Most traditional investment platforms charge two types of fee:
- Platform fee – the charge you pay for holding your investments with them.
- Trading fee – the price you pay to buy and sell individual investments.
Typically, trading fees are around £10 per trade. If you only have £100 to invest, then £10 is going to get wiped out straight away. In this case, that’s a whole 10%…which is huge!
If you plan to sell your investment, you’ll then pay another £10 on the way out. Now, in this example, you’ve got to make £20 (or 20%) profit before you break even!
Fundamentally, the more you pay in fees, the slower your money grows. High fees mean profits could be wiped out or losses exaggerated. This is why so many people go to great lengths to minimise their costs. It can have a serious effect on your wealth in the long run.
Importantly, Freetrade‘s General Investment account has none of the fees above. This means you keep all the profit.
This is why commission-free trading has helped open up investment markets for those starting small. Freetrade allows you to start with just £1.
Another huge advantage is Fractional Shares.
For example, if Tesla’s share price is $700, you might not have enough to buy one whole share. This is often a challenge because many larger platforms require you to purchase whole shares at a time. As a result, small er investors are squeezed out.
In contrast, Freetrade allows you to state how much you want to invest in cash terms. It could be £100 or £1,000. Importantly, it doesn’t have to be multiples of the share value, which gives the smaller investor access and more flexibility.
All these points help smaller investors get started and take away some of the barriers previously putting off those looking to get started.