Buying stocks usually comes at a cost that saps your earnings. But that need not be. New providers are rushing onto the market who advertise that they are particularly cheap. What’s up with these?
The smartphone is a daily companion for almost everyone: To chat, watch videos, check emails or read the news. More and more people are now discovering that they can also trade stocks over their phone.
This is possible with a number of apps that so-called neobrokers have recently brought onto the market. What is meant by this are new online brokers, i.e. securities traders on the Internet who reduce their offer to the essentials. They are considered to be particularly cheap and easy to use. But is that even true? We’ll show you which smartphone brokers are out there, how they work – and how safe your money is with them.
How does a neobroker work?
There is no clear definition of neo brokers. Mostly, however, this refers to online brokers, which are very cheap. They are cheap because they forego personal service and focus on the essential functions – such as buying stocks.
- Examples of neobrokers: TradeRepublic, JustTrade, Scalable Personal-Financial.com or Free Broker
In most cases, you can also control stock trading directly via smartphone – as with TradeRepublic or JustTrade. In most cases the providers do not have their own banking license. Instead, they work with other banks such as BNP Paribas, Baader Bank or Sutor Bank.
Often the selection of stocks and funds with neobrokers is smaller than with conventional direct or branch banks. Often only shares of the largest companies in the world are available for purchase, and those looking for special shares in smaller companies will often not find what they are looking for. The selection of index funds, called ETFs, is also often restricted.
How do I find the best provider?
There are many different brokers on the Internet and the number of providers is growing steadily. You should consider the following criteria when choosing a broker:
- Costs: The most important point – because the costs eat away at your income, called return. Especially if you want to execute a lot of orders, i.e. buy stocks, you should pay attention to the costs per execution. Some brokers offer sgoar flat rates for trading. As an investor, you then pay a basic monthly fee, but no longer have to pay anything for individual orders.
- Selection: The question here is how many stocks or ETFs you can buy from the broker. With some providers, you only have the largest listed companies to choose from. Also sustainable offers like “green” ETFs are rarely found among them.
- Safety: German providers are considered safe (see below). But you should avoid very new providers or those from other countries – especially if they are not based in the EU.
- Savings plan: Often you cannot create a savings plan with Neobrokers. However, this is possible with some providers.
You can find an overview of the most common neobrokers and their conditions in the following table.
Notes on the table
Opening a depot is free of charge with all providers. In addition to the order fees, however, there may be additional costs. Note: Both JustTrade and free brokers require a minimum order volume of 500 euros. So you can’t buy stocks for less money. Both brokers are therefore less suitable for small investors. With Smartbroker you have to pay a custody fee of 0.5 percent if your deposits in the clearing account make up on average more than 15 percent of the total deposit volume. This applies to the part that is above this 15 percent.
Is my money safe there too?
Yes. With a provider who works with a bank within the EU, your money is protected by the so-called deposit protection of up to 100,000 euros. Even if the bank or broker goes bust, an insolvency administrator cannot access your assets.
Often the providers also offer their own deposit insurance. This usually goes far beyond the legal one.