It has been some 5 weeks since our last article. We went to ground simply because we had nothing new to report. Thankfully, now though, we’ve got a host of things to tell you about. We haven’t spent 5 weeks sitting on our backsides doing nothing; we’ve been busy researching new ways to make a few quid and whether they are any good. To date, we’ve only had one disaster. I’m pleased to say that Freetrade isn’t about to be added to that exclusive list.
I’d heard about Freetrade a few months ago, it may have even been a year or so…who knows anymore? Time has been something of an arbitrary means of measurement over the last 16months or so, after all! I have an investment account with Hargreaves Lansdown (HL), so making any changes or rocking the boat wasn’t in my plans. It seemed to be nothing more than making my life unnecessarily complicated.
During lockdown, I had a) more time to pay attention to these things and b) there was a noticeable deterioration in the service I was receiving from HL. I am paying them 0.45% for them to do very little apart from take too long to resolve any issues.
I had a hunt for an alternative platform, but they all seemed to be much of a muchness. YouInvest from AJBell are a touch cheaper than HL, but didn’t have the flexibility to make any switch worthwhile.
At this point, I have to say that this isn’t investment advice, this is a look at an investment platform. Before deciding whether or not you should invest in ANYTHING, please take professional advice. We’re not recommending you invest in the stock market or even use any of these services. Tread carefully, you can lose a lot of money if you get it wrong!
Freetrading
Speaking with a friend of mine one Friday, we got onto the subject of investing. He’d gone balls out in March 2020 and done quite well, so fancied himself as the next Warren Buffet. He did it all via Freetrade, which does exactly what it says on the tin. It costs nothing. Compare that with HL charging up to £11.95 for a trade that was the first tick in the box. The second part was that there is no management fee for a General Investment Account, another intriguing idea.
Delving a little deeper, there are of course charges; they have to make some money somehow, after all. What do these charges look like?
A Stocks and Share ISA: That’s a £3 a month flat fee, whether you’ve got £1 or £1,000,000 in there
A Freetrade Plus account, that will cost you £9.99 a month as a flat fee. For this you can earn 3% interest on any cash up to £4000 you’re holding on your account, so assuming you hold the full £4k in there, you’ll earn £120 a year in interest, so the cost is effectively zero. Additionally, you have enhanced customer support as well as your Stocks and Shares ISA thrown in as part of the package. Furthermore, you have some advanced features such as being able to set limit orders (setting a price for when to buy and sell shares) and also access to a wider range of shares.
Open a SIPP and that will cost you £9.99 or, £7 if you have a Freetrade Plus.
The most you will ever pay seems to be £16.99 per month if you want to have the full range of options and regardless of how much money you have invested with them. If we compare this to the 0.45% I’m paying with HL, it is a fairly simply calculation to make…
The cost of Freetrading vs Not Freetrading
The annual cost of a full service from Freetrade will cost you £203.88
The annual cost of holding £45300 with HL is £203.85
I was a bit surprised by this. I expected the requirements to be lower, i.e. that it would be “worth” switching to Freetrade at a much lower level of holding. My heart sank.
Then I remembered: No trading fees with Freetrade. I pay £11.95 a trade with HL, although this applies to individual company shares or ETFs. Funds do not carry a charge for buying or selling.
Assuming one were to make a single trade every month, that adds £143.40 to the annual cost of HL. With Freetrade that cost would be £0. That’s a lot of money at the end of the day, which can be used to fund your plans/dreams.
The real limitation of Freetrade is in the range of investment options. I like very simple tracker funds as they are low cost (although not an issue with Freetrade) and I also have no faith in fund managers to beat the market; and even less faith in myself to beat a fund manager. Freetrade offers individual shares, ETF’s, Investment Trusts (all of which I have an understanding of) and SPACs and REITS (which I have no comprehension of).
I need to take a closer look at the ETF’s on offer to see if there are any which fit with the kind of thing I’m looking for as although I understand what they are, I don’t know what options are available.
There is one feature of Freetrade which I absolutely love and what makes investing available to the masses: Fractional shares. Yup. You can buy a fraction of a share. If you’ve ever wanted own a piece of Berkshire Hathaway but have been put off by the massive price tag for a single share, or you like the look of Alphabet but $2400 a share is a bit rich for you, then Freetrade can make that a reality for you (*shoulders sink, he sighs* – I’m not advising you to buy these companies, but you know that, don’t you?)
For £2 I could’ve bought 0.0010 shares in Alphabet. I find this incredible and love it as an idea as suddenly a whole new world is opened up to the more modest investor.
Another feature I really like is that you can make your W-8BEN declaration for investing in US markets with a few simple taps of the screen which is infinitely more efficient than other platforms downloading a form, filling it in, signing it and posting it. Some retro things are cool, forms and postage stamps are not one of them.
They have a website where you can look up details of their product offering. To sign up however you have to use the app. The website is a decent resource and allows you to explore the product quite fully before taking the plunge.
Freesharing
It is early days for for my Freetrade account and can’t yet say if it is as convenient as HL. Sometimes you really do get what you pay for, but I am going to persevere with Freetrade for a few months and see what I make of it once I start using it to it’s full potential rather than just playing around with it as possible investment platform.
Freetrade has quite an interesting incentive for signing up…and I’ll freely admit, if it wasn’t for this, I probably would’ve procrastinated for a few months more. When you sign up you and your referral are gifted a free share worth between £3 and £200. It’s a complete lottery as to what you’ll get, but it is genuinely a totally free share, and not some tuppeny-ha’penny company either. It could be that you get a £200 share in Nike, or you could be like me and get one in UBS…who are no slouch in the banking world, to be fair.
If you just want to take advantage of the offer, there is nothing to stop you from signing up, taking your free share, selling it and never using Freetrade again and with the potential to earn up to £200 just for doing so, it’s certainly got to be worth a go. I spend more time messing around with surveys and matched betting for less.
As you’ve seen with our other articles, we’re transparent about these things. If you’re going to sign up to Freetrade, we’d love you to use our link. We’ll receive a free share and so will you. If you sign up without using the link, then neither of us gets anything.
You can find our link here: https://magic.freetrade.io/join/benjamin/2f003b65
As with all the other projects we’ve started and that you’ve followed us on, we’re very grateful for the support.
…and last but not least and for the 3rd time in this article, just to make sure because I am absolutely paranoid about it: This is not investment advice. Don’t buy what you don’t understand. There are no get-rich-quick schemes. Take your time, research, speak to proper qualified people about things before taking the plunge. Good luck on your quest!
We’ll have more ideas for you coming up over the next few weeks.
Good to see you finally onboard with Freetrade. I invested in the company in 2018 (via crowdfunding) and when it was available for Android in 2019, opened my ISA with them.
At the beginning of this year, I transferred my HL SIPP (saving myself £11 a month in fees).
I still have an old ISA with HL, not thinking of transferring that as don’t want to have all my investments with a single provider.
While I’ve gotten used to the app, I would still much prefer something like HL’s website. Freetrade are planning to do a web based app, but we don’t know when that will be.
Be aware that it’s easy being a buy and hold investor with HL because of the fees; it’s tempting to buy and sell more often with Freetrade. What I love is that a few quid of dividends can be invested straight away without you having to wait to accumulate a larger amount to ‘justify’ fees.
Good luck with your portfolio and hope you get some good free shares. Don’t forget to get friends and family to sign up 😉