Sunday, July 10, 2016

International Online Stock Brokerage Comparison 2016 - Smart Money Today

This article idea/need came up after realizing my Boom Brokerage account in Hong Kong wasn’t covering the Europe area so I couldn’t invest in any UK ETFs after the bargain opportunity created by the Brexit. I’m sad and upset, but there is always a solution to any problem.

I started to research for an alternative brokerage firm with a wider range of countries. To my surprise, I learned that not only my brokerage was limited to Asia and US stock exchange, but the fees charged were astonishing.

Every time I buy an ETF, I get charged US$ 20 plus a 3% of any future dividends I receive.

After reviewing the best online stock brokerage out there, I was happy to learn that not only I can access to new Exchange stock markets but drastically reduce my costs. The less my cost are, the better for my ROI. Why pay more for something when some else is offering for less.

Your choice of broker is not a decision to take lightly. Paying US$20 a trade compared to US$2 makes a significant difference to your net worth over time.

Here a list of factor I took in consideration to list the best online brokerage:

Markets Coverage: The more the better, you never know in the future when you’ll need them.
Costs and Fees; The lower the better, that means more money left for you to invest.
Platform; You want the platform being easy to use. Some investors had an issue with some brokerage platform resulting in “buying” instead of “selling” security.
Stability; You want your cash to be safe, isn’t it?

As I’m an international investor, I value to classify the major stock brokers available internationally with easy access online and excellent customer support.

The guide is intended to be as comprehensive as possible. As a result, it’s getting longer all the time.

Best Online International Brokerage Firms

Interactive Broker

This well-established firm is based in US with international offices in Europe, Asia and Australia. It is the largest U.S. electronic brokerage firm by a number of daily average revenue trades; it also is the leading Forex broker.

It is famous among traders because of the lowest fees per trade on the market and unbeatable low currency exchange rates. To open an account, you need a minimum of US$ 10.000.

Platform

Interactive Brokers offers extensive data feeds at pass-through prices. These are also now available for non-clients through its Interactive Brokers Information Systems (IBIS) platform, which may be a partial solution to the problem of getting good international price and fundamental data for global stocks at reasonable fees.

This platform is outdated and very hard to use which male I feel like to be back in the nineties when DOS was supreme.

Markets

Stocks; US, Mexico, Canada, Austria, Belgium, France, Germany, Italy, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, UK, Australia, Hong Kong, India, Japan,Singapore.

Options; US, Canada, Belgium, France, Germany, Italy, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, UK, Australia, Hong Kong, India, Japan, Singapore, South Korea.

Futures; Same as per options.

ETFs; US, Canada, Belgium, France, Germany, Netherlands, Spain, Sweden, Switzerland, UK, Australia, Hong Kong, India.

Warrants; US, Canada, Germany, Australia, Hong Kong.

Forex; Global

Metals; IDEALPRO Metals.

Indices; US, Canada, Austria, Belgium, France, Germany, Italy, Netherlands, Spain, Sweden, Switzerland, UK, Australia, Hong Kong, India, Japan, Singapore, South Korea.

Bonds; US, Europe, Hong Kong.

Funds; US, Netherlands.

Commission

There are two types of commissions; fixed and tiered.

The first is fixed, where you pay 0.5 cents per share bought in the US, with a minimum amount of US$1/trade.

This means that if you purchase anywhere from 1 share to 200 shares, you will pay US$1. If you buy 1000 shares, you will pay US$5. For other countries, the price is 0.8 cents per share.

The second commission type is tiered. Tiered pricing for stocks, ETFs and warrants include low broker fee, which decreases depending on volume, plus exchange, regulatory, and clearing fees.

The minimum fee is $0.35/trade, other than the cost is US$0.35 cents per share. This means if you invest in 1000 shares, you will pay a US$3.5 commission. This is only for the US, for other countries click here.

So, for the International investors, the better option is the tired commission as some countries charge a high minimum fee for tired plans.

For example, if you buy UK shares, you’ll be charged 6 Pound Sterling for the first 200 shares if using a fixed plan. Instead, with a tired plan you have a minimum commission on only 1 Pound Sterling.

Other Cost

There is a US$10 fee per month for account holding less than US$ 100.000. However the monthly fee is reduced by a number of commissions you generate each month, so if the first month you spend US$3, then you will pay US$7 in account fees.

Dividends

Whenever you receive dividends from your holdings, Interactive Brokers don’t charge anything.

Currencies

AUD, CAD, CHF, EUR, GBP, HKD, INR, JPY, MXN, NOK, NZD, SEK, SGD, USD.

Currency conversion charges are the lowest on the market at 0.002% margin of inter-bank rate.

CONCLUSION

Interactive Broker is great to reach a wide range of markets and park money in different currency. It’s most suitable for investors buying blue chips or ETFs considering the small amount of shares traded.

However, if you buy large volumes, for example penny stocks, you better switch to a brokerage that charges a fixed amount per trade.

3 best international online brokarage for investorsaround the globe

Saxo Bank

Another international roller this is a broker and investment bank based in Denmark founded in 1992.

Pretty similar to Interactive Broker with a wide selection of markets and currencies. The only difference is the fes as I’m going to show you below.

Platform

SaxoTraderGO is an excellent software which is user-friendly, simplified and intuitive. The charts are modern and easy to use, big buttons with different colors that will ensure you don’t get confuse when placing an order.

Finance Magnet has done an excellent SaxoTraderGO’s review. I love their platform and can get useful news.

Markets

Stocks; US, Mexico, Canada, Czech Republic, Greece, Ireland, Belgium, France, Germany, Italy, Poland, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, UK, Hong Kong, Japan, South Africa.

ETFs; As above.

Forex; Global

Metals; No Metal.

Indices; 21

Commission

Commission are tired with a minimum amount starting at US$12 and added commission starting at 20 cents per share. Considering the high minimum fee, it’s worth it if you trade high volumes.

Other Cost

There aren’t commissions for accounting maintenance, only some country get charged if the account no active. There is a minimum of US$5 per month for custody charges for bonds and stocks.

Dividends

No Charges.

Currencies

AUD, CAD, CZK, DKK, CHF, EUR, GBP, HKD, JPY, MXN, NOK, SEK, PLN, USD.

Currency conversion charges are 0.5% margin of inter-bank rate.

CONCLUSION

Saxo isn’t as cheap as Interactive Broker for small volume, but offer alternative markets reach and the trading platform is friendly.

Saxo has been accused of manipulating its system following the Swiss/Euro movement in 2015, here the view of John Hempton. He isn’t the only blogger and investor complaining about it.

Charles Schwab

The full-service broker was founded in 1973, and as early 2016, Schwab was home to a staggering $2.51 trillion in total client assets.

From advisory services to research, active trading, customer service, ease of use, and more, Schwab understands what it means to provide a high-quality offering.

They have got an international trading account that reaches 30 foreign exchanges. They are a bit more expensive than Saxo Bank and Interactive Broker starting at US$ 8.95 per equity trade.

However, investors trading ETFs will also enjoy Charles Schwab as the leading broker in its offering of commission-free ETFs, with 214 in total. Chuck Jaffe said there’s a difference between an inexpensive sandwich and a free lunch.

One more thing, all these free ETFs are domiciled in the US, and International investors should keep in mind the 30% TAX on dividends and US estate tax treaty.

Customer service is the best part of Schwab; professional, 24/7 and friendly.

NOTE; The International account is only available for investor resident in the US.

Platform

Schwab employs the StreetSmart Edge trading platform. It’s easy to use, not so colorful or appealing like Saxo’s platform but does the job. This platform uses Javascript, so can’t be run in Chrome.

Good analyzing tools and traders will love the easy order entry.

Markets

Stocks; US and Pink Sheets, Canada, Australia, Belgium, France, Finland, Germany, Italy, UK, Netherlands, Hong Kong, Japan.

ETFs; As above.

Forex; Global

Metals; No Metal.

Indices; 21

Commission

Schwab charges a flat fee of US$ 8.95 for stock trade and $8.95 + $0.75 per option’s contract.

Other Cost

Domestic and International Wire fee is US$25. No account fees.

Dividends

No Charges.

Currencies

AUD, CAD, EUR, GBP, HKD, JPY, NOK, USD.

Currency conversion up to 1%.

CONCLUSION

Charles Schwab is the broker for the US residents that want to go International. They are a bit more expensive than the competition but they make up with an excellent customer service support.

What brokerage are you using at the moment? Are you happy? Share the good and bad thing about your online brokerage.

Friday, July 8, 2016

Best Of The Web For Smart People - June 2016 - Smart Money Today

“The Best Of The Web Series” is my monthly roundup of posts for smart people who want to get ahead in life.

I’m going to share articles from only the best and most successful bloggers on the net that are worth reading.

I do this because the web looks like a jungle making it hard to find valuable content that can impact our lives.

In average, to read an article thoroughly takes between 5-10 minutes and guess what, most of the time the article is a complete waste of time. Not only that but reading poor quality articles will confuse instead than helping you to improve in life.

You better spend more quality time with family, making more money or follow your hobbies.

I’m doing all the heavy lifting for you, and the monthly roundup of posts focus on:

Self Improvement; Inspirational, Personal Development. Educational, Productivity.
Money; Investments, Passive Income, Stock Market, Financial Tips, Savings.
Online Business; Blogging, Tools, How To Make Money, Passive Income.

You can read all the monthly roundup of post series here. Just bookmark the page and come back every first week of the month while having breakfast.

NOTE; Please let me know for any great posts you think should be included in the “Best Of The Web Series”. Let’s share the knowledge.

ON SELF IMPROVEMENT

How much is your job really costing you?
Steve – Think Save Retire

Steve is working hard to retire early, after all “Why to work more than necessary?”

I published his article offering a great inside about real wages. Something that will help you to decide which job offer to accept next.

As you’ll read, it isn’t only about hourly wage and benefits, but the cost involves to perform that type of work. The usual are car cost, chill out costs, luncehs with the coworker and the list go on.

ON MONEY

How To Create Intergenerational WealthSure Dividend

It’s rare to find on the web an article so profound in the long term investing concept. This article opened my mind on the benefit to invest for the long term, in this case, intergenerational wealth.

The author gives clear instruction where to put money for the long-term by investing in:

~ Great businesses

~ With strong and durable competitive advantages

~ And attractive total return potential

I think you can benefit as well by understanding the effect of compounding over an extensive investment period of time.

The reality is, our investment horizon is limited to a few month or years in most cases. In today world, everyone wants to make money fast, let alone to invest with 30 years perspective.

What about create your wealth plan and passing down to your children and grandchildren?

Imagine this, a US$10,000 invested for 30 years at an average compounding return of 9% becomes US$132,677 after 30 years. Hold for 100 years and become US$55.2 million.

Imagine your worth today if your grandfather would have put away for you a small amount of money 100 years ago.

The Inefficiency of US Dividends for Expat Growth Investors
Dan Clarke

Dan is an expatriate born in the UK and now working in Dubai where he is living a 0% TAX lifestyle. Like most of the others middle east countries, there aren’t any taxes for personal and businesses.

I worked in Dubai 4 years, and the tax-free life is sweet plus cars and petrol are super cheap.

Dan wrote this article focusing on expatriate living and working abroad in low or tax-free countries and advises not to invest directly in US investments for the heavy TAX penalties, 30% for dividends and 40% for Estate Taxes. Learn More

When Bonds Are Riskier Than StocksEarly Retirement Now

A new blog with solid posts into the personal finance world. The author plans to retire in 2018. He shares his journey with solid research and charts which offer an easy understanding of the otherwise complicated subject.

I found interesting this article compiling data for the last 140 years on Treasury bonds and stocks.

He explains an interesting new way to look at risks associated with bond and stocks, choosing to invest in the latter as a safer ROI in the long term.

It might sound strange to hear stocks are safer than bonds, but after reading this article, you’ll change your opinion forward.

As per the writer, the next cycle for bonds is bearish. So, if you’re retired and expect your portfolio loaded with bonds to sustain your retirement, think again.

What I like the most, the author brought in some solid data about bond cycles which I’ve found useful to think about my current portfolio strategy for the next few years.

I use cycles to plan out my investment strategy which improves returns. You can get a closer look at “Trading Strategy; How to profit from stock movements” to learn how to profit from cycles.

My Best Ideas – Gold, Silver, and LithiumFI Fighter

FI Fighter takes a different approach to the usual investing strategies. He doesn’t stick to the dividend mantra, or average dollar technique or buy and hold forever theory.

He actively analyzes markets and cycles, create a strategy and go for it. At the moment FI Fighter is focusing on the precious material, mining companies and looking into the alternative energy sector.

In this article, he explains his holding large holding position in gold and reasons keep him away from blue-chip and high dividend stocks.

I think FI Fighter has some strong fundamental points on the current financial situation, and he is in the right direction to pick the next boom sector.

Get ahead in life with the best mentors on the webCLICK TO TWEET

ON ONLINE BUSINESS

Blogger Outreach: How to Get Influencers to Promote Your Content for Free
Brian Den – Back Linko

Brian Den is an expert in online marketing and cover useful topics to grow your blog. You can read more about here.

In this guest post Brian put together an informative mini guide to outreach influencers people and get them to comment on your blog, share your articles and why not, have a permanent link in their resources page. Read More

Friday, July 1, 2016

High Dividend ETFs: Comparison of the Top 3 - Smart Money Today

This is a guest contribution written by Ben Reynolds at Sure Dividend. Sure Dividend uses The 8 Rules of Dividend Investing to build high-quality dividend growth portfolios.

Regular readers of Smart Money Today are very familiar with good ETFs over the next decade, and ETF investing in general.

Dividend investing has slowly returned to popularity. The idea that your investments should actually pay you is not new. With more and more baby boomers retiring, dividend investing’s popularity will likely continue.

Many dividend investors are looking for income now. To this end, they look for high yield dividend stocks and ETFs.

Not surprisingly, there are a wide variety of high yield dividend ETFs that meet this demand.

The number and type of ETFs focused on dividend investing has grown significantly over the last decade.

This article takes a look specifically at high dividend focused ETFs for investors looking to add greater current or future income potential to their portfolios.

High Yield Dividend ETFs

A list of the most popular (based on AUM) high dividend ETfs is below:

iShares High Dividend Equity (HDV) with a 3.5% dividend yield
PowerShares S&P 500 High Dividend (SPHD) with a 3.4% dividend yield
Vanguard High Dividend Yield (VYM) with a 3.1% dividend yield

Note: AUM stands for Assets Under Management

Total returns (including dividends) over the last 3 years for these 3 stocks are shown below. For comparison, the S&P 500 had total returns of 33.1% over the same time period:

HDV: 30.5% Total returns over the last 3 years
VYM: 32.9% Total returns over the last 3 years
SPHD: 49.7% Total returns over the last 3 years

Note: Total return data from ETF Replay

Clearly, the SPHD has performed significantly better than its peers (and the market) over the last several years. Past performance is certainly no guarantee of future success, but it is interesting to see why the ETF performed better.

Here’s how SPHD is constructed (according to its prospectus):

The highest 75 yielding stocks in the S&P 500 are found
The 50 lowest volatility stocks out of these 75 are selected
These 50 stocks are weighted based on their dividend yields

For comparison, the portfolio construction rules of the other 2 ETFs are shown below.

HDV’s investment style is much less transparent. Here’s a quote from the fund’s prospectus:

“The Fund seeks to track the investment results of the Morningstar® Dividend Yield Focus Index (the “Underlying Index”), which offers exposure to high quality U.S.-domiciled companies that have had strong financial health and an ability to sustain above average dividend payouts.”

Unfortunately, the exact methodology that Morningstar uses to create its Morningstar Dividend Yield Focus Index is proprietary. This means we don’t know the exact factors that go into the strategy. The strategy has not worked particularly well over the last 3 years, as it has underperformed the S&P 500 (whatever the exact strategy may be).

VYM’s stated goal is to track the performance of the FTSE High Dividend Yield Index. I could not locate the exact methodology of the FTSE High Dividend Yield Index. It appears to invest in the top 50% or so of high dividend stocks in (or around the same market cap size) the S&P 500.

Not only has SPHD outperformed significantly over the last 3 years, it is also the most transparent in its methodology. The ETF uses a very simple ranking system to find high yielding stocks. It uses volatility as a proxy for risk to weed out the ‘riskiest’ 25 of high yielding stocks in its universe. What’s left is a high yielding portfolio that at least attempts to reduce risk.

Looking at HDV’s yield, it must take a somewhat similar approach. HDV holds 79 stocks, but is far from equally weighted. HDV’s top 10 holdings account for over 50% of the ETFs total holdings by dollar value. For comparison, SPHD’s top 10 holdings hold just 27.5% of the fund’s value.

Vanguard’s VYM is very widely diversified. It holds 428 different stocks. With that said, the Top 10 holdings account for 32% of total holdings by dollar value.

Last but not least, one should consider ETF fees. The expense ratios for these 3 ETFs are listed below:

HDV has an expense ratio of 0.12%
VYM has an expense ratio of 0.09%
SPHD has an expense ratio of 0.35%

Both HDV and VYM are very cheap. SPHD is still relatively inexpensive with an expense ratio of 0.35%. To put that into perspective, every $1,000 invested in SPHD costs $3.50 a year in management fees.

Final Thoughts

When considering high dividend yield ETFs, I believe SPHD stands out due to its clear investment methodology, focus on only 50 stocks (instead of 100’s), high dividend yield, and excellent historical performance.

There is more to dividend investing than just yield; much more. For those interested in more than only high yielding dividend ETFs, see my article on the best dividend ETFs.

When evaluating dividend ETFs, there is no one factor that should be examined. Rather, a mix of information should be gathered and compared before making an investment. Several key dividend ETF investing questions to ask are below:

Is the investment methodology straightforward?
Does it match what I’m looking for?
Is the expense ratio reasonably low?
How long has the fund been around?
How big is the fund (how much AUM)?
What is the turnover ratio?
How good/bad is historical performance?

The investment methodology should line up with what you want the fund to do. As an example, don’t expect a dividend growth fund to give you high current income.

The lower the expense ratio, the better – always. Similarly, a lower turnover ratio implies greater efficiency as management does not have to continuously trade the portfolio, which will run up the expense ratio.

Larger funds that have been around a long time are likely to continue to exist. ETFs can close, forcing you to liquidate your holdings.

Looking at historical performance is not perfect. If a fund has significantly outperformed or underperformed, it’s important to have an idea why to see if the performance is likely to continue.