ETF transaction fee

An ETF (Exchange Traded Fund) is a fund product traded on a stock exchange that tracks the performance of an index, an industry, a region or a theme. The advantage of ETF is that it can provide diversification, low cost, high transparency, tax benefits and other characteristics, which has attracted the favor of many investors.

However, investing in ETFs is not without costs. In addition to the management fees and other fees of the fund itself, investors also need to pay transaction fees, which are fees that need to be paid to brokers or platforms when buying and selling ETFs. Transaction fees will affect investors' actual returns, so this factor needs to be taken into consideration when choosing ETF products.

What does the transaction fee include?

Brokerage commission: This is the service fee charged by the brokerage or platform to investors, usually calculated as a percentage of the transaction amount, such as 0.1% or 0.2%. Different brokers or platforms may have different commission rates, and may also have minimum commission regulations, such as at least 5 yuan or 10 yuan for each transaction. Some brokers or platforms may provide commission discounts or reductions, such as no commission for opening an account for the first time, no commission for a specified period, no commission for specified products, etc.

Stamp duty: This is a tax charged by the state to investors. It is usually only charged when selling ETFs. It is calculated as one thousandth of the transaction amount, which is 0.1%. The stamp duty is fixed and will not vary depending on the brokerage or platform.

Transfer fee: This is a fee charged by the securities registration and clearing agency to investors to register and settle changes in the ownership of ETFs. The transfer fee only applies to ETFs listed and traded on the Shanghai Stock Exchange, and is calculated based on 0.2% of the transaction amount, that is, 0.02%. ETFs listed and traded on the Shenzhen Stock Exchange do not charge transfer fees.

Other fees: These are some additional fees that may arise, such as platform usage fees, SMS notification fees, electronic contract fees, etc. These fees are usually relatively low and may be waived or reduced by the brokerage or platform.

How to calculate transaction fees?

Based on the above introduction, we can get the following formula to calculate transaction fees:

Buying fee = transaction amount x brokerage commission rate + other fees

Selling fee = transaction amount x (brokerage commission rate + stamp tax rate + transfer rate) + other fees

For example, suppose you bought 1,000 shares of an ETF listed on the Shanghai Stock Exchange at a price of 10 yuan through a brokerage platform, and sold the 1,000 shares of the ETF at a price of 11 yuan a month later. . Assume that the commission rate of the brokerage platform is 0.1%, the minimum commission is 5 yuan, and other fees are 0 yuan. Then the transaction fee you need to pay is:

Buying fee = 1000 x 10 x 0.1% + 5 = 10 yuan

Selling fee = 1000 x 11 x (0.1% + 0.1% + 0.02%) + 5 = 13.2 yuan

Total handling fee = 10 + 13.2 = 23.2 yuan

How to reduce transaction fees?

As you can see from the above example, transaction fees will reduce your investment returns. If you sell 1,000 shares of the ETF for $11 a month later, your investment return will be:

Investment rate of return = (1000 x 11 1000 x 10 23.2) / (1000 x 10) x 100% = 8.68%

If you don’t pay any handling fees, your investment rate of return is:

Investment rate of return = (1000 x 11 1000 x 10) / (1000 x 10) x 100% = 10%

It can be seen that the handling fee causes your investment yield to drop by 1.32 percentage points. So how to reduce transaction fees? Here are some possible approaches:

Choose a low-commission broker or platform: Different brokers or platforms may have different commission rates and minimum commission regulations, so compare and evaluate carefully before opening an account. Some brokers or platforms may adjust the commission rate based on factors such as the customer's asset size, transaction frequency, position holding time, etc., so pay attention to check whether you are eligible for discounts.

Take advantage of commission-free activities: Some brokers or platforms may launch some commission-free activities regularly or irregularly, such as commission-free for opening an account for the first time, commission-free for a designated period, commission-free for designated products, etc. If you can make reasonable use of these activities and trade ETFs during the commission-free period, you can save a lot of money.

Reduce frequent transactions: Frequent ETF transactions will not only increase handling fees, but also increase market risks and volatility. Unless you are a professional and flexible investor, it is recommended that you adopt a long-term holding and regular adjustment strategy to invest in ETFs. This can both reduce costs and improve revenue stability.

Avoid small transactions: If you buy and sell ETFs in small amounts at a time, you may be paying excessive fees due to minimum commission requirements. For example, if you only spend 100 yuan each time to buy and sell ETFs, and the broker's minimum commission is 5 yuan, then you will have to pay a 5% handling fee for each transaction, which is obviously not cost-effective. Therefore, it is recommended that when trading ETFs, you should use at least a certain amount to achieve a reasonable handling fee ratio, such as 0.1% or 0.2%.

Choose ETFs that do not charge transfer fees: If you want to invest in ETFs listed and traded on the Shanghai Stock Exchange, then you can consider choosing some ETF products that do not charge transfer fees. These products are usually cross-market or cross-border ETFs, such as Shanghai-Hong Kong Stock Connect ETF, Shanghai-London Stock Connect ETF, China A50 ETF, etc. These products do not require transfer registration with the securities registration and clearing agency, so the 0.02% transfer fee can be saved.