How Do I Choose The Right Investment Platform? – Choosing an investment platform can seem overwhelming. These decisions are often not helped by the different terminology used by different platforms and different payment structures. Self-study can help you simplify your options and help you choose the one that best suits your needs as you change.
In fact, starting to invest and taking action is the most important decision. So choosing the right investment platform can have a big, if not everything, impact on how you achieve your goals. Finally, remember that your needs will change over time, so be prepared to review your platform choices every year or two to make sure they still meet your needs.
How Do I Choose The Right Investment Platform?
Before you get started, if you’re new to investing, you should read our beginner’s guide to investing – how to unlock your financial freedom. It explains the lingo and walks you through the basics. It can even save you thousands of pounds by learning from your mistakes over the years, so you don’t have to learn the hard way.
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Investing involves risk, but research shows that long-term wealth growth is more likely with a savings account.
According to Barclays, over the nine years from January 2020 to December 2018, holding cash is very different from investing in stocks or bonds.
Yes, the benefits are fun and interesting. However, there are some basics before you start investing.
1. Emergency Fund – Make sure you have an emergency fund before you start investing. An emergency fund is cash that is easy and quick to access and is usually held in a Premium Bond Easy Savings account. Keeping cash in an emergency investment is not recommended because you don’t want to be forced to sell when the timing isn’t right or when the market goes down.
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2. Eliminate Consumer Debt – It’s wise to eliminate credit card or loan debt before investing. Loans usually have high interest rates that reduce wealth over time. That doesn’t include mortgages or student loans, so you can leave it alone. Learn how to get out of debt fast with this simple guide to paying off 30,000,000 debt!
3. Create a budget – We know budgets aren’t glamorous. But they are important. Make sure you cover your basic bills and have more coming in than you are going out. This creates “space” and helps determine the investment budget. Learn how to budget like a pro in seven easy steps with this guide.
Make sure you are financially sound before you start investing. Not sure if you’re ready to invest? Check out our Financial Fitness program. Designed to build personal finance and build a solid foundation for your financial future. The first part is free, so check it out here.
Disclaimer – We aim to produce honest and accurate content, but we are not financial advisors. If you need financial advice, Neutrality can put you in touch with relevant professionals free of charge. Some affiliates may receive a small commission for helping manage the site.
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Investment platforms come in two main forms, DIY and robo-advisors. Below you can find the main differences between the two.
The DIY investment platform allows you to choose specific investments. You can choose whether you want to invest in individual companies, funds or a mix of both. With this type of platform, you create your own portfolio. If you have a specific stock of a specific company (like Amazon or Tesla) that you want to invest in, this is the platform for you.
Therefore, DIY platforms are usually aimed at more experienced investors who know what to buy. Some DIY platforms have a basic website and no apps. However, there are DIY suppliers such as Hargreaves Lansdown who provide user-friendly software and easy-to-use websites.
Usually, if you know a specific fund you want to invest in, such as Vanguard’s Life Strategy Series. A fund is money that you share with other investors and a fund manager invests on your behalf. This is also a common field for beginners and if so, DIY platforms can be a good choice for you as the cost is usually low.
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An easy-to-use platform is one of the top priorities for new investors. However, as you become more educated and confident, you can start paying more attention to the stocks you invest in. In this case, a DIY platform is what you need.
Most importantly, as your wealth grows, your wealth protection fees become more important. Therefore, DIY platforms are a good choice, as they often result in lower prices. That’s because you do it, not think it. They only provide a mechanism through which you can invest.
In addition, DIY investment platforms usually have access to financial advice from the platform provider. This is an additional cost service, but not free.
A robo-advisor investment platform is useful for investors who don’t know how to invest or who are just starting out. You usually answer a few questions about your risk tolerance and goals, and the platform’s software chooses the right investment for you.
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Robo-advisor investment platforms usually have good software and are easy to use. You can apply for most platforms directly from the app and get set up in minutes for a small fee. This makes the robo-advisor platform a great starting point for beginners.
For example, one of the Eat Sleep Money team started investing in Moneybox. The first small investments helped introduce them to investing and made them passionate about it.
One of the disadvantages of robo-advisor platforms is that they can be expensive compared to some DIY platforms. Here are some examples for comparison.
Investors who want to invest money from their salary usually choose stocks and shares ISAs. This is an investment account that protects your income from taxes. For most investors, you can put up to £20,000,000 a year into a stocks and shares ISA.
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Read the full ISA guide for more information and to ensure you’re tax compliant.
Most platforms offer accounts such as a General Investment Account (GIA), LISA (Lifetime ISA) or SIPP (Independently Invested Personal Pension).
If you are considering more than one investment platform or already have an open platform, make sure you are only allowed to contribute to one shares and shares ISA each financial year. However, you can transfer your existing investments to another provider and pay them into your new provider’s account in the same year. As part of this process, your old account must be closed.
When you start your investment journey, you should focus more on whether you can invest consistently than on costs. But it’s worth considering, and as your wealth grows, they become a priority when choosing the platform that’s best for you.
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Unlike a savings account, it requires money to buy, hold and sell investments. At best, costs slow investment growth, and at worst, they can wipe out hard-earned profits.
The reason it’s so important to understand your emotions is because they can destroy your wealth. Every pound you spend on groceries means less in your pocket, and that adds up over years and decades.
The problem is that some platform fees are not easy to find and understand. Also, the payment structure used varies across platforms.
Disclaimer: These claims were correct at the time of publication. Some providers charge or split fees across different products (ie if you have an ISA and a SIPP), check the provider’s fees first.
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If your portfolio is between 25,000,000 and 50,000, it is a bit difficult to work with the cheapest platform.
In the end it all depends on what you invest in, how often you trade and how quickly you reach the £50,000,000 rule. If it is too fast, you should switch to a broker that pays faster. But if it lasts for a few more years, it could be good for £0 brokerage mileage with exit fees.
* Regular savings plans are used when you set up regular payments for a specific share or fund (eg £100 to Tesco every month). The platform then makes one large, consistent purchase