If you’re someone who has or will invest enough to make using an S&S ISA worth having, will you use a Freetrade ISA account?
- Yes, I already use it
- Yes, I plan to upgrade in the future
- No, it’s too expensive
- No, it doesn’t offer the things I want to invest in
- No, it doesn’t offer the features I need
- No, I don’t trust Freetrade enough
- No, some other reason (see comments)
lots of votes and no comments so i will start.
i have an S&S ISA that i would like to move away from my current broker. They are charging way too much but i need to bite the bullet and pay the exit fee though (£10 per holding…). Currently i would not move to Freetrade because it doesn’t offer everything that i hold.
I would have liked the poll to have included a “No, I don’t have enough investments to make an S&S ISA worth having” option. I know you’ve set to parameters to specifically exclude such investors, but I think it would’ve been useful to broaden the scope and see also how many users are not yet reaching an investment level where a S&S ISA would be worth it.
Can I ask “what is enough” to make the ISA worth while?
I currently use the Freetrade ISA but suspect I am a “not enough” investor. I don’t want to mess about changing back across to the GIA as I intended to just continue building it for the next 20 years or so.
I’m the same. I want tax free and stress free. Set my sights on compounding from a low starting point and an ISA from the start.
A simple rule of thumb would be “approaching £20k” for most people not wanting to worry about the details.
But basically, “enough” is the amount of investment you would need to be paying more than £36/yr in tax. A typical broad ETF might give you 2% dividends, and you have a dividend allowance of £2k, so strictly speaking you wouldn’t be paying any tax even with £20k. But £20k is the maximum you can put in an ISA in 1 year, so it makes life easier to start before going over that limit.
Well that would mean I am no where near the ISA being worth while as 20k is an eon away. I wanted to have a place I could just build in the long term and not have to worry about selling and moving all of my assets from pot to pot.
Forgive my ignorance but will it make a massive difference just staying put? I could after all just add £3 to my monthly deposit. It’s the price of a beer a month.
no i think it just means you can invest in a basic account without paying the £3 for an ISA. Nothing else changes as you don’t have to report the tax if you are well below the threshold anyway so no extra admin.
In an absolute sense, you’re right, the difference is merely £3/month. If making life easier for yourself is worth £3 to you, that’s quite understandable.
But let’s say your portfolio is returning an incredible 7% dividends that you want to reinvest to get those delicious compounding benefits. You think you’re doing so very well. You’re awesome and your investment choices are the best!
But then you realise that you’re only putting in £100/month, so would only be getting £84/yr profit. But then you’re paying for a Freetrade ISA account you don’t need, which drops the profit down to £48. Hmm, that’s a 4% yield. Not quite so awesome.
Having an account you don’t need lost you 43% of your gains.
The less you’re investing, the more brutal the effect on your gains will be. Fees matter. Fees add up.
Hmm when you put it like that! That’s why I am a mere physio and not a millionaire city trader
So would it be prudent for me to sell all stocks in my ISA (when they return to green again) and re-buy in GIA? Can I just close that?
Also when my GIA reaches 11k would I have to sell again, re-open an ISA and move it all back?
Appreciate the advice
Yes, it would be prudent to switch back to the GIA for now. I’d contact Freetrade support in-app to ask them the best way to do this.
When youre GIA approaches 20k (not sure where your 11k came from), yes, you’ll have to sell it all again and repurchase in the ISA.
You don’t really need to wait for the stocks to turn a particular colour, so-to-speak. What matters is speed - you want to buy back at a similar price to what you sold at. Ideally Freetrade would give you a fast way to sell and repurchase across the 2 accounts. Again, talk to support.
Thank you. Appreciate your advice.
I thought you could invest 11k before paying tax? And if I sell when all of my stocks have dipped into the red I will lose money.
You don’t pay tax on purchase. You only pay tax (outside an ISA) on sale, and only on your profits, and you have a £12k allowance.
You won’t lose money if you buy them back again at the same price. It is the equivalent of not having sold them at all, right? And you (rightly) don’t think you’ve lost any money right now, just because they’re red.
For example, you purchase 1 share when it costs £1. 1 year later, the value has dropped to 50p.
Scenario 1: You do nothing and hold for another year.
Scenario 2: You sell your 1 share for 50p and make a tempory loss. You buy back 1 share for 50p the same day. You hold it for another year.
After that additional year the stock price is up to £2. In both scenarios you hold 1 share at this point in time, and your investment is worth £2.
What matters is the price you buy back at: it must be equal to or less than the price you sold at, or you will make a loss. But due to random price volatility, you could get unlucky and buy back at a higher price regardless of if you sell when it is green or red.
I’ve put that the FT ISA is too expensive for someone in my situation ie with a low level of investment.
I’d love to have an ISA with FT but currently it would lose me money.
As @anon287192 has pointed out, at early stages of investing the fee can eat away at your gains. I’ve mentioned elsewhere that if having the protection of an isa from the beginning is so important, you’d be strategically better off building up funds in a cash isa first. For a low value dividend investor, the fees could even equal a negative return in early years.
Not to say the freetrade isa is bad value, its very good value. I just can get better value from freetrade by not having one right now.
That said, once my GIA reaches a few thousand, I’ll simply open an ISA and start from scratch. No need to transfer the GIA imo. Just sell/manage the GIA as normal and open new positions in the ISA.
Sadly Freetrade doesn’t have mutual funds, I have a few investments which aren’t covered by ETFs or the fees are lower.
As the universe expands I’ll look to move across but for my ISA portfolio they don’t have everything I need/want just yet.
They don’t have everything I have in my HL ISA, but I’ve just left that open and opened another with freetrade. You can have multiple ISAs open as long as you don’t add money to more than one in the same tax year
I’m with @ytsruh.
Also, saying you will switch when the time comes and actually switching are two very different things.
All very good intentions but life happens, you’re too busy, you forget, you can’t be bothered etc.
When there are more options available then I will definitely look in to it. For example I’m talking about the Freetrade investment platform is completed, fractional shares are developed, a DRIP (dividend reinvestment plan) and a few more features are ready. Then I would look at getting an ISA.
Also another reason to not bother yet is that I only have £4k in there at the moment. So it doesn’t seem worth it to me paying £36 a year. That wipes out a decent amount of my profits. I will look at getting one when I’m getting nearer the £20k mark
At the moment I have an isa with HL I’m not paying anything into it and therefore not paying any fees except for Dividend reinvestment.
Originally I was all for moving it, but realised I’d be paying more to hold with FT, for that I’m just going to keep building my portfolio with FT and then move to an ISA when I hit that £20,000