Ahh you young investors have it so good nowadays, especially with Superhero brokerage priced at just $2 a trade. Back in my day I remember paying $24.95 brokerage per trade and you had to have a $500 minimum and and..
…and come to think of it, I’m only 43 years young. So if I start another post here at One Man Many Plans with the cranky old age adage of back in my day feel free to pretend to shoot me.
But I was there when both the internet became a thing and when investing delved into the online world and yes, I was paying some hefty brokerage fees to not only buy shares, but also to sell them. Which automatically meant that unless your shares managed to make at least $50 profit (or you collected/reinvested enough dividends for that to happen) then making a profit was a challenge.
Actually back then owning shares was a challenge too because with the Australian Stock Exchange (ASX) had a minimum of $500. Which meant if you were using Westpac brokering to buy some aussie stock, you’d need at least $500 for the shares and then an extra $24.95 to execute the buy trade.
And in case you’re wondering? A quick Google shows me that rule hasn’t changed:
The Australian Securities Exchange (ASX) requires a minimum investment of A$500 (excluding brokerage) when purchasing shares in any ASX-listed security for the first time. This is known as the ‘Minimum Marketable Parcel’ (MMP) of shares.
-Stake, minimum trade amount AU
Note that after the $500 minimum though, you don’t have to spend at least $500 for the next time you buy more of that company’s shares. Oh god would that be a struggle for investors tipping in only bits of fundage at a time.
So with that law still in effect, how did I manage to buy a single share at $12.90 through Superhero and pay only $14.90 for the whole trade including brokerage? Well there’s a few things to know here.
Please note: I am not a financial expert nor do I claim to be one. Superhero did not pay me anything to write about their news, website or app. Any shares I’ve mentioned in this article should not be taken as recommendations, I am purely writing about my own experiences and reasons. When in doubt about investing, perhaps talk to a professional financial adviser.
Superhero is a custodian model (What it means and what you can do)
Which in a nutshell means:
At Superhero, a custodian holds shares on behalf of our customers for safekeeping. Your shares are held by FinClear, our market, clearing and settlement participant on behalf of Superhero.
-How are my shares protected by Superhero?
But to break it down in a nutshell in laymen’s terms, what it means to new investors like my good self:
-The ASX uses a system called CHESS to do all their stuff. It’s a heavy duty computer system and that’s as complicated as I want to go with writing about it here (I could go deeper but I don’t want to bore you.) Superhero doesn’t have access to the CHESS system, but their custodian Finclear does. So think of Superhero as a waiter who takes your order, Finclear over in the kitchen does the cooking (trading) before handing it back to Superhero to then bring back whatever you ordered to the table (website/app). You still get your shares, they just go through a process first.
-While you can still receive dividends from ASX shares through Superhero, because of the lack of direct access to CHESS, there’s no automatic reinvestment options. Nor can you have any dividend cash sent by cheque to your house from the company/fund you invested in.
-You can however use the money made from dividends to send cash to your back account through the website or app or reinvest it back into the company that paid you or something else/some other stock. Yes, because this is considered a trade, you will pay Superhero brokerage of $2.
-Unlike US stock though Superhero, you can’t buy/own fractional shares. So you could have 23 shares in BHP, but not 23.86642. In the case of US stock though, you could (and I have) bought and owned less than one full share in things listed in the US market. Case in point, I currently owned 0.82616 in the VOO ETF based in the US.
-CHESS affiliation or no, you’re still buying and selling shares and stocks through Superhero which means you’re still creating capital gains events (profits and losses) and these will still need to be reported when you do you tax. You’re not getting out of this one easy here.
-It also means there’s no minimum order. Yes because Finclear has the necessary credentials through the CHESS system (and more than likely has well over AUD $500 in everything available), it does mean you can buy a single share in an Australian company, pay the Superhero brokerage of two dollars on top of it and off it lands in your portfolio.
And so to test this out…
What I bought with the $2 Superhero brokerage
When I first got into Superhero (Jan 2023) Superhero brokerage costs were $5 for ASX listed stock but no brokerage for US stocks, you just paid a small fee to transfer your aussie dollars into US coin. Now since there was a $100 minimum to trade AUD to USD, for some reason I thought it was the same for buying Australian shares. To paint a clearly picture of how I thought it was:
Minimum order: At least $100 worth of ASX stock + $5 Superhero brokerage = $105+
When in actual fact it was:
Minimum order: At least 1 unit of ASX stock + $5 Superhero brokerage = Whatever that happened to be.
But since Superhero brokerage changed from $5 to $2 earlier this week, suddenly we find ourselves with:
Minimum order: At least 1 unit of ASX stock + $2 Superhero brokerage = Whatever this happens to be.
And so for the sake of curiosity and finally buying ASX stock for the first time in over a decade and a half, I executed a couple of quick trades. And now in the Australian side of my Portfolio I have:
BETASHARES AUSTRALIAN DIVIDEND HARVESTER FUND (HVST.AU) X 1 SHARE
Why?: Monthly dividends.
(No not HSV the Holden specialists, HVST!)
Over on the US side of my Superhero portfolio, I have a few stocks that pay me every month. Stocks like Jepi, O and Stag.us. It’s not much, but it adds up and whatever money they make I cycle into the next time I buy more stocks, looking to grow things to a level so that eventually each month it’s able to buy $10 worth of US stock each time without me having to add to it.
The Harvester Fund is an interesting beast as it’s based of shares bought close to their dividend hold date then sold once they get past it, still collecting the div on pay day. Then it repeats the process on whatever both looks good and is about to pay out on an ever rotating cycling of dividend hunting. That’s a lot of work I don’t have to do personally, so I’m happy with that.
At the time of writing it’s paying a div of 54 cents a year per share/4.5 cents a month.
However: Because I only bought a single share for this experiment? To make a profit on it I’d need it to rise in price by at least $4 or, remain steady and hold it for 8 years to make more dividends that the Superhero brokerage set me back. Not great math at all.
Had I bought 2 at the time and still paid only $2 brokerage? The share price would need to rise by just over $2 to turn a profit/be held for 4 years. $1 and 2 years for 3 shares etc and on it goes.
Still, for $2 I was keen to see how this worked and off I went. As I add to it, I’ll be adding a lot more than just a single share each time I buy.
And..
ENVIRONMENTAL GROUP LIMITED (EGL.AU) x 37 SHARES
Why?: Cheap, growth
Priced at just 26 cents a share, my next $10 spare change went to 37 shares of EGL. In a nutshell, they clean up the environment which is a great cause and let’s face it (they’ve said as much themselves), they’re certainly not going to run out work while I’m still breathing for a long time to come.
They’re currently not paying a div but that’s okay, I have been looking for a cheapie for a while now and in the case of this initial investment, the price just needs to rise to 37 cents a share to nullify that cheap Superhero brokerage.
And let’s be honest, each pay day at the moment there’s far more likelihood now of chipping in $10-15 into something like EGL than their is of having a spare $100 to convert into US shares. So I might be growing this little pot for a while at least.
So now I’m buying/investing in more Australian stuff
Obviously the more you buy, the less the $2 brokerage becomes of a hassle/hurdle but the fact that I’m no longer paying at least 12 times that to buy a big $500 wedge minimum? That’s a game changer for me. Thanks Superhero!
Edit: I just found out Superhero has it’s own YouTube channel, so if you want to get even more into your shares and cheap brokerage, have at it!
July 2024 Edit
My little lock box of ASX stocks continues to grow, even if it took a slight path change. It now includes:
ACF.AU – Acrow Limited is a leading provider of smart integrated construction systems across formwork, industrial services and commercial scaffolding in Australia. Enhancing our portfolio are falsework and shoring, screen solutions, Jacking Systems (also known as Jumpform), and internal engineering capabilities.
EGL.AU – The Environmental Group Limited engages in the design, application, and servicing of gas and vapor emission control systems, and inlet and exhaust systems for gas turbines primarily in Australia and internationally. Its products include inlet filter houses, fogging systems, silencers, guillotine dampers, bypass and HRSG exhaust stacks, heating and cooling systems, and diverter dampers; and air pollution control products, such as electrostatic precipitators, fabric filters, and gas cleaning systems. The company also provides engineering services to various industries. The company is headquartered in Notting Hill, Australia.
HBRD.AU – (in place of HVST) BetaShares Active Australian Hybrids Fund (Managed fund) (ASX: HBRD) offers the opportunity to earn attractive, tax-efficient monthly income, from a diversified portfolio of hybrid securities, actively managed with the aim of reducing the volatility and risk associated with owning hybrids directly. HBRD will invest in an actively managed portfolio of hybrid securities overseen by a professional investment manager. If the hybrids market is assessed to be overvalued or to present a heightened risk of capital loss, the Fund can allocate more of the portfolio to lower risk securities such as cash or bonds.
Current growth across all 3: -4%
July 2024 Edit Part 2
Due to bills and other things going on, it’s been a while since I last bought US stocks through Superhero Trading and in my most recent acquisition, I found out the downside to the $2 brokerage deal. Namely the fact that with US stocks, ETFs and the like, they also attract $2 brokerage, this time in US currency.
So previously it was:
Exchange minimum 100 AUD to USD = .65 charge per $100, $10 USD minimum share buy, no brokerage.
Now it’s:
Exchange minimum 100 AUD to USD = .65 charge per $100, $10 USD minimum share buy, $2 USD brokerage.
Which if you’re only buying one particular bunch of shares, an extra $2 USD fee on top really isn’t too much of an issue. However if you’re like me and enjoying buying as many different shares as possible with your converted money, that’s when it adds up. My usual 6 x $10 minimum now needs an extra converted $12 in US funds ($18 AUD) to happen.
It hasn’t stopped me buying US shares, but now there’s a bit more thought time over which shares I’m going to buy (ie 3 sets of shares instead of the usual 6 minimum I previously bought.) Some food for thought if you’re looking to invest in the US market side of things.
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