Stock trading covers two genuinely different things, and brokers are not always careful about the distinction. You can buy the share itself and own a piece of the company, or you can trade a contract for difference on its price and own nothing at all.
Owning the share means dividends, shareholder rights and no financing cost for holding it. A CFD means leverage, the ability to go short, and a daily financing charge that makes long holding periods expensive. Neither is better; they answer different questions.
What it costs
Share dealing is usually a flat commission per trade or a percentage of the value, plus an FX conversion charge if the stock is priced in a currency your account is not. That conversion fee is the one people miss - a 0.5% markup on a US stock bought from a GBP account is often larger than the commission.
What to watch for
- "Zero commission" share trading is usually paid for through the currency conversion spread or wider quotes.
- A stock CFD pays financing every night it stays open. Over a year that can dwarf the price move you were hoping for.
- Fractional shares are convenient but are not always transferable if you later move brokers.
What separates a good broker here
- A clear statement of whether you are buying the share or a CFD on it
- The currency conversion fee, as a percentage
- The size of the actual market on offer - "global shares" can mean 200 or 20,000
- Custody or platform fees charged monthly regardless of activity
