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When it comes to choosing a platform through which to buy and sell investments, there are three key questions that are particularly important to ask yourself when you’re keen to trade investment trusts.
We have looked at a selection of UK-based execution-only platforms that offer the ability to trade in investment trusts to help you find the right one for your investment needs.
Q1. How Do You Like to Deal?
Over the years, there has been a growing trend towards online dealing, although telephone and postal dealing are still common. Often it is not only cheaper to deal online, it gives the investor more flexibility as well as more information at their fingertips: most platforms provide market data, news and charts, which help inform your investment decisions. That’s not to say that you cannot access these if you deal over the phone, but most likely if you are already on the platform’s website, you would place the deal there.
On-line platforms usually offer a real-time valuation of your portfolio, too, and many also provide educational resources and, in some cases, research and investment tips—such as Hargreaves Lansdown’s Wealth 150 list.
It’s helpful to know the dealing options and associated charges with each method. If you prefer to pick up the phone, there’s probably a platform that suits you better than browsing online for information, not least because the charging structure could be different. For online investors, it never hurts to know when and if you can also deal shares over the phone: you may need help placing a trade even if you’re a regular surfer.
Q2. How Often Do You Deal?
This is important because it determines the charging structure of different accounts, according to the frequency of trading. The two main cost components are dealing fees and administration fees.
From the below table of 10 platforms (click the table to enlarge):
- one charges fees based on the percentage value of a deal;
- five have a flat fee regardless of the frequency of trading;
- four give a discount for frequent trading (for example, Interactive Investor charges £10 per deal; falling to £5 for investors that trade at least 10 times a month).
On top of dealing fees, the majority of platforms charge an administration fee, sometimes referred to as inactivity fees (if dependent upon activity in an account). Indeed, four of the listed platforms charge an inactivity fee. For example, Barclays Stockbrokers will charge £12 + VAT if an investor has not executed any trades over the previous quarter. Four platforms charge fees regardless of investor activity. Interactive Investor is somewhat different as it charges an admin fee, which covers commission costs to the value of the fee. Hargreaves Lansdown and iWeb are two platforms that do not charge any administration fees regardless of whether you trade or not.
So it’s important to think about how frequently you’ll trade and to make sure you pick the platform with the right fee structure to best meet this.
Q3. Do You Prefer to Invest a Lump Sum or Are You a Regular Monthly Investor?
One of the biggest dilemmas investors face is market timing. Many professionals argue it is easier to choose a good investment than it is to time your purchase perfectly. One way to mitigate this problem is to drip-feed money into the market instead of investing all in one go. Whatever you choose, make sure your platform can support it. Not all platforms allow regular monthly investing. Also check platforms’ dividend reinvestment option. Although dividend reinvestment tends to be a common feature, the fee level varies for this service and relatively high fees can eat in your dividend gains.
Conclusions
There are plenty of execution-only platforms that allow you to buy and sell investment trusts. The table above is only a selection for comparison purposes. You may have other questions you need to ask before choosing a platform, such as fund availability and ISA fees. Some platforms provide financial advice if the value of your portfolio exceeds a certain threshold. Different criteria will have different priorities for each of us but we think these three questions are a good starting point for all investors looking for an execution-only platform that offers investment trusts in particular.
