alec: [00:25:28] So I think you mentioned steak, they offer access to the US market, there's a few brokers that try to offer access to a number of different markets, and then there's a lot of brokers that offer access to the Australian market. But the important thing to keep in mind is that even if you just have access to the Australian market, you still are able to access overseas stocks through ETFs. So you can get a little bit confusing. But, yeah, it's, um, you just have to understand, like, not just what markets you want to access, but I guess how you want to access them as well. [00:26:06][38.4]

John: [00:26:06] I think if you were looking at if you're looking at international, you can't you don't really have to go past the US, though. Well, I mean, how many people on the International Net, on the Italian Stock Exchange. [00:26:18][11.5]

Speaker 4: [00:26:18] Yeah, I love it. [00:26:19][1.2]

John: [00:26:22] But you can do this in the U.S. So there's exposure like the major companies around the world. You can get that exposure to the U.S.. Yeah. And you can get most of the exposure through the Aussie market as well. [00:26:32][10.9]

Alec: [00:26:33] Yeah. Yeah. [00:26:33][0.5]

Bryce: [00:26:34] So this is a point in your journey, I guess, where you may get to a fork in the road and find yourself signing up to two different brokers, and that is OK. You might find that you want to do the steak option for the US and the superhero for your Aussie access. And that is totally fine. [00:26:49][15.4]

John: [00:26:50] Someone's really nailed the two together. [00:26:52][2.1]

Bryce: [00:26:53] No, no, no. [00:26:53][0.7]

Speaker 4: [00:26:54] Yes, yes. I say no more. So, yeah, [00:27:00][6.0]

Bryce: [00:27:00] it is OK to go down that route if you want access directly. But as we've said before, if you want indirect access, I guess through ETFs, then that is an option that you can do through the Australian Stock Exchange. Yeah. [00:27:14][13.5]

Alec: [00:27:16] So, John, we've touched on the two, I guess, major factors will the two major factors that we really think about here at Equity Mates cost and then access to different markets? There are a number of other factors. And as you said before, a lot of these factors are really influenced by, I guess, your investing style, how you want to invest, how you want to trade. And it will be a bit of a different strokes for different folks situation, depending on what your investing style is. So maybe let's start with that term investing style. What do we mean by that? And how do you figure out what your investing style is? [00:27:54][38.7]

John: [00:27:56] Well, I think the first thing you've got to work out is what like what's your investment strategy? What are you trying to achieve? That's that's the key. And you say we see a lot of people coming on and just start trading to trade with. No. And I've seen it through my career as well with no goal in place. When you put on a trade, you should think about what you want the return of that trade to be. Does it achieve it when it achieves your goal? Do you close out the position? You know, these are all the things you know, if it drops below a certain price, do you close out the position? Do you average down? If it goes up to your average, do you average up? Do you increase the position? So I think the the investment you need to think about your investment strategy and that ultimately drives. What style of investment you're going to undertake if if your goal is to generate a two percent return on every trade, then you could be trading frequently, you know, two percent up, Yuksel, two percent down, you sell. Then you're going to be trading back and forth all the time. [00:28:58][62.3]

Alec: [00:28:59] That that strategy honestly sounds like my worst nightmare, I've got to say. [00:29:02][3.4]

John: [00:29:04] Well, for me, I don't trade a lot. I pick specific companies that I really like and back them and hold them for a long time and see them see them play out. They don't always work. Some of them do. Some of them have. A lot of them haven't. And so it really just depends on on what you're trying to do. As Buffett says, you always make money in the stock market over the long term. And if you look if you look back. And what's that? What's that saying? Past performance [00:29:33][29.3]

Alec: [00:29:35] is an indicator of future [00:29:36][1.1]

John: [00:29:36] performance performance. But if you look back over time, the market always goes up. It's just over the long term, over the long term. So if you pick the high to the low of the GFC, obviously the market went down. But if you pick the high of the GFC to now look the markets, the market's up. Yeah. So if you if you it's and now Buffett quote, it's time, it's time in market, not timing the market that that makes you the money. So that's that's what I think you need to to really look at. I think it's I think it's investment strategy before you can work out what style of investor you are. [00:30:13][37.2]

Alec: [00:30:13] Yeah. Yeah. So let's let's use two of those examples that you touched on there to illustrate some of those factors, let's say be the more trading focussed strategy where you're just trying to get a couple of percent in, you know, quickly and do it over and over again. And then that long term buy and hold, finding good companies are, you know, sort of Warren Buffett style. Let's use those two examples to sort of illustrate some of these other factors. A fact that we often talk about is around information and I guess like, you know, analysis, you know, like broker reports, even things like live data, I guess, comes on the information using those two different sort of investing styles. How should they think about information and the different information that different brokers offer? [00:31:04][50.6]

John: [00:31:05] Yeah. So my. I'll say criticism, my issue with with broken research is that the opinion of one person and maybe there's an investment committee behind it, but it's really it's just an opinion. And let's face it, Broca Research. Yeah, it's a contrary indicator. Yeah. So. Yes, some people do look to to broker research, I've read broker reports and used it as part of my analysis, part of my research process, and you can read three different broker reports about the same company and you can form your own view about it because they're usually conflicting. So I think that that should only be an element just because one bank or one brokerage has a buy recommendation on it doesn't mean it's going to go up. That that's not you shouldn't be solely relying on that. But in terms of information that you could expect from a broker or that would help you from a broker, I think if you were an active trader, having having a good reporting system would be very would be very handy because you're trading so frequently, you've got realised capital gains or capital losses that would build up over over time. And if you're trading 10 times a month. You've had 120 times throughout a year. There's there's capital gains and capital gains tax or losses that are going to apply to your tax on every on every trade. So having a system to report on that would be very helpful. Not all brokers do that typically. And even the full service brokers, they'll just give you a transaction summary for the year and say at 30 June, this is what you held. So then you're going to work it out or you're going to go to your accountant and they've got to work and they send you a nice bill at the end of it. So we do all of that reporting at Superhero for you. It's part of the account that that you get with us or you can use some of the other guys in the market like share site. So very lucky. We've got similar very similar reports built into our platform as them. But but they are tracking your portfolio. So I think that is a key piece of information that would really help. The other one is tracking dividends, tracking your income and franking credits and how all of that flows through to to your year end tax as well. Those are those are critical pieces of information when you're investing. So I think that would be equally as important as as broker research or possibly more important, because you can go and do research around the Internet. You can you can listen to podcasts. You can listen to interviews with management, read company statements that are available through the ASX. Those those things can be found anywhere for mostly for free. But I think it is that account reporting that is that is very important. [00:33:53][168.2]

Alec: [00:33:53] So on that account reporting point, if I'm online trying to do research on different brokers, how do I find out what a broker does in terms of this account reporting? [00:34:03][10.1]

John: [00:34:05] It's not it's not very transparent across the other brokers. And and typically typically a broker is there just to facilitate a trade. And at the end of the financial year, they'll just give you a statement like you get from your bank statement. They won't work at all in the individual capital gains and the income. And so for you, there are platforms that do it for you share sites, one that is just the reporting. But there's net worth is Hubb 24. There's some of the premium, there's some of the bigger platform companies that tend to tend to work with full service brokers, more then than the online guys. But the online guys don't typically provide those those that sort of detail in their reporting. I haven't seen it, I haven't seen it anyway, [00:34:46][41.2]

Bryce: [00:34:47] so we've touched on live data that is another consideration. Not all brokers offer live data if you do want it, it's usually a premium service. But as you mentioned, John, if you're just looking to get into a stock and you're not doing. Day trading or trading by the minute? It's probably not worth considering, obviously, charting tools as well is another piece of information that some investors are looking at, although you can get that free online as well. The Yahoo! Finance, the Google Finance, plenty of shots. [00:35:18][30.5]

Alec: [00:35:18] Yeah, I think part of this conversation needs to be like, what are brokers doing that we need brokers to do and what things that they offer. But other services also offer at a better price or better. And, you know, like trading tools. You mentioned share side there, like a lot of this stuff is sort of like not core business for brokers. So it's kind of like a nice to have. [00:35:38][19.3]

John: [00:35:38] And there's a lot of a lot of those things are done better by companies that specifically focus just on charting. Yeah. [00:35:45][6.5]

Bryce: [00:35:46] So then let's move to functionality. And you've mentioned reporting, but I guess a big one for us when it comes to functionality is around the types of orders that you can place and also the user experience. You know, you've mentioned that something like you're running an Excel spreadsheet, [00:36:03][17.1]

Speaker 4: [00:36:04] which is [00:36:04][0.2]

Bryce: [00:36:06] yours, feels a lot more with the 21st century. But do you think order types is something that a beginner investor should be thinking about when they sign up to a broker? [00:36:15][9.6]

John: [00:36:18] There's there's different order types and there's different levels of sophistication with with different order types, the two the two typical ones are a market order and market order is when you place an order for a dollar amount of shares and it will it will buy or sell up to that dollar amount. And so it'll get you the closest number of shares to that dollar amount. So you could put in a thousand dollars. Chances are you're going to end up buying nine hundred and eighty nine dollars and fifty cents worth of stock because it will round it down to the nearest whole unit. So that's a market order for a seller. It would it would do the same thing. The they or you could put you could put a unit amount in so you could say I want to buy ten shares at the market price. The other one is a limit order. So you could say, I only want to buy my one Afterpay share at one hundred and two dollars. It's currently one hundred and two fifty. So you're not going to buy it. It's above the order price, but if it drops down, you will only pay one hundred and two. You won't pay more than that. [00:37:24][66.4]

Alec: [00:37:25] Yeah. So let me ask you both the question. Do either of you use limit orders when you put a trade on? Like, do you have a very specific price that you won't pay above? [00:37:35][10.2]

Bryce: [00:37:38] Personally, no, [00:37:38][0.5]

John: [00:37:39] no, I use market orders as [00:37:41][1.5]

Alec: [00:37:41] well as science, and but [00:37:42][1.8]

Bryce: [00:37:43] I look at the spread sometimes if there's a risk that it's going to go in market at something, that's ridiculous. [00:37:49][6.5]

John: [00:37:51] But it depends how much you trading as well. Like if you're putting on a fifty thousand dollar day, you're probably going to use a market limit order. Yeah, if I'm putting on a market order for four thousand bucks, you can like it doesn't really. [00:38:02][11.4]

Speaker 4: [00:38:02] Yeah. [00:38:02][0.0]

Alec: [00:38:03] For me, it's just like a risk reward thing. The the risk of overpaying like a little bit and you know, but actually getting that stock that I think is good compared to missing out because I wanted to pay like a cent less and then feeling that pain as a stock. Arun's, it's just yeah, [00:38:21][18.0]

John: [00:38:22] I had this I had this argument with one of my colleagues when I was a broker and it was about Zipp. Because I used to pay up for it and they would always sit back. Why did you pay eighty nine and a half cents for that? Because at the end of the day, it's not going to make a difference that I paid one or half a cent difference. And, you know, they're still sitting back there at 88 waiting for it to drop back. So, yeah, I think there's that risk reward. But do you just want to buy the shares? You might pay one cent more now, but in two weeks. In two months, in two years, what's the price difference going to be? And is the two cents going to make a big difference? [00:39:01][38.3]

Alec: [00:39:01] I think we're limit orders become quite useful is if you're charting or if your day trading and you've identified like certain levels where you think the stock's going to move, then then it can become a really useful tool. But for me, if I'm thinking of holding a stock for 10 years, I'm not going to worry about, you know, a tiny little cent, isn't there? [00:39:23][21.6]

Bryce: [00:39:23] Yeah, we'll go through that in a little bit. When we talk about the actual process of buying in the next episode, I guess to close out the functionality piece to all brokers, offer the same order types, do they, you know, stop loss, for example, limit market. [00:39:39][15.4]

John: [00:39:40] Yeah, they're different across the board. So we only have limited market orders at the moment. We'll look to expand our orders set in the future. But you will see some brokers that offer stock losses. They offer trailing, trailing orders as well. So you can you can follow a share price on its way up and buy it or sell it when it gets a certain price. And you can follow a share price down as well and buy it and sell at a certain price. So if you bought. You want Afterpay share. You could set a price that if it got to 110, it would sell. And at the same time, if it dropped to ninety dollars, you could sell it at 90 to cut your losses. So there are different order types there that they do differ across across brokers. And there's no there's no magic or two types that exist only for one particular broker. They're standardised order types that are set by the ASX. It's just whether particular brokers offer those or types into the market. [00:40:40][59.8]

Alec: [00:40:40] Yeah. Now, there's one last question that we got from a listener around orders that I particularly liked. Well, we're big fans of dollar cost averaging on the show here, you know, just putting consistent amounts of money in the market over a long period of time. And a listener asked, is there a platform that allows for automated investments on a regular basis and not not in the micro investing a few cents here if sense there, but more for, you know, full orders. [00:41:09][28.7]

John: [00:41:11] Is this all I want to buy? Hundred dollars worth of zip [00:41:13][2.4]

Alec: [00:41:14] every month, every month. And it's just not yet automated yet. That idea, you can have a phrase to listeners idea, but it's a good it's a good one. I never thought of that, especially [00:41:25][11.3]

John: [00:41:26] because I think there is you know, I think the we've got the savings accounts, which are bank accounts, and now we've moved into micro investing, which is small amounts going into a managed fund. And this companies that that offer really great user experience. And it's a really great way to get your foot into investing. But then there is a big divide between micro investing and stock and stockbrokers and broking where you're actually going and buying X amount of shares or X amount of money today at this price. And then you own the shares. There's a divide there. So I think there is a great opportunity to have a product that you can on a regular basis top up and invest. It just it just doesn't exist in the market. [00:42:08][41.9]

Alec: [00:42:08] You know, maybe we'll try and beat you to the punch. [00:42:11][2.2]

Speaker 4: [00:42:11] Stuart Equity Mates. [00:42:12][0.6]

Bryce: [00:42:14] All right. So to close out, there are a couple of other factors we've mentioned. Customer service is is one, it's close to Ren thought he doesn't really know how to use it. But for some reason, it's calling up customer service. There's the look and feel of it. But I guess the other thing is getting your money in and out, I guess we can close out on that is is something that probably not many people think about. But once you're in, it can be a bit daunting. Can I get this? Can I not. So is it an easy process? [00:42:48][33.9]

John: [00:42:48] Well, it is actually a question that gets us all the time of us way. So in terms of getting money in, at the moment, we are the only broker that uses pide. So you can fund your account in real time so you can set up your account. I think it takes a little bit longer than buying Amazon socks, but you can you can set up an account in a couple of minutes. You can pay it into your account so your cash is there straight away and you can invest today in terms of getting your money back out. The ASX and this is an ASX set settlement policy. But your your when you trade your shares today, your shares will only settle two days later. So it's called T plus to Trade Day plus two days. So when you sell your shares, it takes two days for the cash to come back into your account. Now, on superhero, you can go to the same day and trade and buy other shares with that cash. But you couldn't put it back into your bank account until superhero as the broker receives the cash back through the ASX. And then and then it's available for you to to withdraw in terms of pulling settled cash out of your account, that that process should be as easy as transferring doing a bank and online bank transfer. And that's and that's what we've got with super. You can put your bank account details in Brisbane account number, and you can transfer your money out pretty, pretty seamlessly. And it's usually overnight. And sometimes intraday that usually either not so you can fund your account in real time and you can pull your cash out overnight through through us. There's other guys who are doing similar sort of with withdrawals. I'm yet to see anyone who can who can do same day funding. I think that the home market is moving in that direction. [00:44:37][108.4]

Alec: [00:44:37] Yeah, yeah. I'd better be moving in that direction if I have to fill out a paperboys form to get money out of that. [00:44:45][7.6]

Bryce: [00:44:47] So a lot of factors to consider when it comes to opening a brokerage account. But look, I think the key messages for us personally, it's it's a fee based factor to begin with and then looking at access to different markets because there's a whole world of opportunity out there. But I think also don't get caught up on finding the perfect broker. You can start your journey and easily move to brokers that suit your investing style [00:45:13][25.9]

Alec: [00:45:13] as you go. Yeah, I'm going to take it a step further. It's not even about don't get hung up on finding the best broker. If you found the worst possible broker for you, charge through high fees, had terrible access. It's still worth just getting. So it [00:45:27][13.6]

John: [00:45:27] just gets is [00:45:27][0.7]

Alec: [00:45:28] one you're investing and two, you very quickly figure out what you like and what you don't like about the platform and will make your next choice a lot easier. [00:45:35][7.4]

Bryce: [00:45:36] Yeah, nice. Well, John, as always, good to chat. [00:45:39][2.7]

John: [00:45:39] Thanks for having [00:45:40][0.4]

Bryce: [00:45:40] me closing out the broker basic series with Super Hero in the next episode where we're going to talk about making the trade and then managing the portfolio. And also, if you want more information on superhero head to superhero dotcom today, you to check it out. [00:45:53][13.7]

John: [00:45:54] Thanks, guys. [00:45:54][0.3]

Speaker 3: [00:45:57] This podcast is a production of Equity Mates media, any views expressed by the podcast hosts or any guests on their own and do not represent the views of Equity Mates media or any other employer or associated organisation? Always remember, all information contained in this podcast is for education and entertainment purposes only. It is not intended as a substitute for professional financial label or tax advice. The hosts of these podcasts are not financial professionals and are not aware of your personal financial circumstances before making any financial decisions. You should read the product disclosure statement and if necessary, consult a licenced financial professional. For more information, head to our disclaimer page, where you can find resources to search for a registered financial professional near you. [00:46:41][43.6]

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