Answer for Minimum Trade Price

Dear Azwin,
Thank you for your enthusiasm.
The value of RM5K derived for UK and AUS market is due to their higher minimum cost per transaction. In the UK it cost a minimum of 50 Pounds per transaction while in Australia, AUD50 per transaction. That works out to about RM325 per transaction for UK and RM150 per transaction for the AUS market.
Let’s calculate that based on the percentage of the transaction.If you buy RM3K of UK shares, the fees will be 325×100/3,000 = 10.83% of the value bought
But if you buy RM5K of UK shares, the fees will be 325×100/5,000 = 6.5% of the value bought
So you can see that by increasing the value of the purchase you lower the average cost of the brokerage fees per share. Therefore the smaller the value of the transaction, the higher will be the brokerage fees as a percentage of the purchase price. So you need to aim for higher capital appreciation in order to achieve profitability. But if the cost of the brokerage fees is spread out over a larger purchase you can likewise lower your expectations of capital appreciation in order to achieve profitability.
Of course you can buy penny stocks in UK for RM1,000 but the cost of the brokerage fees will amount to 32.5% of the purchase value. therefore the stock has to perform way above 32.5% in order for you to achieve profitability.
Most penny stocks in UK are traded in the AIM which is subject to a lot of speculation. It could have wild swings from +400% to -80% or even bankruptcy. Need to exercise extreme care and select stocks which are very financially sound. US, HK and Singapore have lower brokerage charges and therefore RM3K is suffice to spread the cost effectively. Hope this help.

About The Author


Author of the books “Invest In Foreign Shares!” and “Invest In REITs!” both books are available at Popular bookstores “Invest In Foreign Shares!” reached Popular’s top 10 bestseller in August 2014 in the non-fiction category