Freetrade (3/5)— Cheap stocks ISA review
Freetrade is a relatively new startup that provides low cost trading for ETFs and stocks. It has disrupted the UK “do it yourself” stock trading market by providing almost free trading. I’ve been using it for a year now and wanted to share my experience. I’ve also been using trading212 lately and it’s competing heavily with the pricing model of Freetrade.
Note: Trading on your own is very risky. You may lose all your money. I’m not a financial adviser. The below is based on my personal use of the app and is true to the extent of my knowledge.
Summary ratings
Overall rating: 3/5
The saying “you get what you pay for” applies here. The platform has very basic capabilities compared to its direct competitor (Trading 212) and existing established trading platforms. It is still a start up and I’m super excited about it, but you need to be aware that the tools and capabilities of the platform are still nascent. The cost is cheap but everything else is still too rudimentary.
Ratings break down:
Ease of use: 5/5
Cost: 4/5
Stock info: 2/5 (bare bones)
Portfolio management: 2/5
Trading capabilities: 2/5
Costs
The trading costs are listed on the freetrade website.
- For ISAs you’ll pay 3£ per month and can buy and sell as many stocks as you’d like without incurring extra transaction costs. The premium account which provides more stocks and the ability to create limit orders and stop losses costs 9.99£ per month
- If you’re buying stocks in foreign currency you pay 0.45% extra on top of the exchange rate.
Compared to other low cost brokers for ETFs and shares:
Other costs to be aware of that all brokers have :
- You pay the stock market exchange tax if there is one. For example the UK LSE has a 0.5% stamp duty on transactions.
- For ETFs there are sometimes transaction costs and ongoing charges that are listed in the “costs and charges” link of the app
Stock information
Every trading platform provides some amount of information about a stock and its performance. Freetrade provides the bare minimum and doesn’t include details such as stock performance KPIs (ROE, EPS, …), trading volumes, financial statements. You’ll need to get that information from the internet. I’ll list out the information you get below:
- Stock current price and historical price (maximum 5 years back). The way the stock is displayed is unconventional in that it’s purely a percentage and not the actual price over time (see first screenshot)
- The market opening times
- The current value of your investment, number of shares, average price, and investment gains/losses
- The sector this stock is in and a brief description
- The costs and charges associated which links to a website outside of the app(Example link)
- A key information document (KID) for UK stocks which links directly to vanguard in the below example (Example PDF link)
Portfolio Management
When investing, you’ll need to have an overview of how your overall portfolio is doing. Is your portfolio losing or gaining money, is it high risk and high growth or balanced. Freetrade provides the bare-bones again, showing overall gains and losses, high level sectors and investment categories, and that’s it.
Trading
The trading experience is simple and straight forward. Search for the stock in the “Discover” tab, specify the amount in GBP, and your order will be executed as either a basic order if the market is closed or an instant order if it’s open:
- Basic order: You specify the amount of money you want to spend on the stock and it will get executed at 3PM the next day. This has the downside that if the market is volatile and you you don’t pay attention to the stock price you might over pay.
- Instant order: This is during the opening time of the market and will be based on the best execution price. Again, you can’t specify how many stocks you want to buy — just the amount of GBP you’re willing to spend.
There are no advanced options such as limit orders and stop losses. However, the upcoming “Freetrade Plus” account, which costs 9.99 per month, will provide the limit order and stop loss options. Although at that price points other brokers might be cheaper long term.
A few ideas that would make Freetrade better
I’m pretty sure most of the below is on the roadmap of freetrade but adding them here in case they aren’t :
- Transparent costs: Embed the costs and charges in the stocks page so that when someone buys a stock they know what they’re paying for — including hidden costs by ETFs. This will also later on give you the ability to report to customers on costs and charges, which adds up over the long term.
- More stock information: Include long term financial information so that the customer knows what they’re getting into. At least some form of risk measure.
- Better portfolio insights: Provide better insights on the overall portfolio. Bonds and Stocks is too broad. Aggregated risk, similar to what’s available in morning star would be ideal.
- Price alerts: This is such a basic feature that makes everyone aware of the movements in the market — especially important during the current times. It would also drive more engagement with the app.
Note: Trading on your own is very risky. You may lose all your money. I’m not a financial adviser. The information is based on my personal use of the app and is true to the extent of my knowledge.
Sources:
https://www.trading212.com/en/Trading-Conditions
https://freetrade.io/pricing
https://www.youinvest.co.uk/isa/charges-and-rates
