Zero-commission trading of US stocks is coming to Ireland. A new mobile brokerage, Singapore-based Gotrade, promises an investment world “without borders, barriers or minimums”, allowing investors in more than 150 countries (including Ireland) to trade US stocks for free.
Like US retail favourite Robinhood, it also offers fractional trading; that is, with as little as $1 in your account, you can buy a fraction of a share.
Not everything is free – there is a relatively hefty $12 charge for withdrawals, for example – but there’s likely to be an appetite for this kind of offering.
Meme stocks like GameStop and AMC aren't just wildly popular among Robinhood's US-based Redditors. Data from discount brokerage Degiro shows they have been among the most-traded stocks in Ireland and across Europe in recent months.
Hyperactive behaviour
Zero-commission brokers can also be used by buy-and-hold investors, although the danger is that free trading will drive hyperactive, unthinking activity. Earlier this year, Dan Egan, a behavioural finance expert at online investment company Betterment, cautioned that "free is easy" – too easy.
Egan referred to an experiment where people could buy a delicious Lindt truffle for 15 cent or a cheap-tasting chocolate for 1 cent. Most (73 per cent) chose the tastier Lindt truffle. However, when offered a Lindt truffle for 14 cent or the cheap chocolate for free, the results were reversed; 69 per cent chose the free chocolate, even though the price difference (14 cent) hadn’t changed.
Egan’s point: low cost is better than free. Paying a euro or two for a stock may be preferable to getting it for free.
