One of my friends, Kate started trading on local stock exchange about one year ago after hearing her friends talk about catching stocks on their uptrend and receiving regular dividend payouts.
She didn’t have any experience but just armed with finance and accounting degree and basic understanding of business. She invested in local stock market and a few of her shares went up but she did not hold on to them. She traded aggressively sometimes making as many as 5-10 online trades per day. However, she was surprised to discover that her portfolio was making a loss due to the high brokerage fee. Thus, a brokerage fee is crucial as it will eat into the profits and may actually end up with thin gains.
Brokerage fees are mostly capped at 0.7% of the transacted value. On average, online platform provides charge a brokerage rate of 0.42% while for remisier, the rate is 0.6% of the transacted value. So, it is usually cheaper to trade online.
Besides that, the clearing fees are a standard 0.03% of the transacted value while stamp duty is levied at 0.1% or RM1 for every RM1,000 of the transaction.
It’s advisable to look at how your brokerage charges if you want to keep trading fees low. If your selling price is marginally higher than your buying price, then you should make sure that any profit will cover the fee. For example, a brokerage could charge RM12 per transaction or 0.42% of the transacted value, whichever is higher. This means that you will be paying as much as RM30 in total charges (inclusive of clearing fees and stamp duty fees) for transaction worth less than RM6500.
If you make many trades, then try to keep a record of all transactions and also pay attention to the costs of buying and selling, which include brokerage fees, clearing fees and stamp duty.