What is a low brokerage trade

Low-cost broker | Neo Broker | Cheap securities trading

That's how much fees you can save with low-cost brokers

Here is an example: If you invested 5,000 euros and made a profit of say 50 euros, you could sell the security at low cost.

At Trade Republic In this scenario, a fee of two euros would be incurred, one euro for buying one euro for selling. At Smart broker would be eight euros. For comparison: At the DKB, 20 euros would be charged. At Comdirect even 34 euros. The profit would be significantly reduced by the order fees with classic brokers.

Order volume:Scalable CapitalTrade RepublicSmart brokerJusttradeFree brokerComdirectDKB
1,000 eurosEUR 0.99 / EUR 0.001.00 euro4.00 euros0,00 €0,00 €9,90 €10,00 €
5,000 eurosEUR 0.99 / EUR 0.001.00 euro4.00 euros0,00 €0,00 €17,40 €10,00 €
10,000 eurosEUR 0.99 / EUR 0.001.00 euro4.00 euros0,00 €0,00 €29,90 €10,00 €
Source: extraETF.com

Trading on a few stock exchanges - exception: Smartbroker

Trade Republic's financial products are currently only tradable on a single exchange: LS Exchange. Trading on the Frankfurt Stock Exchange or on Xetra is not offered. It is similar with Scalable Capital. Trading there is only possible via the Gettex stock exchange. At Justtrade, the range has already been expanded somewhat: investors have two trading venues and two over-the-counter partners at their disposal. In turn, free broker only offers one trading platform: Gettex, the over-the-counter trading system of the Munich Stock Exchange.

Only Smartbroker steps out of line here: The custody accounts at Smartbroker are managed by DAB Bank (BNP Paribas) and thus all domestic exchanges, 16 over-the-counter locations and 19 foreign exchanges are open to investors. In terms of possible trading venues, the offer is extensive, but of course it has its price: Smartbroker is 3 to 4 euros more expensive per transaction than the other low-cost brokers, but still significantly cheaper than most of the established ones on the Market. This shows that the more complex the offer, the more expensive the broker usually becomes.

How limited is the offer from the low-cost broker?

With all low-cost brokers stocks, funds, ETFs, bonds and certificates can be traded. Two low-cost brokers also offer free ETF savings plans. The main restriction is that the ETF products can only be traded by selected ETF providers, but by no means by all providers. But the offer is still not small:

  • At Scalable Capital, over 1,300 ETFs from all ETF providers can be traded and are also suitable for savings plans.
  • Over 500 ETFs from iShares can be traded at Trade Republic, around 300 of which are eligible for savings plans.
  • Justtrade has around 1,000 ETFs (including ETCs) available to investors. Savings plans are yet to come.
  • 300 ETFs from DWS and recently also from Amundi can be traded with free brokers - savings plans are not (yet) offered.
  • The Smartbroker has around 600 ETFs as part of a savings plan, of which 295 ETFs from Amundi, Xtrackers, Lyxor and iShares can be saved free of charge.

For whom are low-cost brokers not recommended?

Especially for internet savvy people who like to manage their finances only online and of course for frequent traders, the low-cost brokers are a sensible alternative. But they make no secret of the fact that their customers have to accept compromises when it comes to additional offers and above all to service. Customers who value personal contact with bank advisors may prefer a classic broker who is available 24/7, issues credit cards and offers other services that go beyond pure trading, such as a checking account.

Of course, this also applies to investors who value a balanced range of products across all categories. And those who regularly want to save a savings plan can (so far) only do so with Trade Republic and Smartbroker, which of course only makes sense if the respective low-cost broker has the desired stocks, bonds, commodities or real estate ETF at all . Only then are low-cost brokers - compared to traditional brokers - a cost-effective alternative.

How do I choose a neo broker?

Investors who, despite certain restrictions in terms of service and offer, should nevertheless flirt with a low-cost broker in order to be able to make an informed decision, answer the following questions for themselves and compare them with the various brokers:

1.What is my investment strategy?
2.How important is the topic of saving for asset accumulation to me?
3.How do I want to act in the future (mobile, desktop, external platforms)
4.In which securities do I want to invest? ETFs? Shares? Bonds? Warrants?
5.Which stock exchanges are important to me?
6.What is the average order volume?
7.Do I want to open a joint, individual or children's depot?
8.How important is customer service to me (e.g. personal contact person, hotline, etc.)?
Source: extraETF.com

Depending on your personal focus, not only low-cost brokers come into question.

Tip: With direct banks, ETFs can be traded on particularly favorable terms. In our broker comparison, we have compared the conditions of banks for trading ETFs and compared them with each other. Read the broker comparison now!

What “cost traps” / fees should investors watch out for?

Investors should take a close look, especially when it comes to discount campaigns that are limited in time. Often these are bait offers, which, especially if you save a savings plan for decades, do not make any significant difference in terms of return. Especially if investors value exclusive service, it must be clear that the broker will have to charge a little more for it. On the other hand, of course, nothing speaks against keeping “running costs” as low as possible, because the bottom line is the return that counts in the end.

In addition to the free custody fee with low-cost brokers, there are of course other costs that investors should consider in their overall calculation:

1.Depot management costs
2.Order execution costs or limit fees
3.External costs per stock exchange (on-exchange, over-the-counter)
4.Costs for dividend payments, distributions or certificates Negative interest on clearing account
5.Discount campaigns or special fee models
Source: extraETF.com

Once you have identified all of these cost items, you can make an informed decision as to which broker you can use to implement your savings targets most cost-effectively.

How safe are the online brokers?

Since all tested online brokers as well as the new low-cost brokers work together with classic banking institutions, they can be regarded as safe.

Trade Republic, for example, works with HSBC as a settlement bank and is also licensed as a securities trading bank and is thus directly monitored by BaFin. Justtrade mediates its customers with Sutor Bank, free broker with Baader Bank AG. Smartbroker works with DAB, a subsidiary of BNB Paribas.

Since the low-cost brokers all work with banks that have been established for a long time, investors do not have to do without the most important “basics”. Topics such as the annual tax notification, calculation of the withholding tax or allowances are clearly regulated as with any other bank.

So there are good reasons to assume that investors' money will be kept safe. These are:

1.If online brokers are regulated by full or securities trading banks, they are also monitored directly by BaFin.
2.If they are regulated by "custodian brokers", the partner bank is also monitored by BaFin, just like the custodian brokers themselves, albeit with somewhat lower requirements or indirectly.
3.The bank or partner bank guarantees deposit protection for the credit balance.
4.The securities in the custody account are managed in trust for customers.
5.Access to the depot is via two-factor authentication (login + approval via smartphone, etc.)
6.Every transaction is carried out using secure procedures such as AppTAN, ChipTAN, FaceID, PhotoTAN, QRTAN, etc.
7.A depot is opened via VideoIdent or PostIdent.
Source: extraETF.com

Conclusion: why and how can low-cost brokers be so cheap?

Investors can only trade securities with low-cost brokers. Classic banks offer their customers a current account and / or credit cards. Investors can also buy active funds there or take advantage of a robo-advisor offer. The bottom line is that traditional banks offer many services that low-cost brokers cannot or do not want to offer at all.

The fact that the low-cost brokers restrict their product range and the selection of stock exchanges naturally follows a calculation and thus the question of how and why low-cost brokers can offer such favorable conditions has basically already been solved: the stock exchanges or trading places pay For every successfully placed order, reimbursements to the broker. Many traditional banks keep the remuneration for themselves and demand a separate fee from the customer for each order to be executed.

The low-cost brokers are different: They use the reimbursements from the stock exchange (at least in part) to keep order commissions and custody fees permanently low. The remaining part of the reimbursement will be invested in the expansion and continuous improvement of the (digital) offer. And since the low-cost brokers are reputable companies, they are certainly an asset to private investors, simply because they create a lot of competitive pressure. But of course they can only maintain that in the long run if they win a significant number of customers. Because in the end, low-cost brokers earn their money when they have many customers who carry out as many transactions as possible. Then - and only then - can you keep your offer low or even offer it free of charge.

Our low-cost broker recommendations

We recommend the following providers in the field of low-cost brokers.
providersCosts at € 1,000Costs at € 5,000Custody fee 
Scalable Capital0,00 € (0,99 €)0,00 € (0,99 €)NoMore info *
Trade Republic1,00 €1,00 €NoMore info *
Smart broker4,00 €4,00 €Custody fee if there is too much cash on handMore info *

Video Tip: How to Find the Right Online Broker

Tip: With direct banks, ETFs can be traded on particularly favorable terms. In our broker comparison, we have compared the conditions of banks for trading ETFs and compared them with each other. Read the broker comparison now!