There are still many people who invest through their bank, and that is a shame! In our article on inexpensive investing we already mentioned that there are big differences in investment costs between different providers. In addition, the banks often offer the least favourable conditions at the highest cost price. In this article we will go deeper into alternatives to investing through a bank.
Investing through a bank
Many people invest at SNS bank, ASN bank, Deutsche bank and ING bank, but that is a shame! The costs at these banks are usually very high. At the ING bank, for example, you already pay a basic fee of £16 per year and a variable fee that comes on top of that. In addition, you pay a further £4.00 and 0.04% of the purchase price for a transaction in a stock. All this makes investing at a bank very expensive and this is at the expense of the return and the possibility of spreading risk.
Do you get more when you invest with the bank? Not really; there are no good reasons that justify the expensive investing at the bank. The options are usually the same as those of another online broker. Only if personal contact is appreciated can a bank offer any benefit over an online broker. At a bank like ING, for example, you can often visit the branch office to open an account.
Investing with an online broker
It is ultimately cheaper to invest with an online broker. Most online brokers do not charge an annual fee for using the account. Thus if you do not do much with it, it costs you nothing. The costs for purchasing a stock, for example, are also significantly lower.
One example of an online broker is Plus500. With Plus500 you trade in derivatives on stocks so that you do not purchase the stock physically. As a result, the transaction costs can be significantly lower than with a traditional bank. It is possible to try Plus500 for free by means of a demo. Click here to open an account >>
Even if you prefer to invest physically, an online broker can offer a solution. There are also online brokers that offer cheaper rates. There is always a basic cost price per stock, but it is easily half of the cost price charged at ING bank. A good provider where you can physically invest in stocks is DEGIRO, and you can read all about it here.
Ultimately it is important to choose a broker that suits you well. It is therefore wise to compare the different brokers with each other. Consider for yourself what you think is most important about a broker and make a choice based on your own selection criteria. In our overview of brokers, you will find several good brokers that may suit you.
Remember, creating a demo account is free and completely risk-free. So first try out which broker you like and then get started with the big money!