Why Cost Matters When Investing In The Stock Market
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Do you know all the costs of investing in the stock market? For many of us, we focus on the costs that come from taking on the risks (and the opportunities) of investing in the hopes of fruitful returns.
However, just like buying a car, we don’t necessarily realise all of the other costs and fees that come with it and how it can affect our finances down the line.
In this article, we’ll break down some common fees and costs you might face when investing in the stock market, why they can affect your returns, and how you can reduce those costs.
What are the costs of investing?
There are numerous costs and fees associated with stock market investing and it can differ from the Malaysian markets to the US markets.
But in general, here are the key costs and fees that you will need to pay when investing:
Brokerage fee/commission
A brokerage fee is any commission or fee that a broker charges you to facilitate trading or provide any other services.
The fee/commission is usually calculated through a percentage of the total value of the trade/transaction. For example, if you buy RM5,000 worth of shares and the commission rate is 1%, then the broker will receive RM50 as their fee/commission.
The commission range can vary depending on the broker or type of securities, but the minimum percentage ranges from 0.15% to 0.6%. More often than not, the brokerage fee/commission can be one of the major costs (other than the purchase price itself) that you’ll face as an investor.
Clearing fee
A clearing fee is what you pay to complete the transaction of purchasing securities through a clearinghouse. It’s essentially a service in which to ensure the correct and timely transfer of funds to the seller and securities to the buyer.
Bursa Malaysia is the Malaysian clearinghouse and their fees are currently set at 0.03% of the transaction value with a maximum fee of RM1,000. It is a necessary cost to consider when you’re trading securities.
Stamp duty
All legal documents in Malaysia are required to pay a stamp duty tax, including securities transactions. The fee is paid by the buyer of the security, with the current rate of 0.1% of the total value of the transaction.
The maximum amount is capped at RM1,000 for shares or stocks and RM200 for marketable securities. Similar to clearing fees, stamp duty is a necessary cost that you’ll take into account when buying securities or stocks.
Other fees
On top of the fees discussed above, there are additional fees that you might encounter when investing such as buying-in and trading fees to inactivity and platform fees.
Certain fees, such as platform fees, tend to vary so it’s important to carefully check and review all the fees that are associated with the platform you’re using.
How these costs impact your returns
Now that you know the different costs associated with trading platforms. Let’s see how it all can add up if you’re not careful.
Let’s say you’re trading with a trade value of RM10,000. This means you bought Stock A at RM10,000 and when you go to make the transaction, the actual cost will be higher than RM10,000.
This is because you’ll have to pay for the commission fee, clearing fee, etc. Here’s a breakdown of how the costs will be calculated:
| Trade value | Commission | Clearing fee | Stamp duty | Total |
|---|---|---|---|---|
| RM10,000 | RM60 | RM3 | RM10 | RM10,073 |
At first glance, this might not seem much, but over time, the cost will accumulate and will have a significant impact on the overall returns that you get. While certain fees are unavoidable, such as the stamp duty and clearing fee, it’s the commission that can have a more significant impact on your investment returns.
Getting more from your investments to maximise returns
Strategising your investments to lower the costs of trading while ensuring that you get the maximum returns, it’s a good idea to use platforms that offer lower commissions/fees or a more affordable pricing structure.
Webull Malaysia is one of the most prominent online trading platforms that’s looking to cater to investors and traders who want to make the most out of their investments by offering competitive pricing structures for trading.
They achieve this by giving new users a zero-commission fee period (90 days)** where they can buy and sell stocks on their platform without having to pay any brokerage fees.
Here is how it works and how it compares to other trading platforms.
| Total fees/commission/brokerage fees charged by brokers | ||||
|---|---|---|---|---|
| Market | Trading Value (RM) | Webull MY (90 days free commission) | Platform A (180 days free commission) | Platform B |
| Malaysia | 100 | RM0 | RM3 (platform fee) | RM1 |
| 200 | RM3 (platform fee) | RM2 | ||
| 500 | RM3 (platform fee) | RM5 | ||
| 1,000 | RM3 (platform fee) | RM9 | ||
| 5,000 | RM3 (platform fee) | RM9 | ||
| 10,000 | RM3 (platform fee) | RM10 | ||
If you decide to place multiple orders of single stocks in a single day, the calculations will be as per below.
| Total fees/commissions/brokerage fees charged by brokers for multiple orders placed on a single stock in a single day | |||||
|---|---|---|---|---|---|
| Market | Trading Value (RM) | Transaction amount, few orders, single day | Webull MY (90 days free commissions) | Platform A (free commission) | Platform B |
| Malaysia | 500,000 | 100,000 | RM0 | RM3 (platform fee) | RM100 |
| 50,000 | RM3 (platform fee) | ||||
| 200,000 | RM3 (platform fee) | ||||
| 150,000 | RM3 (platform fee) | ||||
| Total | RM0 | RM12 | RM100 | ||
After 90 days, Webull Malaysia’s commission fees are introduced and here’s how it compares to other platforms.
| Total fees/commission/brokerage fees charged by brokers | ||||
|---|---|---|---|---|
| Market | Trading Value (RM) | Webull MY | Platform A | Platform B |
| Malaysia | 100 | RM5 | RM3.03 (platform fee + commission) | RM1 |
| 200 | RM5 | RM3.06 (platform fee + commission) | RM2 | |
| 500 | RM5 | RM3.15 (platform fee + commission) | RM5 | |
| 1,000 | RM5 | RM3.3 (platform fee + commission) | RM9 | |
| 5,000 | RM5 | RM4.5 (platform fee + commission) | RM9 | |
| 10,000 | RM5 | RM6 (platform fee + commission) | RM10 | |
While at first glance, it might look like the costs seem a bit pricey. However, if you were to make multiple orders placed on the same stock, on the same day, an amalgamation of commissions is applied.
| Total fees/commissions/brokerage fees charged by brokers for multiple orders placed on a single stock in a single day | |||||
|---|---|---|---|---|---|
| Market | Trading Value (RM) | Transaction amount, few orders, single day | Webull MY | Platform A | Platform B |
| Malaysia | 30,000 | 5,000 | RM24 | RM27 (platform fee + commission) | RM30 |
| 3,000 | |||||
| 8,000 | |||||
| 2,000 | |||||
| 3,000 | |||||
| 9,000 | |||||
Overall, Webull Malaysia can still be more affordable to trade with for the Malaysian markets if you place multiple orders for a high investment amount of stock.
Trade amalgamation allows you to combine your orders to help you save on trading costs and is applicable for buy or sell trades.
It is automatically applied if your order fulfils the following conditions:
- It’s the same stock or the same ETF
- Trades are on the same side (Buy trades can only be amalgamated with another buy trade)
- Trades are done on the same trading day
- Trades are from the same account
The zero-commission fee period also extends to Webull Malaysia’s US markets. After the 90-day zero commission period, you get to enjoy 50% commission off° (or 0.025% on the trading value of US stocks) on US trades for the next 90 days.
So, if you’re interested in investing in US stocks such as Nvidia or Apple, here are the costs.
| Total fees/commission/brokerage fees charged by brokers | ||||
|---|---|---|---|---|
| Market | Trading Value (USD) | Webull MY (90 days free commission) | Platform A (180 days free commission) | Platform B |
| US | 100 | $0 | $0.99 (platform fee) | $1.88 |
| 200 | $0.99 (platform fee) | $1.88 | ||
| 500 | $0.99 (platform fee) | $1.88 | ||
| 1,000 | $0.99 (platform fee) | $1.88 | ||
| 5,000 | $0.99 (platform fee) | $5 | ||
| 10,000 | $0.99 (platform fee) | $10 | ||
| For multiple orders of a single stock in a single day with a total trading value of 65,000 | 10,000 | $0 | $0.99 (platform fee) | $10 |
| 40,000 | $0.99 (platform fee) | $25 | ||
| 15,000 | $0.99 (platform fee) | $15 | ||
| Total | $0 | $2.97 | $50 | |
After the 90-day zero commission fee period with the 50% off or (0.025% on the trading value of US stocks) applied, Webull Malaysia still offers a more affordable pricing structure compared to other platforms.
| Total fees/commission/brokerage fees charged by brokers | ||||
|---|---|---|---|---|
| Market | Trading Value (USD) | Webull MY | Platform A | Platform B |
| US | 100 | $0.99 | $1.02 (platform fee + commission) | $1.88 |
| 200 | $0.99 | $1.05 (platform fee + commission) | $1.88 | |
| 500 | $0.99 | $1.14 (platform fee + commission) | $1.88 | |
| 1,000 | $0.99 | $1.29 (platform fee + commission) | $1.88 | |
| 5,000 | $1.25 | $2.49 (platform fee + commission) | $5 | |
| 10,000 | $2.50 | $3.99 (platform fee + commission) | $10 | |
| For multiple orders of a single stock in a single day after 90 trading days with a total trading value of 8,000 | 1,000 | $0.99 | $1.29 (platform fee + commission) | $1.88 |
| 1,000 | $0.99 | $1.29 (platform fee + commission) | $1.88 | |
| 2,000 | $0.99 | $1.59 (platform fee + commission) | $2 | |
| 3,000 | $0.99 | $1.89 (platform fee + commission) | $3 | |
| 1,000 | $0.99 | $1.29 (platform fee + commission) | $1.88 | |
| Total | $4.95 | $7.35 (platform fee + commission) | $10.64 | |
For multiple orders placed on the same stock, on the same day, Webull Malaysia becomes the clear choice in how affordable they are compared to other platforms.
Similar to trading in the Malaysia market, Webull Malaysia offers a fairly competitive and affordable rate for trading in US stock, if you strategise your investments smartly.
Start investing with Webull Malaysia
Taking your first (or hundredth) step towards investing should be on a platform that you not only trust but also provides features and benefits that are advantageous for its users.
As an investing platform that’s approved by the Securities Commission Malaysia, it is a safe platform for you to invest and trade.
If you’re looking for Shariah-compliant platforms, Webull Malaysia offers Shariah-compliant funding services and a unique parallel financial system that gives you the freedom to fund your account with an Islamic Bank or Conventional Bank.
Not only that, Webull Malaysia is currently running promotions from now until 07/02/2025, for new users who can enjoy the following benefits:
- Register & successfully activate an account with Webull Malaysia
- 90 Days 0-commission for MY & US stock trade
- LV2 real-time market quotes for MY & US markets
- Deposit *RM8,000 to receive RM100 trading voucher (5 x RM20 vouchers)
- Deposit *RM8,000, maintain for 60 days & execute 1 BUY trade within campaign period
- Receive *RM300 free US shares
Investment costs and fees can significantly impact your ability to maximise your returns if you’re not aware of them. By understanding the different costs and fees and how to strategically minimise them, you can reap more of the rewards of your investments.
Ready to get started with your investment journey? Create a Webull Malaysia account with iMoney today to receive exclusive rewards.
*Terms and conditions apply.
** For users who are currently benefitting from a 180-day or 90-day free commission period, the free commission will continue to apply until expiration.
°For existing clients whose 180-day free commission period has lapsed, a 50% commission rate will be automatically applied.
