A new generation of digital platforms allows South Africans to invest in offshore equities cheaply, easily and conveniently. But some, like Shyft, are cheaper and more convenient than others. Here are the red flags to look out for when investing in overseas shares through mobile apps – and how to tell the best from the rest.

1. Delayed forex clearance

Let’s say you want to buy shares in Tesla (TSLA) today. Not tomorrow, not after the weekend. Today. Tesla is a US stock, so on most South African equities apps, you won’t be able to buy immediately unless you have enough dollars sitting in your USD wallet. So instead of instant gratification (or, more to the point, buying the stock at exactly the right moment), you’ll have to wait until your rands have been converted to US currency. That process can take a day or two through most apps (you know, the ones that aren’t Shyft).

You don’t want that. Instead, use an app that spares you the frustrating time lag by letting you execute instant forex trades at live, competitive rates. That way, your forex reflects when you need it: immediately.

2. Expensive forex rates

Speaking of forex… You know the “official” exchange you see listed on news sites or online currency converters? Those are seldom (if ever) the rates you end up paying to buy foreign currency. Your bank or financial provider will add on a brokerage cost, which pushes that rate up. That cost varies from bank to bank and app to app.

What that means is that you might pay R18.58 per dollar through one app and R18.95 through another. Same day, same currency pair – radically different exchange amounts. Make sure your app offers the cheapest forex rates, so more of your money actually goes into your investments. 

3. High fees

Fees are among the best-kept, worst-kept secrets in the equities business. Confused? Let us explain. Investing involves fees. Everybody knows that, and everybody accepts that. (It’s why your financial advisor often talks about your “expected returns after fees”, with special emphasis on the last two words). But while everybody knows that those fees exist, remarkably few investors know how much they’re actually paying.

Remember that the fees will vary depending on who you invest with. One South African app, for example, charges a fixed rate per transaction of 2.64% to buy US-listed shares via EFT, or – incredibly – 4.94% if you use a card. Consider that: you’re losing nearly 5% of the value of your investment to fees! And some platforms can charge nearly double what others charge for transactions over USD 1 500. So do yourself a favour and check how much you’re paying in fees.

4. Once more, with feeling: High fees

This point is so important, we’re listing it twice. Let’s use the Tesla shares example again. The cost to purchase 10 shares at USD 260 per share (the share price as of end-June 2023) varies dramatically depending on fees. You’re looking at brokerage fees ranging from around USD 12 (based on Shyft’s flat fee of 0.4% and $2.49 transaction fee) up to USD 128 (based on another platform’s flat fee of 4.94%). That’s a massive difference in the same trade – even if the percentages themselves don’t sound so big.

5. Limited related services

Why have five apps, when you could just use one?

Some investment apps also offer international payments, some don’t. Some that do, only offer outgoing payments – but what if you want to receive international funds? Some apps let you hold and store foreign currency so you can trade at the best possible moment, while others don’t. Does your app allow you to place orders when the markets are closed? Why not? And so the questions and comparisons continue. What does (and doesn’t) your app offer?

We reckon a good equities investment platform should do more than one thing. Yes, you want to access and make trades in your shares portfolio, but you should also be able to buy and store forex, manage multiple currency wallets, send and receive money internationally, make peer-to-peer payments, invest offshore and even create cards. And all with a once-off sign-up process and biometric sign-in. If the app you’re using doesn’t offer that level of simplicity and functionality, you’re using the wrong one.

Get the app that does it all.