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Always remember that investments can go down as well as up in value, so you could get back less than you put in. A rule of thumb is to hang on to your investments for at least five years to give them the best chance of providing the returns you want.
Contents:
Our comparison tables are designed to help you find the best trading platforms in the UK.
Use the filters below to quickly locate the best UK stockbrokers for buying and selling stocks and shares, exchange-traded funds (ETFs), exchange-traded commodities (ETCs), investment trusts (ITs), contracts for difference (CFDs), foreign exchange (forex), options, and other trading products.
Please keep in mind that when you trade, your capital is at risk. The fees below are not exhaustive–other fees apply. ISA, pension, and tax rules also apply.
The platforms below are authorised and regulated by the UK’s financial watchdog, the Financial Conduct Authority (FCA).
Here are the best trading platforms in the UK:
Earn up to 4.85% annual interest on uninvested cash
Interactive Investor is a subsidiary of wealth management giant Abrdn and the second-largest investment platform in the country. Also well known for its fixed monthly subscription fees (as opposed to annual percentage-based fees like most other investment platforms), Interactive Investor has been providing investment services and financial information to UK customers since 1995.
If you choose to invest with Interactive Investor, you will gain access to over 40,000 investment options, including UK and overseas shares, funds, investment trusts, and ETFs. This is the second-widest choice of UK and international investments offered by an investment platform in the UK. Interactive Investor allows you to build your portfolio in multiple ways depending on your investment goals, attitude to risk and personal preferences. Beginner investors or those who prefer ready-made investments can build their portfolios using Interactive Investor’s Quick-Start Funds, an easy way to start investing where you choose from six low-cost funds prepared by the team of experts at Interactive Investor. Advanced or more confident investors can choose from a wide range of funds and shares and build their portfolios themselves. Interactive Investor gives you access to 17 global stock exchanges, including exchanges in North America, Europe and Asia Pacific. These include markets such as the FTSE 100, FTSE 250, FTSE All-Share, S&P 500, NASDAQ, NYSE, Dow Jones and more. In addition to the above, Interactive Investor offers Japanese, Indian and Chinese shares in the form of American Depositary Receipts (ADRs).
Interactive Investor gives you a free trade every month, which you can use to buy or sell any investment. After that, trades usually cost £3.99. For those investing £50,000 or less, you can sign up for the cheapest plan (Investor Essentials), which costs only £4.99 a month but does not come with the monthly free trade. The platform also offers a free regular investing service that allows you to deposit as little as £25 a month towards your investments without paying a trading fee each time, irrespective of the plan you choose. Interactive Investor also has lots of expert ideas, research and insights, which can be helpful when selecting investments. Interactive Investor’s suite of products includes a Trading Account, Stocks and Shares ISA, SIPP and Junior ISA.
Capital at risk.
Earn up to 5.2% annual interest on uninvested cash
XTB is good for beginners but much better for advanced traders. It is a user-friendly, fully-customisable European trading platform renowned for its extensive CFD and forex trading offerings. XTB provides traders instant access to hundreds of global markets and over 5,600 instruments, including UK and overseas stocks and shares, ETFs, forex, indices, commodities, stock CFDs, and ETF CFDs.
For beginners, XTB offers commission-free fractional stock and ETF investing. This means you pay no dealing fee when you trade or invest in real stocks and ETFs. It also means you can buy tiny fractions of the most expensive American or local stocks with as little as £50. For advanced traders, you’ll enjoy using XTB’s robust in-house trading software, xStation, or popular trading platform, MetaTrader 4 (MT4). xStation by XTB is a powerful trading software available on iOS, Android and desktop devices and suitable for both beginners and advanced traders. The xStation software gives you access to comprehensive charting and risk management tools. With the inbuilt trading calculator, you can easily estimate costs, profits or losses before opening a position, modify stop loss and take profit orders directly on the chart or close all positions with a click of a button. XTB also provides an extensive library of educational materials, including videos, webinars, and courses suitable for both beginners and experienced traders. When you sign up, you will have access to a dedicated account officer who will work with you to help you better understand your needs and how XTB operates.
It is free to open a trading account with XTB, and all users have access to a free demo account with £100,000 of virtual funds that you can use to practise trading and investing until you become confident enough to use real money. Deposits in GBP and EUR are free of charge, but withdrawals below £60 have a £12 processing fee. Real stock and ETF trading is commission-free for monthly turnovers up to €100,000 (£85,000). Transactions above this limit will attract a commission of 0.2% (minimum €10 (£8.50). If you invest in foreign stocks and ETFs, a 0.5% currency conversion fee may apply. Stock and ETF CFD trading are also commission-free. Spreads and margins apply to other products. Inactive accounts attract a monthly fee of €10 (£9). Other fees apply. For more information, visit XTB. XTB does not offer an ISA or SIPP.
Please note: Contracts for Difference (CFDs) are leveraged products and carry a significant risk of loss to your capital, as prices may move rapidly against you, and you may be required to make further payments to keep any trades open. Between 74 and 89% of retail investor accounts lose money when trading CFDs. These products are not suitable for all clients. Therefore, please ensure you fully understand the risks and seek independent advice.
Earn up to 5.3% annual interest on uninvested cash
eToro is a trading platform that offers investing in stocks and cryptoassets, as well as trading CFDs. With eToro, beginners and expert traders in the UK have real-time access to thousands of stocks, ETFs, indices, commodities, forex, cryptocurrencies, and NFTs from top exchanges worldwide. For beginners, specifically, eToro’s real stocks are commission-free, and you can buy them in fractions, which means you can buy a portion of an Apple stock for, say, £50 and pay no dealing fee (other fees may apply). For expert traders, eToro provides an impressive range of fundamental and technical analysis tools, including market news, economic data, social media trends, news sentiment trends, and advanced charting tools. ProCharts, a professional-grade technical analysis tool available on eToro, allows users to compare charts from different financial instruments and time frames. eToro also offers risk management tools, such as Stop Loss, Take Profit, and Trailing Stop Loss, to help you better manage your positions and protect your investments. Stop Loss and Take Profit are not guaranteed.
If the above is not your style and you’d rather invest in a ready-made investment portfolio, eToro has over 40 fully allocated, balanced investment portfolios, focusing on market segments you can understand and relate to. Some of the portfolios include MetaverseLife, BigTech, GoldWorldWide, Vaccine-Med, BitcoinWorldWide, Diabetes-Med, Driverless, and GigEconomy. These portfolios are a grouping of several assets, such as stocks, cryptocurrencies, ETFs, and even people, bundled together based on a predetermined theme or strategy. eToro also offers Copy Trading, a unique feature that allows everyday investors to copy the trades or investments of top-performing traders on the eToro platform. Anyone can copy trades on eToro. Similarly, anyone can give others access to copy their trades. If you are an expert trader approved to participate in eToro’s Popular Investor Program, where others copy your trades, you will be eligible to receive monthly earnings.
It is entirely free to open an account with eToro, and all registered users receive a US$100,000 demo account for free, which you can use to practise trading until you become confident. Trading on eToro occurs in USD, so a currency conversion fee will apply if you deposit or withdraw in a currency other than USD. Withdrawals incur a fee of US$5 (£4), and the minimum withdrawal amount is US$30 (£24). For UK customers, eToro offers an eToro Money app that allows you to convert your GBP to USD free of charge, thereby reducing your foreign exchange costs. eToro does not offer an ISA or SIPP.
Please note: Your capital is at risk. 80 - 90% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money. Additionally, cryptoassets are high-risk investments, and you should not expect to be protected if something goes wrong. Tax on profits may apply. Copy Trading does not amount to investment advice. Other fees apply. For more information, visit eToro.
Freetrade is a mobile trading app that gives you access to thousands of UK and overseas stocks, ETFs, REITs, and investment trusts covering different sectors and markets worldwide. The Freetrade app can be accessed on iOS, Android and desktop devices and offers a slick and easy-to-use user interface and experience. The app is a great choice for both beginners and experienced investors.
With Freetrade, you can invest in fractional shares of even the most expensive US shares with as little as £2. Depositing, trading and withdrawing on Freetrade are commission-free (other charges may apply). FX rates apply to US stocks at the spot rate + 0.99%. To get the most out of Freetrade, you can choose from three subscription plans. The Basic Plan costs £0.00 per month and allows you to open a General Investment Account (GIA) and trade commission-free. The Standard Plan costs £5.99 per month and allows you to open a Stocks and Shares ISA in addition to your GIA. With the Plus Plan at £11.99 a month, you get a Self-Invested Personal Pension (SIPP) and a Stocks and Shares ISA in addition to your GIA. Dealing on Freetrade is commission-free, irrespective of the subscription plan you choose. Freetrade’s suite of products includes a Stocks and Shares ISA, General Investment Account (GIA) and SIPP.
Special offer: Get a free share worth £10 when you join Freetrade and fund your account with at least £50.
Please note: When you invest, your capital is at risk. The value of your investments can go down as well as up, and you may get back less than you invest. ISA rules apply. SIPP eligibility and tax rules apply. Free share terms and conditions apply.
InvestEngine is a low-cost ETF investment platform that provides a choice of managed portfolios tailored to you and commission-free DIY investing to help you build long-term wealth. Users can invest in over 500 exchange-traded funds (ETFs) from leading global asset managers.
With InvestEngine, you can invest in two ways depending on your tolerance for risk and savviness as an investor: beginner investors or those who prefer a ready-made investment portfolio can select from one of the managed portfolios on offer, where the team of experts at InvestEngine will take care of the day-to-day investment decisions for you. These portfolios are a selection of ETFs based on your preferences and risk tolerance. Once you’ve selected one, you do not have to do anything else besides monitor the performance of your investments. Advanced or more confident investors can choose from 500+ commission-free ETFs and build their portfolios themselves. InvestEngine also offers fractional investing, which allows you to buy bits and pieces of an ETF with as little as £1. This enhances your ability to build a diversified portfolio even if you have a small amount of money to invest. With the DIY Portfolio, there are no platform fees. However, the managed portfolios attract a fee of 0.25% per year. All InvestEngine portfolios are free of set-up fees, dealing fees, ISA subscription fees or withdrawal fees.
InvestEngine stands out amongst its competitors as one of the cheapest trading platforms in the UK because it charges no platform or management fees on its DIY Portfolio and just 0.25% a year on its managed portfolio. You can also start investing with as little as £100. InvestEngine’s suite of products includes a Stocks and Shares ISA, Personal Account and Business Account.
Capital at risk.
Pepperstone is a CFD and forex broker that allows you to trade a wide variety of instruments, including forex, indices, stocks, ETFs, commodities and other assets via contracts for difference (CFDs). The Pepperstone platform boasts low-cost spreads, fast execution speeds and access to over 1,200 trading instruments. The Pepperstone CFD trading accounts allow a minimum trading size of 0.01 lots and a maximum of 100 lots. Retail traders can access leverage up to 30:1 and over 60 currency pairs.
Pepperstone also allows scalping, expert advisors, hedging, and news trading. With Pepperstone, you can trade and enjoy the seamless creation of advanced trading strategies via some of the most popular and powerful trading software in the world, including TradingView, MetaTrader 4 (MT4), MetaTrader 5 (MT5), CTrader, DupliTrade (for social and copy trading), and Capitalise AI (for code-free trading automation). The Pepperstone platform is suitable for both beginners and advanced traders. It is especially suitable for professional traders who want to take advantage of higher leverage. Pepperstone also has a suite of educational materials to help traders at every level.
It is entirely free to open an account with Pepperstone, and all registered users gain access to a free demo account, which you can use to practise CFD trading until you become confident. On Pepperstone, the spreads, which function as trading fees for CFD brokers, start at 0.6 pips for forex CFDs, 0.4 for index CFDs, 0.05 for commodity CFDs, and 0.10% per side for UK share CFDs. Pepperstone also charges a swap rate (overnight fee) for holding CFD positions overnight. Other fees apply. Pepperstone does not offer an ISA or SIPP.
Please note: When you invest, your capital is at risk. Between 74 and 89% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and can afford to take the high risk of losing your money.
CMC Markets is a CFD, forex, and spread betting platform that gives you access to over 12,000 instruments across a wide range of global financial markets, including forex, indices, commodities, shares, ETFs, and treasuries. The platform offers more forex pairs than any other broker listed here. It also offers an enhanced charting experience, allowing users to choose from more than 115 technical indicators and drawing tools, over 70 patterns, and 12 in-built chart types.
Experienced traders and beginners alike will find the platform useful, given its range of tools and resources, including a pattern recognition scanner, advanced order execution, and comprehensive news and analysis from Reuters. These tools are designed to offer quick execution, precise charting, and accurate insights. CMC Markets also offers a premium membership, CMC Alpha, delivering benefits like savings of up to 28% on spreads, a complimentary Financial Times subscription, and interest on uninvested cash. For active traders, a specialised account offering spreads starting from 0.0 pips and fixed low commissions is available.
Opening a live spread betting or CFD account with CMC Markets is completely free, and you can also access numerous tools such as charts, Reuters news, or Morningstar quantitative equity reports at no cost. All registered users receive a demo account with £10,000 of virtual funds, which can be used to practise trading until you are confident to trade with real money. With CMC Markets, the spreads, which function as trading fees for CFD brokers, start as low as 0.7 pips for forex CFDs, 1 point for stock and ETF CFDs (commission fees apply), 0.3 points for commodity CFDs and 0.5 for index CFDs. Holding costs (for trades held overnight, which is essentially a fee for the funds you borrow to cover the leveraged portion of the trade) also apply based on the value and duration of your trade. CMC Markets does not offer an ISA or SIPP.
Please note: Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when spread betting and/or trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
AJ Bell is one of the UK’s largest online investment platforms, and its mission is to make investing as easy as possible for anyone. The platform offers thousands of investment options for the DIY investor, including shares, funds, bonds, investment trusts, ETFs, ETCs, and warrants.
There are multiple ways to get started with AJ Bell, depending on your risk tolerance and investing savviness. Beginner investors or those who prefer to choose a ready-made investment portfolio can get a little, or a lot, of help from AJ Bell’s specialists by selecting one of the investment ideas on offer. Investment ideas are diversified ready-made baskets of investments that you can select based on your personal preference and attitude to risk. There are eight total investment ideas, each built by a specialist team, and you can pick the right one for you depending on whether you are seeking to simply grow your money over time or receive an income whilst still growing your money. Expert investors can take advantage of the stock and fund screeners and complex instruments available on AJ Bell and build their portfolios themselves.
AJ Bell charges an annual platform fee ranging from 0.25% to 0%, depending on the size of your portfolio. Dealing fees for buying and selling investments online are £1.50 for funds and £5 for shares (reducing to £3.50 if there were 10 or more online share deals in the previous month). AJ Bell’s products include a Share Dealing Account, Stocks and Shares ISA, Junior Stocks and Shares ISA, Lifetime ISA, SIPP and Junior SIPP.
Capital at risk.
Hargreaves Lansdown, a FTSE 100 company and the UK’s largest investment platform, is one of the best share dealing accounts in the UK. Although not the cheapest, it compensates with unrivalled stock research and trading tools, prioritising long-term client relationships and financial security. There is almost no stock, fund or investment trust you cannot find on Hargreaves Lansdown, along with detailed information on fund composition, performance data and advanced charting. With Hargreaves Lansdown, you can access over 15,000 instruments, encompassing over 2,500 funds, UK and overseas shares, bonds, ETFs, ETCs, investment trusts and more.
With Hargreaves Lansdown, you can build your investment portfolio in three ways. You can pick your own investments to match your values and goals, select ready-made portfolios, or pay a financial adviser to choose investments for you. The ready-made portfolios can be used as all-in-one investments. Pick one from the different risk levels, and you are good to go. You will still have to monitor your portfolio as with any other investment. If you pay for financial advice, the specialist investment adviser will recommend a suitable portfolio of investments for your goals and ensure that your portfolio is cost-effective, well-balanced, diversified, and ideal for your stage in life. Advanced or more confident investors who want to pick their own investments can choose from a wide range of funds, shares and other investments and build their portfolios themselves.
Hargreaves Lansdown does not charge a platform fee on its Fund and Share Account but charges 0.45% (capped at £45) a year on its ISA and 0.45% (capped at £200) a year on its SIPP. It offers most products, including a Fund and Share Account, Stocks and Shares ISA, Lifetime ISA, Junior ISA, and SIPP. These services are intended for investors who are happy making their own decisions.
Please note: Your capital is at risk. The fees quoted here are not exhaustive. Other charges apply.
Earn up to 3.91% annual interest on uninvested cash
Saxo is the UK division of Saxo Bank, a large European bank that allows you to invest in 71,000+ financial products from stock markets worldwide. With Saxo, you can invest in UK and overseas stocks and shares, bonds, mutual funds, ETFs, forex, CFDs, futures, commodities, and options.
Saxo allows you to invest in one of two ways depending on your investment knowledge: Beginner investors or those who prefer to choose a ready-made portfolio can select from one of the managed portfolios on offer, where Saxo experts navigate the markets and manage your investments on your behalf. The average cost of this managed portfolio is 0.95% per year (including fund costs). Advanced or more confident investors can choose from the range of financial products on offer and build their portfolios themselves. Saxo traders benefit from extensive charting with 50+ technical indicators, integrated trade signals, news feeds and risk-management features via the SaxoTraderGO platform. Advanced traders can access even more sophisticated trading features on SaxoTraderPRO, Saxo Bank’s desktop-only advanced trading platform.
Saxo has different transaction fees grouped into trading tiers. If you plan to trade high volumes, you can upgrade your tier to get lower transaction fees. The Classic tier, which attracts the highest trading fees, costs 0.08% (min. £3) per deal for UK Stocks and US$0.015 (min. US$1) per deal for US Stocks. Other fees apply. Saxo’s suite of products includes a Trading Account, Stocks and Shares ISA and SIPP.
Please note: Capital at risk. 64% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.
Bestinvest is a UK low-cost investment platform that allows you to trade or invest in over 3,000 instruments, including shares, funds, ETFs, and investment trusts. With Bestinvest, you can build an investment portfolio in two ways depending on your personal preferences, goals and attitude to risk.
Beginners or those who prefer a ready-made investment can build their portfolio by selecting one of Bestinvest’s ready-made investment portfolios. These off-the-shelf style portfolios are created and managed by the team at Bestinvest and come with a carefully selected and diversified collection of investments. Once you have picked one, you do not need to do anything else. There are three ranges to choose from: Expert, Smart and Direct, depending on whether you want to maximise the returns for the risk you take, focus on cost-efficiency or focus on individual investments. The team at Bestinvest will walk you through the process of selecting a ready-made portfolio. Advanced or more confident investors can choose from a wide range of funds, shares, ETFs and ITs and build their portfolios themselves.
To start building your portfolio with Bestinvest, you can deposit a lump sum or set up a monthly savings plan (which allows you to automatically save or invest a set amount into your investment account every month). There are no set-up fees or fund dealing charges with Bestinvest. Bestinvest charges an annual platform fee ranging from 0.40% to 0% for DIY investing and 0.20% to 0% for ready-made investing. The dealing fee for buying and selling shares online is £4.95 per deal. Bestinvest’s suite of products includes a Stocks and Shares ISA, Junior Stocks and Shares ISA, General Investment Account, SIPP and Junior SIPP.
Capital at risk.
The table below aims to show representative examples of your annual investment fees (platform and dealing fees only) for individual stocks and shares held in a Stocks and Shares ISA.
To make the best use of the table, click the column headers to sort from the most expensive to the cheapest trading platform and vice versa.
For example, if you want to see the cheapest platforms for a lump sum investment of £20,000, click once on the £20,000 lump sum header. To see the most expensive broker for a lump sum investment of £100,000, click twice on the £100,000 lump sum header.
Continue this exercise on all the headers until you find what you want.
The calculations below are based on the following scenarios:
We also assume you will make 12 ad hoc deals in the same year.
A deal is either one of buying or selling an investment. It is also called a trade.
We use the colours green, amber, and red to indicate how expensive or cheap a stock trading platform is compared to the others. The cheapest trading platforms are coloured green, the more expensive ones red, and the others amber.
Keep in mind that a platform showing up as green does not make it the best one for you, as cheap does not always equal good. Depending on what you are looking for, some of the more expensive trading platforms could have a wider variety of stocks, bonds, funds, ETFs, and more.
If you are investing small amounts and choose to go with the cheapest trading platform for that amount, note that some of the more expensive platforms become cheaper as your pot increases. Consider Interactive Investor, for example.
Additionally, we show the costs which apply to the first year only. It is important to mention this because, with trading platforms like iWeb, your charges reduce after the first year. Whereas with platforms like EQi, your charges might increase after the first year.
Finally, for each online stockbroker listed in our comparison table below, your money is protected by the Financial Services Compensation Scheme (FSCS) or the equivalent European scheme up to a maximum of £85,000 per person.
Capital at risk. ISA rules apply. Other charges apply.
Here are the best trading platforms for ISAs:
| Platform | Regular Investor Charge | Dealing Charge | £20,000 | £100,000 | Learn More |
|---|---|---|---|---|---|
| 1.50 | 5.00 | 102 | 102 | DETAILS |
 | 1.00 | 6.00 | 120 | 172 | DETAILS |
| 4.95 | 139 | 459 | DETAILS | |
 | 11.50 | 208 | 378 | DETAILS | |
 | 8.95 | 157 | 357 | DETAILS | |
 | 1.50 | 10.99 | 192 | 407 | DETAILS |
| 0.00 | 72 | 72 | DETAILS | |
 | 2.00 | 9.50 | 150 | 150 | DETAILS |
| 1.50 | 11.95 | 188 | 188 | DETAILS |
 | 9.90 | 139 | 139 | DETAILS | |
| 3.99 | 144 | 144 | DETAILS | |
| 3.99 | 240 | 240 | DETAILS | |
| 0.00 | 0 | 0 | DETAILS | |
 | 5.00 | 160 | 160 | DETAILS | |
 | 7.50 | 160 | 340 | DETAILS | |
 | 1.50 | 7.50 | 170 | 440 | DETAILS |
 | 5.95 | 71 | 71 | DETAILS |
Trading is the buying and selling of shares in publicly listed companies. It is also called share dealing or stock trading.
A share is a unit of ownership in a public company. When you buy a share, you own a small unit of a public company.
For example, if you buy a share in Apple Inc., you will become a part-owner of Apple. If Apple performs well, you will benefit from its success. If it does not, you may lose some money.
You may also come across the word stock or equity. In most situations, stocks, equities and shares refer to the same thing. Stocks could also mean all your shares in one or more companies.
Companies issue shares to raise money to fund their activities. Individuals and institutions trade shares to benefit from the successes of companies they believe in.
When you trade stocks, you may benefit from capital gains, receive dividends, beat inflation, take advantage of compound interest to grow your investments and vote at shareholder meetings.
A stock market is a marketplace where buyers and sellers come together to trade publicly listed company stocks on stock exchanges such as the London Stock Exchange (LSE), the New York Stock Exchange (NYSE), the National Association of Securities Dealers Automated Quotations (NASDAQ), and the Shanghai Stock Exchange (SSE). The NYSE and Nasdaq are the two largest stock exchanges in the world based on the total market capitalisation of the companies listed on each exchange.
To trade stocks in the UK, you need to open a stock trading account with a trading platform or stockbroker. The best stockbrokers in the UK will allow you to hold your investments in a tax wrapper, such as an Individual Savings Account (ISA), General Investment Account (GIA) or Self-Invested Personal Pension (SIPP).
There are two main types of stock that companies can issue to raise capital: common stock and preferred stock. A third type of stock also exists, which is a type of common stock called dual-class stock. See below:
A stock market index is simply a list of stocks in any given market. It is used as a benchmark to measure stock market performance.
Examples of stock market indices include:
Market capitalisation, often referred to as “market cap,” is a way to measure the size of a company based on the total value of its outstanding shares of stock. It is calculated by multiplying the number of outstanding shares by the current market price of each share.
When it comes to stock trading, companies are often classified based on their market capitalisation. Small-cap stocks refer to companies with a market cap of less than $2 billion. Mid-cap stocks have a market cap between $2 billion and $10 billion, and large-cap stocks have a market cap of more than $10 billion.
Investing in small-cap stocks can be riskier than investing in mid- or large-cap stocks but can also lead to greater potential returns. Mid-cap stocks tend to have more stability and a moderate level of risk, while large-cap stocks are generally considered less risky but may have lower potential returns.
When trading stocks, you will notice that there is a standard classification of industries and sectors. The Global Industry Classification Standard (GICS) is a system used to classify companies based on their economic characteristics and business operations. The GICS system includes 11 sectors:
Traders make decisions about what companies to invest in based on many factors, including market capitalisation, industry sectors, and geographical location.
The amount of money you can make in the stock market depends entirely on your choices.
Using the S&P 500 as a benchmark for the stock market’s overall performance, we can see that it enjoyed significant growth in the ten years leading to 2020.
In 2010, the S&P 500 had a closing value of 1,115.10. By the end of 2020, the index had grown to 3,756.07, an increase of 238% over the decade.
The stock market experienced a steady rise in the early part of the decade, with the S&P 500 reaching new all-time highs in 2013 and 2014.
However, the market experienced a significant downturn in late 2015 and early 2016, as concerns over a global economic slowdown and the impact of falling oil prices weighed on investor sentiment.
The market then rebounded in 2016 and continued to grow steadily until 2020, reaching new all-time highs in August 2020, driven by hope in the COVID-19 vaccine and the US stimulus package. However, the market faced a sharp downturn as the pandemic continued to impact the economy, and uncertainty about the outcome of the US Presidential Election in 2020 increased.
Please keep in mind that past performance is not a reliable indicator of future performance.
There are two ways to trade stocks in the UK. You can either trade stocks directly (called direct investment) or use leverage (called margin or leveraged trading).
Direct investment involves buying stocks or bonds directly from a stockbroker or as part of a mutual fund.
You can buy individual company shares directly through a stockbroker. Investing in stocks in this way means that you are taking direct ownership of a company’s shares, making you eligible to vote at shareholder meetings and receive dividend payments. Investing in individual stocks and shares is one of the most common ways to invest in the stock market.
The first opportunity you will have to invest in shares is when the shares are created and offered to the public for the first time. This is called an Initial Public Offering (IPO) or ‘Going Public.’ Companies go public to raise money to fund their activities.
Once shares are created, they can be bought or sold on the stock exchange. This is called the secondary market because it comes after the IPO. The price of shares at IPO is typically determined by the underwriter of the IPO, usually a large bank. After the IPO, the share price is determined by changes in supply and demand.
You can participate in IPOs or join the secondary market via an online stock trading platform or stockbroker. The best platforms in the UK will allow you to invest in stocks via the secondary market with as little or as much as you feel comfortable with. Most platforms will accept an initial investment of about £25, while others might allow you to start trading with £1. Trading platforms or stockbrokers that give you direct access to an IPO might require a higher initial deposit. Stockbrokers offer three types of services: execution-only, advisory and discretionary.
Another way to invest directly in stocks and shares is through mutual funds. A fund is a diverse basket of shares, bonds or other assets representing a country, industry, index or theme. Examples of funds include index funds, active funds and exchange-traded funds (ETFs). Funds save you the trouble of buying shares in multiple companies or worrying about building a diversified portfolio. They are also safer and cheaper than buying individual stocks since you share the risks and costs with other investors. Most people, including experienced investors, use funds when investing.
Margin trading is the use of borrowed money to buy stocks, forex, commodities, indices and other markets. It is also called leveraged trading. When trading on margin, the trading platform or stockbroker will loan you the total value of the trade, requiring only a small deposit as collateral. This deposit is called a margin.
Because of the loan given to you by the broker, your profits can be magnified when trading on margin, as you can trade much larger amounts than you would with your own money. However, in the same way that your profits can be magnified, your losses can also be magnified, and you could lose all you invested.
Leveraged products allow you to take a long or short position in a financial market. If you believe the price of an asset will go up, you buy (or “go long”). Similarly, if you think the price of an asset will go down, you open a sell position (or “go short”).
There are several ways to trade on margin in the UK, including via contracts for difference (CFDs), forex, options, spread bets, and futures.
To trade stocks in the UK, you’ll need to:
The following are the taxes on stocks and shares in the UK:
When you buy UK shares electronically, you will pay a 0.5% Stamp Duty Reserve Tax (SDRT) to the government.
If you purchase UK shares using a stock transfer form, you will pay Stamp Duty if the transaction is over £1,000.
Stamp Duty on Irish registered stocks is 1%.
You do not pay Stamp Duty on AIM stocks or Exchange-Traded Funds (ETFs).
When you sell shares or other investments, irrespective of the country where the shares are registered or the currency the shares are denominated in, you may have to pay Capital Gains Tax if you make a profit.
You may have to pay tax on the following:
You only have to pay Capital Gains Tax on your overall gains above your tax-free allowance.
This tax year, the Capital Gains tax-free allowance is £6,000 (£3,000 for trusts). This means you will not have to pay tax on the first £6,000 profit you make from selling your stocks and shares unless you have already used up your allowance elsewhere, for example, on the profit from the sale of cryptocurrencies.
Additionally, the first £1,000 you receive in dividend payments is tax-free. Visit GOV.UK for more information on the tax on dividends and the dividend allowance.
You may also be able to reduce your tax bill by deducting losses or claiming reliefs - this depends on the asset. Another way to limit your tax bill is by trading certain kinds of leveraged products. Please speak to your tax adviser for more information. Also, visit GOV.UK for more on Capital Gains Tax allowances.
Here are the best platforms for short-selling stocks in the UK:
The best trading platforms for beginners in the UK are Freetrade, eToro, InvestEngine, and Interactive Investor. All four platforms are easy to use, offer a wide range of trading instruments, and are available to download on iOS and Android devices.
eToro, Freetrade, and InvestEngine offer commission-free trading on some investment products like US stocks and ETFs. Commission-free trading means you pay no trading fee when you buy and sell investments. This can be particularly advantageous for beginners with little money to invest.
These platforms also offer fractional trading, which allows you to buy and sell bits and pieces of a stock or ETF. With fractional trading, you can invest in expensive stocks like Tesla ($TSLA), which typically costs over £150, with as little as £2 because you are buying a fraction of the stock instead of the whole. All platforms also offer a slick and easy-to-use mobile experience available on Android and iOS devices. eToro, InvestEngine, and Interactive Investor are also available on the web for those who prefer to trade on their computers.
Interactive Investor is the second-largest investment platform in the UK. It also has the second-widest range of investments in the industry. These features can benefit beginners who want to learn to trade but do not want to be limited to mobile app-only interfaces or a small number of trading instruments.
Finally, both eToro and Interactive Investor provide a demo account with virtual funds, which can be helpful for beginners who are not yet confident enough to trade with real money.
The best share dealing accounts in the UK are Hargreaves Lansdown, AJ Bell, and Interactive Investor. All three are seasoned, highly reputable brokers for trading stocks, ETFs, index funds, and other investment products in the UK.
An investor with a small amount of money should look to invest for the long term in low-cost global or total-market passive index funds and ETFs via the cheapest trading platforms.
The cheapest trading platforms in the UK for index funds and ETFs are InvestEngine, Bestinvest, and Vanguard. These platforms do not charge a fund dealing fee, so you only ever pay the platform fee and fund manager costs. Other fees may apply.
Here are the best online brokers in the UK:
The best trading apps in the UK are eToro, Freetrade, and Interactive Investor. These are easy-to-use, low-cost mobile apps for trading shares, ETFs, REITs, and other investment products.
Most stock traders lose money because they make impulsive decisions driven by emotions such as fear and greed. They also tend to trade too frequently, increasing the chance of poor trades and incurring high brokerage commissions.
Additionally, they often lack a solid investment strategy and risk management plan, which can lead to significant losses when the market turns against them. For example, a trader who buys a stock based on a hot tip from a friend without doing any research or analysis is more likely to lose money than a trader who carefully studies the company’s financials and industry trends.
Traders who lose money also tend to chase market trends and follow the crowd, encouraging a herd mentality and potentially creating a market bubble.
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