Saving to invest
Setting aside a percentage of your hard-earned money is one of the smartest things you can do especially in the current economic times. While many people have no problem cultivating a saving culture, making the right decision on how to invest the accrued funds is usually the challenge.
This comes as no surprise because many people have become exceedingly untrusting of ‘investment firms’ that have unfortunately ended up being Ponzi schemes. Scores of unsuspecting investors have been duped repeatedly by companies that show up with unrealistic claims of multiplying their clients’ money, only to disappear without a trace once funds have been sent to them.
Taking control of your funds
Initially, the only role that investors played was availing their funds and sometimes letting the broker know if there were preferred stocks that should be purchased on their behalf. It has now become increasingly important to have direct control over your funds and ultimately, your investment vehicles. One of the easiest ways to achieve this outcome is to buy shares in different companies. Over the recent years, it has become easier than ever to buy shares because brokerage firms have finally given this power to the customers. All you need to do is access a broker’s website through the internet, open a trading account and verify your identity. Once your identity is successfully verified, then you can deposit real money and start buying shares.
Choosing the easiest and cheapest way to buy shares means that you first have to identify the deliverables that you need from the broker and the platform they offer. For example if you have just begun exploring the idea of investing for yourself, a platform such as Nutmeg would be a great place to start.
This platform offers different investment packages that cater to different demographics and their emphasis is that they do not charge any set-up, transaction or exit fees. Their website illustrates a sliding matrix of weekly management fees that you will be charged depending on how much you deposit and your risk appetite. You can start investing with as little as £100. Between this and £100,000 the fees charges start at 0.75%. An encouraging fact for those who choose to invest using Nutmeg is that they are backed by the Financial Services Compensation Scheme, so your investment to the tune of £85,000 is protected.
Wealthify, another platform provider, which is backed by Aviva would also be a good place to start if you would like automated control over your funds rather than having financial experts manually picking how to invest for you. They have a minimum investment of £500 but their fees at only 0.4% do give Nutmeg a run for their money.
If you have a good amount of knowledge and experience in buying stocks, then you will most probably want a platform that gives you as much more control over your funds. If this describes you, then you would want to first look at a platform like the Lang Cat which is renowned in carrying out due diligence on trading platforms. For £25 per month or £300 per year, the Lang Cat offers up-to-date research about platform costs and business performance. It is also wise to visit TradingGuide where you will get reliable advice that will help you find a good broker to invest with.
The first piece of advice that they give to investors is to open an Individual Saving Account (ISA), which is a smart way to reduce the amount of taxes and deductions that your money is subjected to. The rest of the parameters that would be important to consider include:
- Transaction charges – A commission might be charged on every buy or sell order that is executed. If you are a high frequency trade, these costs could add up quite a bit so best be sure that they are not too inhibitive.
- Spread – This is the price that the broker offers you for a stock, in comparison to the actual market price. If the discrepancy is too high, your trades will always need time or big moves to put you in the money.
- Stamp duty – Taxes paid to the government for each transaction.
- Forex charges – This especially applies to stocks that are domiciled in a different country so your broker would need to convert your capital into the required currency in order to buy those shares.
Some investors are very particular about transaction fees while for others, exorbitant fixed charges are a deal-breaker. Ultimately, the number of funds that you have set aside for investment, along with your trading style will determine the factors that attract you the most to a broker.