How To Choose An Online Broker In The Philippines
The internet has made everything so much easier, and online trading brokers have made investment an option for just about anyone. A good online broker can turn you into an investor, buying and selling stocks with just a click from the comfort of your own home, or on the go on your smartphone.
Choosing the right online trading broker can be the most important financial decision you make this year. You do plenty of research before picking a stock; you should do the same thing before picking a broker. To get you started, here are five things a good online broker should have. Use this checklist to help you decide on the qualities you need in an online broker in the Philippines:
1. Has an affordable minimum investment amount and portfolio balance.
Every online broker has its own minimum required amount to start an account, as well as a minimum portfolio balance. Some require only P5,000, some P25,000, and some as much as P1,000,000. Before you open an account with any online broker, first find out how much you can afford to start investing with, and make sure that you meet the minimums.
However, bank-based online trading platforms like BPI Trade and Metrobank’s First Metro Securities don’t have a minimum requirement if you already have a deposit account with them. Consider this option if you’re interested in keeping the process as seamless as possible.
2. Charges reasonable fees.
You should understand the fees involved in buying and selling stocks. Here’s an example schedule of fees, from AB Capital Securities:
| BUYING STOCKS | |
| Philippine Stock Exchange fee | 0.005% of the gross amount (number of shares bought multiplied by the price per share) |
| Securities Clearing Corporation of the Philippines (SCCP) fees | 0.01% of the gross amount |
| Broker’s commission | 0.25% of the gross amount |
| VAT | 12% of broker’s commission |
| SELLING STOCKS | |
| Stock transaction tax | 0.5% of the gross selling proceeds (number of shares sold multiplied by price per share) |
| Transaction fees | 0.005% of the gross selling proceeds |
| Securities Clearing Corporation of the Philippines (SCCP) fees | 0.01% of gross selling proceeds |
| Broker’s commission | 0.25% based on gross selling proceeds |
| VAT | 12% of broker’s commission |
So let’s say you buy P100,000 worth of shares of Company X at P100 (1,000 shares). This would be the fees attached to this trade:
| BUYING STOCKS | |
| PSE fee (0.005% of P100,000) |
₱5.00 |
| SCCP fee (0.01% of P100,000) |
₱10.00 |
| Broker’s commission (0.25% of P100,000) |
₱250.00 |
| VAT (12% of P250) |
₱30.00 |
| Total |
₱295.00 |
On the other hand, if you decided to sell your 1,000 shares at P100 (P100,000 gross selling proceeds), you’d have to pay these fees:
| SELLING STOCKS | |
| Stock transaction tax (0.5% of P100,000) |
₱500.00 |
| Transaction fees (0.005% of P100,000) |
₱5.00 |
| SCCP fee (0.01% of P100,000) |
₱10.00 |
| Broker’s commission (0.25% of P100,000) |
₱250.00 |
| VAT (12% of P250) |
₱30.00 |
| Total |
₱795.00 |
Keep in mind that this is just an example; each broker has its own schedule of fees.
Know the fees for your transactions, and research all the online brokers to find out which schedule of fees will give you the most value for money. If an online broker has an unusual fee structure that wildly differs from the others, thoroughly go over all the fine print to ensure that the fees aren’t hidden there.
3. Provides resources and tools.
First-time investor? A lot of Philippine online brokers like COL Financial have peso-cost averaging options, which let you invest a small amount (like P5,000) on a regular basis. Want a lot of information regarding the stock market and your investments? Choose a broker that gives you access to up-to-the-minute market updates, trend reports, and recommendations on what stocks to buy. An online broker that can give you the tools to make good investment decisions, especially if you don’t have the time to do a lot of research yourself, is one worth keeping for the long-term.
4. Suits your investment style.
Do you see yourself as an active trader, or a passive investor? (An active trader makes a lot of trades over a short time, seeking to capitalize on volatility, while a passive investor buys and holds stocks for the long term.) If you’re active, look for a broker with low execution fees, or gives good rates on large trade volumes. A broker with low commissions and makes trades quickly would be the best bet for active traders. If you’re more passive, look for a broker with no monthly fees, with a setup that encourages long-term investment.
5. Has excellent customer service.
Sometimes, something might go wrong with your online trading, and you’ll need to speak to someone about it. A good online broker will provide you with good customer service, either over the phone or online, to help you through every step of the investment process. Some will even provide professional advice on the stock market and portfolio management for a reasonable commission.
These aren’t ALL the things you have to consider when taking the plunge with online trading brokers, but it’s a good starting point to help you choose the right online broker so you can get investing in no time.
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