I’ve been on the phone to Commonwealth bank for thirty minutes listening to hold music. I’m calling with questions about trading international shares. I’m clearly not alone.

This week, we’ve highlighted a range over overseas companies trading below fair value. But how can investors access them? Today we’re looking at how to select a broker for investing in international shares directly.

We've looked at the fees and products of ten popular online brokers to help investors pick one that suits them. We’ve looked at the big four banks, CMC markets, IG brokers, eToro, SelfWealth, Superhero and Stake.

The good news is there are zero brokerage options for most of the major overseas markets, including the US, UK, Canada, Germany, and Japan. Other markets incur higher fees.

To simplify issues, we’ve focused on international trading. Most of the ten brokers do offer ASX trading, but it usually comes with additional fees. Finally, we’ve approached this from the perspective of a long-term investor who trades infrequently. Day traders may want to consider sophisticated brokers with more features.

Investing in the United States

The US stock market makes up about half the global share market by size. Investors who want access have plenty of simple low-cost options.

All ten of the brokers on our list offer access to US markets. Five charge no brokerage. By comparison, brokerage at the big four banks ranges from $14.95 for NAB to $59 for ANZ per trade .

The main other fee associated with international trading is applied to currency exchanges. Brokers add a percentage to the exchange rate when changing Australian dollars to a foreign currency.

This fee is either applied at the account level, whenever investors move money in and out of their trading account, or at the trade level, each time an investor buys shares.

The difference matters most for investors who frequently trade because paying foreign exchange fees on each trade adds up.

Among the five zero brokerage options, Superhero and eToro offer the lowest FX transfer fees at 0.5%. However, eToro does not offer trading in Australian shares. Stake charges 0.7%.

For an investor exchanging $10,000, the difference in fees between 0.7% and 0.5% is $20.

CMC markets and IG brokers charge 0.6% and 0.7%, respectively, in FX trading fees, for each trade made.

The final thing to consider is the W-8BEN form. The US tax office will default to withholding 30% of income for tax. Submitting this form reduces this to 15%. All the zero-broker options incorporate the form into their online application process. Stake charges a one-off $5 fee for this.

Investors in the US get access to more than just US stocks because so many global companies dual list in the US. For example, Chinese tech giant Alibaba is listed on the New York Stock Exchange as BABA. Australian mining giants BHP and Rio Tinto also use this structure.

US broker Robinhood estimates 650 dual listings are available in this way.

Investing outside the United States (major markets)

Options narrow investing outside the US. Superhero, Stake and Self Wealth only offer US markets. But zero brokerage trading is still available through IG brokers, CMC markets and eToro for certain other markets.

The major banks all offer access to various overseas markets but charge brokerage fees.

IG brokers and CMC markets offer zero brokerage trading for the UK, Japan, Germany and Canada between them. Investors can buy companies like BMW (BMW), Toyota (7203), or Glencore (GLEN) and only pay an FX fee between 0.6% and 0.7% on each trade.

eToro offers zero brokerage trading in 16 markets, from Norway to Saudi Arabia. A limited number of companies are available on each exchange. For example, there are over 2,000 companies listed on the Hong Kong exchange, while 134 are available to purchase on the eToro app. Clients pay a $US5 withdrawal fee in addition to the FX transfer fee of 0.5%.

All three brokers charge inactivity fees. IG brokers charges $50 for each quarter with less than three trades—investors will want to average one trade a month. CMC markets charges $15 per month after an account has been inactive for a year. eToro charges $US10.

Investing in smaller Asian or European markets

Investors who want access to smaller markets and a wider variety of stocks will need to pay more.

Commsec and Westpac offer the largest range of markets, more than 25 each. But fees are among the highest. Westpac has the highest fees across all the brokers surveyed. With fees north of $USD115 for smaller markets in Asia, Europe or Israel.

The big four banks also charge inactivity fees that kick in after a year. They range from $25 a year for Commsec to 0.5% per month at NAB.

Investing in China

None of the brokers we surveyed offer Chinese shares. Investors can consider the Hong Kong market, where many mainland Chinese companies list, such as Tencent Holdings (00700). Alternatively, many large Chinese companies are listed in the US, such as DiDi (DIDI).

CHESS versus custodian

The CHESS versus custodian debate does not apply for international shares, says John Winters, chief executive at broker Superhero.

“CHESS is an Australian invention run by the ASX. Everywhere else is run on a custody model,” he says.

He says there are no issues for those who may hold Australian shares via CHESS and foreign shares via a custodian with the same broker.