When we say we want a cheap way to invest in shares – we aren’t talking about finding cheap shares. If our focus was primarily on investing on cheap shares, we wouldn’t account for the business performance or any growth prospect. However, the actual CHEAPEST way to invest is by finding ways to reduce the fees charged on PLACING the investments.
For long-term investing, the cheapest way to invest in shares is to use the Barclays investing platform. With a dealing fee of £3 and holding fee of £2 per year, an investment in a share of £1,000 over 2 years would only cost £7. Fees can vary depending on whether you invest in funds, shares and even how often you trade!
Now, if you don’t like the look of the investment platform or investment choice – here’s our research so you can make a well informed decision on where and how to invest your money!
Investment Platforms
In general, investment platforms make their money by charging you a fee PER TRANSACTION. This means, whenever you place an investment, they will take a small cut of it.
Additionally, they will also charge an annual fee for your account so be wary of who you sign up to! Here’s a few popular platforms out there and how they stack up:
| Key Information | Investing Fees | Cost of Investing £1,000 into a share for 2 years | |
|---|---|---|---|
| eToro | Charges inactivity fee. ($10 monthly after 12 months) | Withdrawal Fee – $5 | Inactivity fee (for 12 months) – $120 Withdrawal fee – $5 Total – $125 |
| Hargreaves Lansdown | N/A | Holding fee investments – 0.45% p.a. (capped at £45) Share dealing fee – £11.95 per trade Fund dealing fee – £0 per trade. | Holding fee – £9 Share dealing fee – £23.90 Total – £32.90 |
| Fidelity | N/A | Service fee – 0.35% p.a. Dealing fee – £10 | Service fee – £7 Dealing fee – £10 Total – £17 |
| HSBC | Must have a bank account with them. | Quarterly account fee – £10.50 Deal fee – £10.50 per trade | Quarterly fees – £84 Deal fee – £10.50 Total – £94.50 |
| Barclays | Holding fees are a min. charge of £4, max charge of £125. | Holding fee (funds) – 0.2% p.a. Holding fee (other) – 0.1% p.a. Dealing fee (funds) – £3 Dealing fee (other) – £6 | Holding fee – £4 Dealing fee – £3 Total – £7 |
As you can see, some platforms are much more expensive than others whilst some have specific restrictions on who can use them and what you can invest in.
These are a few of the popular picks that people tend to go for and they should be evaluated based on your investment style.
For me, I’m with Hargreaves Lansdown because I predominantly buy and hold investments for a very long time and I mainly invest in funds for the level of diversity it gives me. However, you may want to choose a platform like eToro if you are into trading more with shares and on a more frequent basis.
BUT WAIT?!
Now, you’re obviously reading this because you want to find ways to keep as much money in your pocket as possible and the above is the best way to do that. However, there are a few considerations other than ‘cheapness’ that we should be aware of when choosing investment platforms and investments themselves.
Reputation of the Investment Platform
A factor that should be considered when assessing which investment platform to pick (other than how cheap it would be), is the reputation of the platform themselves.
The way that the platforms work is you send them your money first via debit card payment (usually) or direct debit and they deposit those funds into your account. You can then use the funds in the account to invest into the various places you decide.
I don’t know about you but there is no way I’m going to send someone £1,000 in straight up CASH, because they said they’ll charge me a lower fee. ‘Hey – don’t worry, I won’t charge you anything, just send me your money’. Don’t be that guy.
Instead, do your research – and research HARD. You don’t want to be stuck with your bank’s investment platform because they charge you through the nose as they know you already trust them. My bank tried charging me £20 for every deal I placed…. Image – 5 trades costing £100 a month… bit sickening really.
Platform Ease of Use
Another consideration you may want to think about is the ease of use and accessibility of their platform.
I found that Lloyds Bank (who I bank with) had a horrible user interface – there is still £20 sat in the account that I can’t figure out how to withdraw… it’s THAT bad.
However, with Hargreaves Lansdown, they have a really user friendly interface and the mobile app is arguably better than the website! You can run analysis to see your portfolio diversification and adding/withdrawing money is sooo straight forward.
(Sounds like I’m trying to sell you something but I’m not affiliated with HL so I have nothing to gain).
A great tip would be to sign up for a few accounts and see how you get on. I know with eToro, they give you £100,000 (yay)… of demo money (ahh)… so that you can try your hand at trading to make sure you’re comfortable with how everything works.
As these platforms usually deduct their fees from the money you hold on the account, if you don’t deposit anything into them then you can’t be charged – after all, you can’t take what isn’t there!
So try taking a look at a few and weigh up the cost of each platform with how easy it will be to invest.
Investment Performance & Potential
From looking at the table, some platforms charge different fees for investing in funds and investing in shares. Although it might be cheaper to invest in one over the other – make sure you’re investing for the right reasons.
Yes, if you’re with Hargreaves Lansdown, you’re charged £11.95 per share deal but nothing on fund deals. So you should definitely invest in nothing but funds? No.
Don’t let a potential short-term saving of £11.95 deter you from investing in a share that you’ve solidly researched and are convinced it’s going to be a winner in the long-term.
Summary
To summarise, the cheapest way to invest in shares is through the Barclays investment platform. However this is only based on the example of a single share investment that is held over 2 years.
Once you’ve decided your particular investing style, have a go at noting down when you think you’ll be buying/selling and price up the different costs using the table at the top of the article – you can then choose the cheapest platform for your investing style.
Again, these are a few of the top platforms – there are plenty of others out there but just make sure you do your research before parting with any of your hard earned money.