Is fee-free share dealing any good? Freetrade and Trading 212 in focus
Nice to see freetrade getting some press again - a prelude to the new crowdfunding round perhaps
Crucially, neither Trading 212 or Freetrade allow you to invest in investment funds, investment trusts, or individual corporate bonds outside an ETF.
I’m not sure I buy that a restricted trading universe is a bad thing for beginner investors. In some ways it’d be better if Freetrade offered an incredibly simple ISA where you didn’t even choose investments (as well as their current offering) - for many beginners the choice of investments is simply bewildering (as evidenced by many beginner posts on this forum).
investment funds, investment trusts, and corporate bonds are not IMO the sort of thing beginner investors should touch with a bargepole, particularly at the moment.
Free trades are never quite free
This headline and the para after is disingenuous IMO, as it intimates that charges on free trades are somehow different from trades on platforms that charge more - the spread exists on HL too - does the spread differ significantly between brokers? HL also charges a currency fee - I think it is 1% - hl fx fees.
If this is all they can find to criticise, freetrade are doing pretty well.
Nothing is free. You still pay FX charges and stamp duty.
I can sense the fear in the article and the denial that Freetrade are about to disrupt.
I think there is a place for both Freetrade and Hargreaves Lansdown long term however HL will get a lower market share long term.
From a Freetrade point of view you could argue / worry about long term profitability and from a HL point of view I would be worried about losing market share and the pressure is to lower fees / profits.
I think Freetrade is here to stay. I am a Freetrade customer and Freetrade is delivering bit by bit everything I want. If you give customers what they want you will succeed.
True. However paying £11.95 per trade HL compared to £0 per trade Freetrade seems quite reasonable
Am I correct there is no stamp duty to pay for ETF’s ?
Yes, that is correct.
Do you know when the next funding round will be? Also what platform? I missed the first rounds and would love to invest in this company/community.
We haven’t announced a date yet, in case you’re interested, there’s been some more discussion about the next round here: 4th round?
HL is a very well run business, they will drop their rates to accommodate. Sure, they will never be “free”, but I know many people who would rather pay £5 a trade and have good service. If you are putting in a trade worth £5000 at a time, it doesn’t matter if you pay £5 or £10 or £0, in the long run, fees are meaningless if you are holding for periods of years.
Another view point that was mentioned in this podcast was what the broker optimises.
For example a broker charging a monthly flat fee is more aligned to long term investing as they are not incentivised to optimise frequent short-term trading, while a per/trade broker maybe wants higher volumes of trading, so might optimise short-term, frequent trading.
Of course it’s up to the individual on what they choose to do, so just because you can, doesn’t mean you will, but it’s always good to align interests.
If you invest in HL for individual shares, it won’t make a difference in 10 years time. The problem arises when you buy funds. Don’t buy funds. Do some research and buy stocks.
This is if you buy funds. To compare with Freetrade where there are no funds available, if you only hold shares, ITs and ETFs in a HL ISA, the 0.45% is capped at £45 a year, so over 30 years, it would be a £1350 reduction, versus Freetrade’s £1080.
HL is cheap if you hold shares for years and if you buy in large quantities. Obviously if you are swing or day trading, HL fees will kill you. Then again, swing trading with Freetrade is not easy as you have to deal with stamp duty or fx fees 99% of the time.
To make money in investing, you need to buy and hold. If you keep buying and selling, your broker will be rich.
I recently bought £18,000 worth of AVIVA shares with HL, the fees are meaningless when you are transacting in that amount. £18,000 for sure is a large amount to buy in one go, but it is not market moving, there are enough bids and asks till £150,000 for most stocks, before you start paying more or receiving less as you go down the order book.
I think Freetrade is great for investing, but I don’t think you will have people swarming from HL to Freetrade with old ISAs, since it is such a pain to change ISA providers.
Out of interest, was it for the dividend yield?
The problems arise when you overtrade, if you just buy and forget you even bought the stock, fees will not affect you. What is the value of a £11.95 fee when you have a capital gain of £4000.
@harihar I bought some today, not quite as much as you though
On the other hand, with Freetrade you have to do a market order. For large numbers of shares, placing a reasonable limit order with HL could save you much more than you spend in transactions costs. Making Freetrade more expensive.
I found with Freetrade if have spare £5 I can buy some shares. With HL I can’t due to fees. Freetrade helps build up portfolio , this will be even better when fractional shares buying is launched
Is that really the case/perception? £10 that could have instead been invested at 6-7% over a long period surely adds up?
Over 10 years that £10 could double and be an extra £10, or £30 over 20. Ten trades over the first year of a 20 year buy and hold strategy could be loosing out on £300 of investment including assumed growth. Over the 20 year period that will keep adding up (less and less each year obviously as time in market drops but still easily £1000s lost).
I may have missed something, or maybe I’m just Too poor/stingy to justify throwing away £1000s even over 20 years . Regardless of how small the % of the whole pot it is you have to ask is the HL platform adding £1000s of value if your managing your own trades? Maybe I’ll think differently when I win the lottery or make an incredibly lucky investment