What’s the cheapest investment account for £100 a month?

Once upon a time, not that long ago, investing for the younger generation – barring the select few with deep pockets – was tricky and expensive, with plenty of barriers of entry.

However, a battle has emerged as platform giants and banking big boys look to entice novice investors, largely thanks to the success of Freetrade. 

They’ve wised up that 20-somethings grow-up, earning potential swells and if they can get them loyal with a slick app, low fees and good customer service, they could be with it for life.

Banks historically battled for just left school current customers. Why? Well, there is plenty of research suggesting they will stay loyal. That will mean credit cards, loans, mortgages in the future. Wealth management was only really open to those with big balances. 

Investing is a Dodl: New AJ Bell app wants to take the fear out of investing

But now, that has all changed. Investment platform AJ Bell, which experienced a surge in customers since the start of the pandemic, is looking to further solidify its presence in the market with newer investors. 

Its answer? A big cuddly monster.

Last week it launched its long-trailed new investment platform Dodl, which will be cheaper to use than its traditional platform and charge no commission for buying and selling investments.

Dodl will offer trading accounts, stocks and shares Isas, and self-invested personal pensions (Sipps), with the ability to invest in shares and funds.

It will offer a selection of 50 UK shares and 30 funds with some popular US shares joining soon after.

AJ Bell claims the app will make investing easy regardless of experience and it is streamlined ‘so as not to overwhelm investors’ with the promise of ‘jargon-free investing’.

AJ Bell boss Andy Bell said: ‘This combination of simplicity and value make Dodl a great option for anyone looking for a low-cost, easy-to-use investment app to help them meet their investment goals.’

It is clear AJ Bell sees opportunity in the growing space of low-price, commission-free investing which has been catapulted into the mainstream by apps like Trading212 and Freetrade.

It is pitting itself directly against them with an annual charge of just 0.15 per cent, lower than AJ Bell Youinvest’s charge of 0.25 per cent. 

But AJ Bell is not the only platform that is looking to take the fight to some of the older, legacy investment apps. As the competition hots up, what else is on offer for new investors? We look at some of the low-cost options for investors.

Freetrade is one of the big beasts among this new wave of investment apps. Since its launch in 2017, it has quickly become one of the most popular investment apps in the UK.

Its referral system, which promises a free share worth up to £200, has seen Freetrade’s customer numbers surpass 1million and more than double its valuation to £650million in under a year.

Freetrade users can start investing in over 6,000 UK and US stocks and ETFs with no annual administration charges and free dealing, they can also open or transfer an Isa or Sipp, but these come with extra costs of £3 and £9.99 per month, respectively.

Easy to use: One of the selling points of Freetrade is the user-friendly app and interface

Easy to use: One of the selling points of Freetrade is the user-friendly app and interface 

While there is no charge for buying shares under its standard plan, not all investments are included, in order to access a wider market, including smaller company shares, investors can sign up to Freetrade Plus, which costs £9.99 per month. If they do that they do not pay the £3 monthly Isa fee or can pay £7 per month for a Sipp.

Freetrade Plus also allows investors to earn 3 per cent on up to £4,000 of cash in accounts.

A foreign currency charge of 0.45 per cent applies for overseas stocks.

Wombat has been around slightly longer than other competitors. Launched in 2017 by Australian-born entrepreneur Kane Harrison, it promises commission-free trading with ‘no hidden fees’.

DIY PLATFORM COSTS 

If you start with £1,000, and then invest £100 per month, this is how much it will cost at each of these platforms in year one. 

DIY INVESTING PLATFORMS AND STOCKS AND SHARES ISAS 
Platform Annual charge  Cost 
Dodl 0.15% £3.30 
Freetrade   £3 per month  (or free with Freetrade Plus) £36 
Wombat   0.1% (plus £1 a month)  £14.20 
InvestEngine (DIY)  Free + ETF costs  £0 
Vanguard    0.15% £3.30
HSBC   Cautious Portfolio – 0.62% £13.64 
Barclays Smart Investor  Investments in funds 0.2% 
All other investments 0.1%
£6.60

 

Its users can also invest in a range of thematic funds including the British Bulldog, which includes some of the UK’s best known businesses like Tesco, Barclays and Rolls-Royce, while The Money Maker theme includes some of the world’s biggest banks.

Wombat also allows users to buy fractional shares in some of the world’s biggest companies including PayPal, Netflix, and a host of other domestic stocks.

There is a minimum £10 deposit to start investing – as well as an option to contribute monthly – and charges start to kick in when the account value is over £250.

It then costs £1 a month plus 0.10 per cent of the account value – billed monthly – as well as a fund provider fee of between £0.07 and 0.75 per cent.

There also seems to be a push for financial education and responsible investing so its auto-invest function – which takes funds via direct debit – is a key differentiator.

Online wealth manager InvestEngine launched its DIY service last summer. It is going up against Freetrade with its free Isa and trading offering.

However the platform does not offer individual stocks, instead offering a range of around 150 exchange traded funds (ETF).

The costs are low: the DIY option has no account charge and no dealing fees, while customers who opt for the managed ETF portfolio pay a fee of 0.47 per cent fee.

Among the more established players, US giant Vanguard’s UK investment platform is cheap with a 0.15 per cent year fee and has no costs for buying and selling.

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However, you can only invest in Vanguard’s passive funds, its active range, or its popular LifeStrategy funds that invest in shares and bonds around the world.

Banks have long tried to outbid each other with student perks to try and entice young savers with the hope they’ll stay loyal for decades.

Now it seems banks are starting to realise they need to offer low-cost mass-market solutions for investing.

HSBC has started advertising its own investments, specifically targeting small-time investors. Investors can open an account with just £50 per month if they already have an HSBC current account, with a 0.25 per cent quarterly fee.

Barclays’ DIY platform Barclays Smart Investor charges 0.2 per cent on funds and 0.1 per cent on other investments. 

The platform fee is £4 per month minimum, or the sum of 0.2 per cent per year of funds plus 0.1 per cent of other investments in the account.

They may have larger customer bases but what banks don’t have on their side is technology. 

Often they have needed to replatform, as was the case with Barclays Smart Investor, formerly Barclays Stock Broker. 

However, if they are able to get a cut of this growing market the banks may have some success with a generation of new investors.

Compare the best DIY investing platforms and stocks & shares Isa

Investing online is simple, cheap and can be done from your computer, tablet or phone at a time and place that suits you.

When it comes to choosing a DIY investing platform, stocks & shares Isa or a general investing account, the range of options might seem overwhelming. 

Every provider has a slightly different offering, charging more or less for trading or holding shares and giving access to a different range of stocks, funds and investment trusts. 

When weighing up the right one for you, it’s important to to look at the service that it offers, along with administration charges and dealing fees, plus any other extra costs.

To help you compare investment accounts, we’ve crunched the facts and pulled together a comprehensive guide to choosing the best and cheapest investing account for you. 

We highlight the main players in the table below but would advise doing your own research and considering the points in our full guide linked here.

>> This is Money’s full guide to the best investing platforms and Isas 

DIY INVESTING PLATFORMS AND STOCKS & SHARES ISAS 
Admin charge Charges notes Fund dealing Standard share, trust, ETF dealing Regular investing Dividend reinvestment
AJ Bell YouInvest 0.25%  Max £3.50 per month for shares, trusts, ETFs.  £1.50 £9.95 £1.50 1% (Min £1.50, max £9.95)  More details
Bestinvest 0.40%  Account fee cut to 0.2% for ready made investments Free £4.95 n/a n/a More details
Charles Stanley Direct 0.35%  No platform fee on shares if a trade in that month and annual max of £240 Free £11.50 n/a n/a More details
Fidelity 0.35% on funds £45 fee up to £7,500. Max £45 per year for shares,  trusts,  ETFs Free £10 Free funds £1.50 shares, trusts ETFs £1.50 More details
Hargreaves Lansdown 0.45% Capped at £45 for shares, trusts, ETFs Free £11.95 £1.50 1% (£1 min, £10 max) More details
Interactive Investor  £119.88 as £9.99 per month £7.99 per month back in trading credit £7.99 £7.99 Free £0.99 More details
iWeb £100 one-off £5 £5 n/a 2%, max £5 More details
Freetrade Free for standard account £3 month for Isa  Freetrade Plus with more investments is £9.99/month inc. Isa fee No funds  Free  n/a  n/a  More details 
Vanguard  0.15%   
Only Vanguard funds
Free  Free only Vanguard ETFs  Free  n/a  More details 
(Source: ThisisMoney.co.uk March 2022. Admin charges quoted annually, may be monthly or quarterly)
 

 

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