I am thinking seriously about getting involved with buying and selling shares. I am a total beginner but have had some advice from an American friend (lives in US) who seems to be doing fairly well trading just Google shares. However, I live and work here in Switzerland on an L permit and am a UK citizen and must now choose an online broker. I have read through most of the past threads on this subject but still have a few specific questions:
1. Do you have to go through a Swiss broker like SwissQuote or is it possible to trade through say a US or UK broker? Is this basically to avoid tax complications or is the tax decided on where you live rather than where your broker lives?
2. If I must go through a Swiss broker, does anyone have any experience with SwissQuote versus SaxoBank and the Interactive Brokers these days? I gather SwissQuote, whilst being the most popular, are more expensive than the other two.
3. If you are trading shares of a US company like Apple or Google in NASDAQ, which I assume are priced in USD, and your money is in CHF, do you convert currencies each time you trade or do brokers like SwissQuote let you keep your money in a dollar account so you could always convert currencies in bulk and keep a dollar reserve?
An incomplete reply, limited to my personal experience:
1. IB is an excellent broker, financially stable. The other two are a joke. In your situation, you would open an account with the London subsidiary of IB.
2. If in doubt, ask any broker for a list of the exchanges and trading platforms (a) of which they are a member, and (b) of which they are an introducing broker. Diligently avoid trading via the (b) list.
3. Taxation is based on your residence.
4. IB will allow you to choose your "base currency", so you can keep your funds in US$ if that it what you will principally trade. (You should ask carefully if withdrawals may be in your base currency or in "other" currencies; I believe there are no restrictions.) IB has perhaps the lowest cost available for FX conversions.
5. In general, for any broker: when trading in "other" currencies (not the currency in which your account is denominated), the broker technically "loans" you the currency; overall, not a good idea for long-term holdings, though OK for very short-term trades.
1. It is possible to trade through any broker. Capital gain is decided on where you live. Dividend is taxed by the broker depending on where you own the shares. For example if you own a german company on the US exchange, the dividend will be charged based on German taxes. You can get these taxes back if you file a tax return but I have not been able to figure it out yet.
2 Interactive brokers is the best and the cheapest. I strongly recommend it. I am a customer for 9 months now.
3. If you have negative balance in a particular currency, the broker will charge interest on those. Look at the rates of the corresponding brokers on their webpage. IB charges one of the lowest rates, but you need to maintain margin requirements. Margins are not very easy to understand. You need to do your own research for it.
You can also trade at IB on a cash basis (which is what I do), although it makes life slightly more complicated as you have to purchase foreign currency before you trade. For example, my account is denominated in CHF. If I want to purchase a USD-denominated stock, I must first buy dollars, then buy the stock.
I also find the IB trading platform quite confusing -- no doubt that's because it's build for professional traders and I'm not a professional trader. There's definitely a learning curve.
Finally, the last thing to point out is IB's charges -- if you trade often, the trading charges are very low, but there's a minimum charge of $10 each month, regardless of whether you trade or not. If you're a buy-and-hold investor, you basically end up paying $120 a year to maintain your account. In my case, even with infrequent trading, IB is cheaper than the alternatives.
So does that mean you keep two different cash accounts, one in USD and the other in CHF? I guess if you are constantly trading USD based stocks and making a profit, you may not need to convert much from CHF as your USD account is hopefully growing in time.
Also if you register with IB UK office, do they automatically treat you as a Swiss resident based on your address? And are you committed to stay with them for a min period.
From the answers I see here, it seems IB (UK) is the way forward..
Yes, and no. You have the same account, you see all your stocks in the same window and at the same place. They are denominated in different currencies. You will have a USD and a CHF account in the sense that it will maintain the cash balances separately.
There is no min-period, except maybe a month. They will ask for your residence permit to open an account. You can update you residential proof later on if you move countries.
Someone just called me from the Saxo Bank after I had left them a message yesterday, and he said their fees are only 2 cents per share per trade for North American markets and there are no additional maintenance or annual fees which I find hard to believe. Of course, if you are trading penny shares or shares that are less than a dollar this is expensive but for expensive shares like Apple (400 somthing dollars) or google (around 600) this seems like a good deal. I have seen their web platforms and looks quite sleek.
Only ever risk as much as you are willing to lose....
Oh.. and a simple lesson in shares.
If you invest 1000 chf in shares, you can either buy 100 at 10chf or 1 at 1000 chf.
You also look at how many are traded per day in the market that you are looking into. If only 3 shares of 1000 chf are traded per day, your likelihood of selling to someone who wants to buy your share, is lower than for a share that is 10chf, where 10,000 are traded per day.
Then you look at the price movement of the share. For a 1000 chf share to rise 10%, it has to go to 1100chf. Has this share ever been at this price before, and what do you think are the chances of this happening again?
For a 10chf share to go up 10%, it goes to 11chf. Is this more likely for this product?
You, in effect, will still have made 100chf (if you sell).
The idea is heaps simpler than analysing an exothermic reaction in a super saturated solution, and it pays more
It depends on how much money your trading. Sticking to 1000 share trades your paying $20/trade on 2 cents a share which is rather over priced now a days. Should be looking around the $6/7 per trade for a better deal in the long run. Plenty of options all around. Well there are in Canada anyway.
Please though, before you go through with anything. Paper trade. Sit down and trade hypotheticals and don't cheat or anything because once your out there, you can't just erase something you don't like. So work out some time to keep track of some trades on excel and just see how you did after a few weeks at minimum. You will make mistakes by yourself at first and the more time you have to making mistakes that don't cost you money, the better.
Trading is not a game and there are serious risks you should consider if you approach it as one. Read up on investopedia and other sites to understand the inherent risks or trading penny stocks and other securities.
Wow, skimmed over this part of the message initially, and it changes my advice somewhat. Interactive Brokers trading platform is not appropriate for beginning traders -- there aren't many "Are you sure you want to XXX?" warnings and it certainly isn't what I would describe as user-friendly. I've been trading stocks online with a number of brokers for nearly ten years, and I still had a pretty steep learning curve.
Moreover, Interactive Brokers ask about your trading experience -- and unless you lie, they won't open an account for someone without previous trading experience. From their website:
Accounts are geared towards professional/active traders and investors; therefore we require the following from customers: Good or extensive product knowledge for any product you wish to trade. Prior execution of 100 or more trades (any product). A minimum equity deposit in cash or stock of USD 10,000 (or USD equivalent) or USD 5,000 for IRA Account (or USD equivalent). Also, you should understand what you're investing in as well as the associated risks. The suggestion of another poster to paper-trade for a while is a good one.
In terms of your list of possible Swiss online brokers, there is also Keytrade Bank; we (full disclosure: I work for them) are about 25%-50% cheaper than Swissquote depending on the amount of your trade; you can trade all major US equity markets in real-time (NYSE, Nasdaq, Amex, OTC BB). You can pm me for more details or check it out on www.keytradebank.ch
So finally opened a demo account with Saxobank, and thank you all for your comments and tips. Did paper trading for about 2 months with $100K of virtual money and made a little over $10K mainly on google and apple stocks.
Opened my first real account with saxo yesterday with $25000 real money. bought 40 apple shares at 602 by day's end it was 619, good start I say.
A few surprises which the demo account does not show:
Stamp duty levied by Swiss government at 0.15% of total trade on sell as well as buy. That means I lost about 40 on buy and will lose another 40 on sale if I sell now at 619. The saxo fee is another 15. So nearly 120 dollars loss on the profits ( (619-602 = 17 x 40 = 680). So net gain as of today 560.
Still not bad but this stamp duty could ruin things if you do this too often. I wonder if the Capital gains tax in UK is a better deal? Also no tax with CFDs, which I know very little about but I know they are real high risk and probably not good for a beginner?
No custody fees with Saxobank... that's nice. It would make it the only trading platform I know of, together with Schwab, to not charge these ridiculous petty fees.
So I would like to open an account with a swiss based stock broker. If I then move back to my home country, can I continue to have my account here? Or will I have to move my funds to a broker in my home country?
And how exactly would this work since CH doesnt have capital gains tax on stocks and my home country does?
If your home country has residency-based taxation on worldwide income (which is quite common for developed countries, bar the US), you would in theory have to declare those capital gains to your home country if you are residing there.
If your home country has no FATCA-like arrangement, you can choose whether to declare it or not. Keep in mind that if you decide to move this money back home later on, questions may be raised concerning the source of said money if not previously declared (if we are talking about a big amount).
I have an account with Saxobank and have been trading with them for about two months.
I received a US divided and had the full withholding deducted. I asked them if they offered traduced withholding rates using the double taxation treaties and they said that they don't offer this. I thought that most brokers would offer this service by submitted a W8Ben form.
Does any one know if the other typical brokers offer this? I would like to invest in some dividend yielding shares, but hurts when the are taking the full withholding each time.
A US broker will deduct 15% with a W8BEN, a Swiss broker will deduct 30%. Almost all can be refunded by doing a tax return, the percentage returned depends on your level of earnings, a low earner will have less refunded.
It's been almost 15 years since I last bought shares but now I'm tempted to buy some UK shares as I know the company and the market and the analysis and commentary is in English.
My question is mainly on stamp duty for buying UK shares as I know that buying UK shares from CH will also incur CH stamp duty although CGT won't be applicable as I'm CH resident.
My UBS bank can buy the shares for me via custody account but I'm wondering if a UK broker will take me as a client as the last time I tried to open account with Interactive Investor back in 2012 when I wanted to buy BDEV when it was 190p, I simply couldn't do it.
Furthermore, with the introduction of HFT I don't have a clue anymore why certain shares do well or bad although it contradicts the FTSE performance for the day.
Since it's been a long time, I feel a crash course is needed. I know there are some day traders on this forum, perhaps they can give me some pointers.