COMMENT
Save A Fortune On Share-Dealing!

By Cliff D'Arcy
December 5, 2005

Regular readers will know that I'm a big fan of investing in shares.

Indeed, I'm been dabbling in the stock market since my late teens and, naturally, over almost two decades, I've made great gains and horrible howlers in equal measure! However, I'm much surer of my investing strategy these days, because I no longer race to "get rich quickly". Instead, I simply invest a big chunk of my spare cash into the shares of quality companies, sit back and let time to the rest.

One thing that my "get rich slowly" strategy certainly does is to minimise "breakage" - the trading expenses that eat into your returns. For example, your returns are hit by:

1. Stamp duty (the government takes 0.5% of the value of each purchase of UK-listed shares, so a £2,000 buy means coughing up £10 to the Chancellor);
2. The bid-offer spread, which is the difference between the (higher) buying and (lower) selling price of a share at any one instant; and
3. Buying and selling commissions (the trading fees that your stockbroker charges).

Although you can't do anything about (1) when buying UK-listed shares, a good stockbroker can help you to tackle the cost of (2). For example, several leading online brokers offer a "price improvement" service, which often beats market makers' best prices. For example, Fool Partner Squaregain, the UK's second-largest retail stockbroker, beats the quoted spread in nearly nine out of ten cases, which saves its customers about £7 per trade.

In addition, you can make big savings by having an account with a stockbroker which has low dealing fees. Thanks to the wonders of the Internet, execution-only brokers (which simply process your trades without giving you advice) can offer very low dealing charges for electronic dealing, plus low annual management fees, too.

Generally speaking, the cheapest stockbrokers are those which charge flat fees, which means that your fee is fixed and doesn't depend on the value of each trade. For example, let's look at the annual cost to an investor who makes, say, two monthly trades of £2,000 each in a UK dealing account (not inside a tax-free ISA wrapper):

• Hoodless Brennan: £154 (£7 per trade)
• ShareCrazy: £216 (£9 per trade)
• IWeb: £240 (£10 per trade)
• iDealing: £260 (£10 per trade, plus £5 quarterly fee)
• Hargreaves Lansdown: £278.80 (from £9.95 per trade, plus £12.50 quarterly fee)
• Barclays Stockbrokers: £288 (£12 per trade)
• Squaregain: £300 (£12.50 per trade)

At the other end of the scale, expensive or high-street stockbrokers might charge fees of between £600 and £1,200 for the same dealing pattern. Ouch!

Finally, before you switch brokers, be sure to check out the special offers which many brokers offer. Online stock-broking is a cut-throat business, so many brokers will, for example, stump up towards any transfer or closure fees that you incur, or will give you a certain number of free trades.

Here's to successful - and profitable - investing!

More: Check out the delightful deals in the Fool's Online Brokers centre | Three Ways To Invest For Less.