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I recently got fed up with high trading costs, so I opened a third brokerage account at a lower cost broker.
After buying a stock in Japan, by complete chance, I saw the broker was charging me 0.99% to convert Euros to Japanese Yen!
I nearly fell out of my chair!
Detailed cost comparison
Before I opened the account, I built a detailed spreadsheet (I love Excel) comparing dealing costs.
But I did not include foreign exchange (FX) charges. This is because these charges were buried in a different document and was not shown on the dealing cost page.
I immediately compare these costs to my existing brokers which were not bad at about 0.45%. This was about equal to the dealing cost I saved.
So overall the new brokerage account did not save me anything. But I must admit that broker does have quite a nice trading interface.
Compare your FX costs
As FX costs are not as openly displayed as dealing costs you may want to find out how much your broker charges you, especially if you invest in a lot of foreign currency stocks like I do.
How to save FX costs
I have been thinking about how to lower FX costs, but I have not found a satisfactory solution yet. I will let you know when I do.
What I am thinking about is opening a Japanese Yen account.
This will save currency conversion costs, but I will then have a position / investment in Japanese Yen. With the Yen at a record low against the US Dollar and quite low against the Euro, this does not bother me. BUT it is another risk to manage, and I am not sure if I want to do that.
What about FX hedging
If you are thinking about what to do about foreign exchange risk in your portfolio, I wrote a detailed article on exactly what I recommend you do. Click the link below to read it. How to hedge currency risk in your portfolio.
Your, helping you keep your FX costs low analyst
PS I know markets are still uncertain BUT have you already started building your buy list? If not, why not sign up today and start now.
PPS It is so easy to forget and put things off why don’t you sign up right now?