View the article online at http://citywire.co.uk/money/article/a465317
Diary of a dumb investor: picking a platform
I’ve just been given £10,000 to invest, and it’s burning a hole in my bank account as I hesitate over hurdle number one - which online platform to use.
OK, so I’ve just been given a load of cash to invest – if you didn’t read my first diary entry last week: a sweet £10,000 – and it’s burning a hole in my bank account as I hesitate over where, and how, to do so.
To start off, I want to thank everyone who made suggestions in responses to my first article. I learnt a lot, especially about the importance of doing due diligence ahead of picking an online trading platform.
Some of the advice was less useful, although pretty funny: ‘put it all on red!’ was one such nugget.
But also I noticed there was speculation as to whether I – and the cash – actually exist. Let me dispel those doubts once and for all: I am truly a dumb investor, and the money is really there.
I’ll prove this by going into the minute details of the profits and losses made, and charges incurred, as I make trades; and if this isn’t enough – I’ll also attach copies of statements on my portfolio (with my personal details blurred out, of course, to avoid a potential mugging by any criminally-inclined Citywire readers).
So, let’s get down to business. I went to moneysupermarket.com, a price comparison website, to find the cheapest trading platform on offer. I typed in that I wanted to compare charges over the course of a year, with an average of three trades per month, each with an average value of £500.
It came up a list of ten platforms. The cheapest, offered by SVS securities, charges £5.75 per trade with a total cost of £207, according to my specifications; the most expensive, offered by Hargreaves Lansdown, charges £14.95 per trade and with a total cost of £538.
My choice would appear pretty obvious. Yet on closer examination, I saw that not all of the platforms offered the same things. With SVS, I could only trade UK stocks, exchange traded funds (ETFs) and exchange traded commodities.
So I wouldn’t be able to buy shares in Facebook when it goes public. Or, for that matter, put my money in other funds, corporate bonds and investment trusts.
Moving down the list, I saw that Halifax, at No. 6 for value, offered a broad range of investment options, including: UK shares, unit trusts, gilts, corporate bonds, funds, investment trusts, ETFs and global markets. All at a cost of £11.95 per trade, coming to an annual total of £430.
That’s actually pretty disheartening, since it works out as 4.3% of my £10,000 (and not including 0.5% stamp duty) – which I would basically need to double to make the whole thing more worthwhile than sticking the money in a savings account.
But I’ve made up my mind: Halifax it is. I’m just going to try not to think about the charges too much. In fact, I’ll probably be too busy deciding what sort of assets I want to buy, which I’ll let you know in my update next week.
I’ll finish this week’s diary with lesson learnt number 2: investing is expensive and it’s difficult to get started. No wonder people are scared off.
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by Gavin Lumsden on Apr 16, 2014 at 15:17