Freetrade makes it easier to lose your money on the stock market

gordon gekko and bud fox holding a phone with freetrade

Gordon Gecko. The Wolf of Wall Street. Christian Bale’s portrayal of Michael Burry in the Big Short. These characters embody the public idea of ruthless finance types who will use every trick in the book – including cheating pensioners out of their money – to make their own millions.

To that roster of characters I’d like to add me, Conrad Quilty-Harper, blogger, digital editor and the proud owner of £199.28 worth of stocks and shares. I’m not going to make millions with my tiny pot of money, but to own those shares at least I didn’t have to move to Wall Street, don a double-breasted suit or set up an ISDA Master Agreement*: I simply downloaded an app on my phone.

Yours truly and my £199.28 Freetrade stock portfolio

This is a review of Freetrade.io, a new app, based in London, which allows its users to access a selection of shares available to buy in the UK. With a few touches and a thumb press, you can buy and sell shares and have a very good reason to reinstall the iOS Stocks app.

Of course it’s always been relatively easy to buy shares if you really wanted to. MoneySavingExpert has a brilliant list of some affordable options. The difference with Freetrade is that, as the name suggests, it’s free to trade.

There is a caveat: free trades happen in bulk at 4PM every day and you have to pay £1 per trade if you want to do it “instantly.” But that compares remarkably favourably with existing competitors like AJ Bell (£9.95 a trade), Interactive Investor (£10), X-O (£5.95) and Hargreaves Lansdown (£11.95, which drops if you make more trades).

What none of those more expensive options offer is a process as seamless as Freetrade. If you have online banking already, to gain access it’s only slightly more complicated than signing up for Netflix. Put in your details, your National Insurance number, transfer some money to a bank account, and within a few days you’re able to buy shares.

I’ll use this animated gif to show you how many touches it takes to sell my £13 worth of Vodafone shares.

Not many.

The app isn’t perfect. In fact it’s not even available to the general public at the moment (you have to sign up and join a queue, very British). And it does a lot of those annoying fintech things like not put axis on charts (WHY?!) and uses language that developers think are cute  but actually make you question whether you should give them your money at all (e.g. BT’s listing in the app is described as “slow internet”). On the other hand, when I encountered a bug they fixed it within a day and sent me a chat message within the app.

I signed up to Freetrade simply to play around with the app, but as the app develops and the company continues to add new shares (the roadmap is quite comprehensive) it might start replacing my other investment platforms where I currently have my stocks and shares ISA and private pensions. If you’ve ever tried to change your investments in a legacy pension provider, you’ll know why. It also makes buying shares remarkably easy, if you have some money going spare and want to invest in a promising company, you can.

One final thing: Freetrade made me realise how poor most of the news and information is there about the stock market for retail investors. You can use the iOS Stocks app, for instance, but that often has no recent news about relevant companies. A better source is the FT’s Markets section, but again their coverage isn’t universal. Surely there’s an opportunity there…

More information about Freetrade and investing apps in the UK

Can I use Robinhood in the UK?

Soon. Robinhood is a similar app which launched in the US in 2013, and also offers “commission-free” trading. The company announced in August that it had regulatory approval to operate as a broker in the UK and it plans to allow UK customers to buy and sell shares in Q1 2020. There’s a waitlist to sign up too.

What is Freetrade app?

Freetrade is a stock and shares investment smartphone app which allows you to trade for free, as long as you don’t mind waiting until 4PM every day. The company is still an early stage start-up, and has raised money several times using crowdfunding platform CrowdCube. As of mid-April, it has about 25,000 user accounts who have invested over £12 million.

How can I trade for free?

It’s possible to trade “for free” using Freetrade, a mobile app which lets you invest in a limited selection of stocks, shares and exchange traded funds (ETFs), as long as you limit yourself to a normal investment account and only buy and sell shares once a day at 4PM. Freetrade charges £1 for an “instant” trade when the markets are open, and there is a charge for an ISA account and a premium “Alpha” account which is in the works.

How can I get Freetrade?

Sign up to Freetrade with this link and you’ll get a free share. Here’s some more information about the offer.

Further reading if you’re interested in finance

• Reddit’s UKPersonalFinance is fascinating if you’re interested in money

You really should be reading more about pensions 

• Better Have My Money is a very entertaining newsletter by a newbie investor

(This blog was originally published in December 2018. *A plot point in The Big Short.)

Got a NEST pension? Consider changing your default fund

The government’s pensions auto enrolment fund has been wildly successful. Today, 87 per cent of people have a UK pension scheme, up from 55 per cent in 2012 when the rules changed to mean that you had to opt-out of saving (rather than opt-in). The numbers are even more impressive for young people: 84 per cent of people aged 22-29 now have a workplace pension, up from 24 per cent in 2012.

A huge number of these new savers are investing their money in a NEST pension, one of the government’s main pension scheme options which now has more than six million members.

99 per cent of these six million savers are invested in NEST’s “default funds.” In other words, of the millions of new automatic savers, only 1 per cent have made a manual decision about where their money goes.

I’m one of those 1 per cent.

The default fund option in NEST is not right for me, and I think many other savers who, like me, have many decades until retirement, should consider moving their money too.

What was the NEST default fund wrong for me?

The objectives of the default fund are threefold: maximising the total size of the retirement pots; ensuring that cohorts who contribute similar amounts have similar outcomes; and, to “dampen volatility” while people are saving.

To achieve these objectives, the default fund invests a maximum of 55% of its portfolio in equities, presumably because any major volatility in the stock market would mean a temporary fall in the value of their pension, which would put off savers who will then choose to withdraw their money entirely.

Even worse, in the first five years of investing, only 35 per cent of your default fund money is in the stock market, and up to 30 per cent of your money could be invested in cash (in other words, inflating away!).

The portfolio for the default NEST pension fund in its least conservative phase puts a maximum of 65% of its assets in the stock market, which I feel is very conservative

I want my retirement fund to make me as much money as possible and for me the best way to do that is to put it all in the stock market. Read my Freetrade review for more detailed reasons why.

Since I won’t be able to access my retirement fund for at least 30 years, I’m not worried about monthly or even annual fluctuations. NEST does provide alternative options for those who want to take on more risk, but even its “higher risk” fund targets a portfolio that is 70 per cent equities. The only option that is 100 per cent equities is the Sharia fund, (which also happens to be the fund that’s performed best since inception.)

In summary: the default fund is an incredibly conservative and risk-averse option, and you should consider changing it. Even if you don’t change, you should know where your money is going.

Further reading

NEST’s different funds and how they invest your money

UK Post Box review: my most luxurious digital service

Is your pension plan water?