As interest rates rise, we really need a ETF we can use to park cash balances where they will hold their value and generate a small return. Unlike its competitors, Freetrade doesn’t pay interest in cash balances (above the excellent 3% on £4k plus deal), so as interest rates rise and Freetrade’s competitors increase the interest they pay on cash balances, Freetrades low fees are at risk of being outweighed by the loss of interest.
We have access to various bond-based ETFS (ERNS, IGLT, etc), but they’ve all experienced much higher than usual volatility due to the high global inflation rates - so anyone parking cash in these will have seen their capital erode.
We really need something that behaves like a safe money-market fund - and while most of the UK money-market funds are OEICS, CSH2 (Lyxor Smart Cash) has remained highly stable, producing an effective return a little below bank rates, but with very low volatility.
If anyone knows of another ETF available on Freetrade that can fulfil this function, please let me know - otherwise do please give this a vote… 0% on cash balances is going to kill our portfolios!
You’ve got my vote. I tend to keep cash in high-interest savings accounts but I can see why some may prefer a liquidity fund. Unfortunately, relatively low volume may be a stumbling block to adding this.
As a workaround, why not hold the cash element in a separate Sipp with say HL which pays interest and offers money market OEICs? You could then transfer across if/when you want to deploy it. Obviously, it’s not an ideal solution as you’d have to wait a few weeks for the transfer.
BestInvest and HL both pay interest on cash balances. And possibly more importantly, most of your competitors allow trading in OEICs, so cash balances can be parked in money-market funds and attract a safe rate of return.
As I said in my initial post, my issue isn’t that Freetrade doesn’t pay interest - it’s that you don’t currently provide access to a fund that will act as a an interest-bearing proxy.
On Nutmeg I have “parked” my investments into cash and receive the BOE base rate (currently 4%) less 0.75% fees, no upper limit. Interest paid quarterly. Their investment fees are 0.75% up to £100k and 0.35% for anything above. Obviously a very different service to FT (and expensive), but in this particular case it is more advantageous if you are worried about volatility and want to exit the markets for a little while