Subject: Re: How to invest (part 2 of 3) Shrewd'm style
Before you can acquire assets, you need a brokerage account (examples amongst the giants include Charles Schwab, Fidelity, and Interactive Brokers). This is your portal to the global markets.


Might I suggest some considerations regarding the choice of brokerage?

Since most people will not want to suffer the pain in the neck of changing brokerages, they should consider which brokerage corresponds best to their needs. For instance, if you want access to international markets (occasionally buying shares in some exotic country like the UK, Greece, Japan, Canada, Australia…) most US brokers will not deliver. Brokerage fees should be low but if they are zero, it’s probably because tour broker is getting paid in some hidden way, like charging you a lot of interest on any negative balance, or not paying you much interest, if any , on your positive cash balance, or is not executing trades at the best available price (routing them somewhere where they get paid for order flow (PFOF), or through very disadvantageous forex rates on currency conversion.

These things will not have the same importance for every investor, but they can make a fairly big difference. For instance, changing $50,000 in Canadian currency for US dollars is likely to cost you a lot more than it might appear at first glance - with my old Canadian broker (TD Direct Investing, also called TD Waterhouse), this could cost as much as $1000, basically because their rate for buying that amount of USD is (currently) 1.3839, meaning I pay CAD$1.3839 for every US$1. If I do the currency conversion in the other direction, the rate they quote me is 1.3476. In other words they take a cut of almost 2% each way. For me, this is a much more important consideration than the brokerage fee, although it will not matter to someone who never needs to convert currency because they stay within their home market.

These considerations led me to prefer Interactive Brokers as my broker, and then (full disclosure) to make what has been a very profitable investment in the company. More generally, I like doing business with and investing in companies who seem to be looking out for their customers’ best interests, what I would call the ’Costco’ model. And I am always on the lookout for suggestions about other companies that seem to operate like this, in the hope that they perform as spectacularly. So far, WISE comes to mind for foreign exchange (for travellers or businesses), and I think Apple has some of the same DNA.

Regards, DTB