Disclaimer – I am not, in any way, affiliated with Freetrade. I am also not a contributor to either of their crowdfunding campaigns, and nor do I plan on doing so. All opinions are my own.
Freetrade – the U.K’s potential answer to Robinhood. Trading and investing in individual equities has long been an expensive affair in the U.K and Europe, charging exorbitant rates unless you’re looking to trade frequently.
Freetrade’s basic account promises to bring trading to the layman with fee free share purchasing (Isa charges and instant trades aside), but how do they do it, and how can they get away with providing such a service?
According to their website, this is done by building their ‘business model’ and ‘tech stack to keep overheads low’…rather ambiguous from an outsiders perspective and raises many questions as to whether this is sustainable long term. As someone that isn’t in this industry, this seems initially like nonsensical business jargon and something, if I were looking to put in a more serious amount of money, I would want clarifying for fear of unexpected, future charges.
They also execute trades in batches at the same time every (working) day, twice a day. They make reference to this being a similar approach to that of the brokerage giant, Vanguard, but with even such a large and globally recognised broker needing to charge a 0.15% platform charge, it begs the question how does this comparatively tiny start-up can manage to charge nothing?
All that said, my experiences with the app so far have been excellent; my only real concern is the longevity and sustainability of the freemium business model, but that is for another day.
Their in app, live chat service has been exceptional, and they are very quick to respond. Being a mobile only platform, you receive notifications to your phone, much like a text message, whenever you receive a reply so you’re not having to constantly log back in to double check. All their rather helpful FAQs on their desktop site are also available on there too.
Depositing money is all too easy. In order to top up your account, you simply need to link a bank account, got to ‘My Account’ and click ‘Top Up’:
Next, you’ll be presented with a few tips for topping up and when your money will be available, and also a reminder to use your ‘unique reference number’ which you will be presented with on the next page:
On the final page you will be provided with your Freetrade account number, sort code and unique reference – this is not absolutely necessary but if not entered when transferring your money, may cause a delay in your money reaching your account.
As mentioned in the second screenshot, top ups are processed between 7am-4pm, and deposits after this time will enter your account around 9am the next working day.
After your money is in your account, you are ready to begin investing with Freetrade…
My Freetrade Journey – first investments
The majority of my investments are in a separate brokerage Isa account with another provider in the U.K, invested mainly in passive index trackers and the odd active fund. I can hear the shrieks and cries of all the Tim Hale fans as they scan their eyes over the word ‘active’, but fear not, this only makes up about 5% of my portfolio, so you can put your pitchforks down.
As this is something I won’t be touching for a number of years, I wanted to dabble with some spare ‘fun money’ in individual shares just to see my money working in other ways. My theory goes that by having this side account with only a few hundred in will give me a distraction to check daily, meaning I will leave my passive portfolio alone and won’t be checking it as much. The issue I was finding in trying to get started, was that my £10 investment in Sainsbury’s, for example, would be immediately eaten up if I went through Hargreaves Lansdown, and considerably depleted even going through Degiro. It wasn’t until late last year I began hearing about Freetrade – shout out to r/PersonalFinance and r/UKInvesting.
I have chosen the ‘Basic Account’ as I am already contributing to an S&S Isa as mentioned above. With the small amount I will be investing and the Capital Gains Allowance increasing to £12,000 for 2019/20, I don’t this will be too much of a concern.
I made an initial deposit of £50, sticking ~£5 in Sirius Mineral, Vodafone and Sainsbury’s.
My reason for choosing these three were rather crude and simple compared to my thought out fund allocation in my main account:
Sirius Mineral– a pure punt, hedging against my FOMO…I’m not usually one to invest or even buy anything because I don’t want to miss out (hence the lack of crypto in my portfolio and absence of a Mercedes on finance on my driveway), but this seemed like a fivers worth of shares worth gambling with (and yes I realise this way of investing is akin to gambling). They also dropped around 6% on the day I invested, so as they say “be greedy when others are fearful”.
Vodafone– again, and this will be a common theme with these initial ‘toe dipping’ investments, a rather basic reasoning for popping £5 into them. I’m with Vodafone and always been impressed by their services and retail stores…they’re also currently at one of their lowest valuations for 10 years.
Sainsbury’s– I shop here at least twice a week, every week. From personal experience it’s always busy, every time of the day. This is just anecdotal I know, but even the Sainsbury’s in the grotty little market town I work in finds masses of people still frequenting its stores. I probably won’t increase my stake anytime soon, however.
Ideally my first investments were going to be Diageo, Prudential and Unilever, but I somewhat underestimated how much £50 would get me and I don’t intend to risk much more in individual shares every month when I could be adding this to my more diversified, passive fund portfolio.
I will wait for a downtick in either of the above, but with Unilever priced at around 40 odd quid currently, I think that may have to wait an extra month when I deposit my next £50. Prudential or Diageo will more than likely be my next punts.
What else am I watching?
- Kier Group
- Royal Mail
- National Grid
Overall I am very happy with my experience with Freetrade so far. There is no waiting list anymore, making the sign up process seamless. Their customer service is excellent and the initial usability and interface of the app (albeit currently basic) is decent considering the app has only been live for a matter of months.
There are only a few changes I’d like to see implemented soon. Obviously the introduction of yet more equities would be great, but within the list of shares it would be handy to have an alphabetised shortcut running down the side of the screen, much like that of the one in the ‘Contacts’ iPhone app.
Also, when browsing individual shares, the performance charts and information about the share is rather basic. Although I appreciated the causal nature of Freetrade, appealing to the retail investor, I think their platform will be reserved for my ‘fun’ investing in the near and distant future because of this. If they continue growing their brand, developing their app and expanding its usability and maintaining their excellent customer services, I see no reason why people will not warm more to them and begin to trust their platform with their money.
UPDATE 23 April – Having used the platform a little more now, there are a number of additions I would like to see within the app. I believe a lot of these have been briefly mentioned in their 2019 road-map but I would still like to lay them out for this post.
Probably the biggest change I would like to see implemented is partial share investing. At the moment you are only able to buy whole shares. This means if you’re looking to only put in small amounts (£50 a month for example), you will either find yourself saving a number of months or simply looking for alternative investments if you wish to purchase shares in Disney (~$133), Apple (~$207) or Berkshire Hathaway (~211). Partial share investing would appeal even more to the sort of retail/casual investor Freetrade initially appear to be marketing for.
One other ‘biggy’ I would like to see implemented is the introduction of more analyses in under the portfolio tab. At the moment this tab simply shows your holdings, the amount of shares you hold in each and the current value of the combined shares. It would be helpful to have something visual to segment your portfolio by various categories such as sector and weight of a particular holding within your portfolio. At the moment I am having to do this independently through an Excel spreadsheet. This ties in with what I mentioned above with trusting the platform with greater amounts of their money – simple features like this are part and parcel with Vanguard and Hargreaves Lansdown, so Freetrade will have to follow suit at some point.
Again, coming back to the discover tab, it would be helpful to be able to search a stock by sector and/or description rather than just the exact name. At the moment there is no way to browse just ‘Insurance’ shares or ‘Retail’ shares. Obviously, this is redundant if you know exactly what stock you want to be investing in, but it would be great to browse the list of choices available, within a particular, sector on whim.
I think that is all for now; I have added a number of stocks to my portfolio since this post was first created, with my breakdown on the corresponding page having been updated accordingly.