Online stock trading
The rise in smartphone usage over the past decade has led to a boom in online stock trading.
Investment apps have been the key driver of this change.
And the online stock brokers that provide them have given people a level of access to the stock markets that’s unprecedented in human history.
This trend is showing no signs of stopping, with the 2021 investment outlook looking like it will continue to attract more investors.
But if you’re just starting out, it can be hard to know what the best stock trading app, UK or otherwise, is for you.
This guide can help you figure that out.
We’ll go through some of the things you should be looking for in an online stock broker, so that you can figure out what the best investment apps are for you.
Pros and Cons of investment apps
Online stock trading has attracted lots of controversy since its inception in the 1990s. The development of mobile apps to facilitate the process hasn’t changed that.
In short, stocks and shares apps can give you cheap, fast and simple access to the financial markets.
The benefit here is obvious.
Stock trading has long been an opaque, expensive process, with lots of room for treating customers poorly and making it hard for them to make money from investing.
But the ease with which people can now access the markets also poses risks.
It means it’s now simple for people to put money into the markets. That’s fine if they understand the risks and know what they’re doing, less so if they don’t.
And that’s why it’s so important to understand how to invest in stocks and which broker to sign up to before you do anything.
Things to consider when choosing an online stock trading app
Like most things in the world of investing, figuring out what online stock trading app is right for you will depend on your own circumstances.
There are a number of things to look at, including:
- How experienced you are
- What type of investments you want to make
- The assets you want to invest in
- Customer service
- Account types
We’ll cover the above (and more) now.
What type of investor are you?
Most UK investment apps will have an offering that tries to cater to both new and experienced investors. And often there is little distinction in terms of the products and services that the two need.
But more savvy investors, particularly those that want to trade regularly, will often look for some tools or services that a newbie investor might not be interested in.
That’s why it’s important to make sure you’re choosing a platform that’s right for your level of experience.
Best for beginners
A simple design and easy to access app is more likely to be better suited to newer investors.
You want to be clear what you’re buying and getting access to, not feel bamboozled by pages of graphs, ratios and statistics that you aren’t familiar with.
A simple rule of thumb here is that if you are scrolling or swiping your way through the app and can’t figure out what you are looking at or what the numbers on the screen mean, you’re probably better off looking elsewhere.
This is not to say that the app shouldn’t have those things at all or that they serve no purpose. But if they are put front and centre of an app, it generally means the company is targeting more sophisticated investors or perhaps even day traders.
And this points to something else you can look for as a beginner investor - educational content and research tools.
If a company has lots of built in material aimed at providing you with investment guidance then that could mean they offer a better service for beginner investors.
Best for experienced investors
If you’re an experienced investor, the chances are you know what you want, whether it be research tools, data or charting software.
The best thing to do here is figure out what you need and make a decision accordingly as to what the best investment app is for you.
Having said that, it can often be the case that third-party data sources or other research tools are easier to use alongside trading apps.
That being the case, it may be that you just want to find a very simple investment app to use for trade execution and use external tools for the investment decision making process.
Active or passive investor
We often split people into ‘active’ or ‘passive’ investors.
In reality, it’s probably better to make a division between people who want to invest long-term and those that make frequent trades with the goal of making short-term profits.
If you are someone that does the latter, the chances are you’re going to want a mix of strong analytics tools and, more importantly, a very solid price feed.
But for your average investor, who is looking to make profits over the long-run, these tools are going to be less important.
What you do need is more likely to be determined by what we just discussed — how advanced an investor you are.
It doesn’t matter how wonderful an investment app is if it doesn’t actually offer the assets you want to buy. You may want to just buy stocks but you may also want to do other things, like invest in SPACs.
The chances are that you know what you’ll want to invest in before you sign up. Some common assets that people want to invest in include:
The best investment apps in the UK will tend to offer a wide range of assets.
You may want to invest in one asset class now but, if you end up wanting to buy a different type of asset down the line, it could be frustrating if the investment app you’re using doesn’t offer it.
So make sure that any app you sign up to has the assets you want to trade in the first place.
But also remember that you may want to buy something different later on and so it might be better to sign up to a company with a wide range of assets.
What types of accounts are available?
UK investment apps tend to offer a number of different account types.
These provide a range of services, tax efficiencies and investment options.
Knowing what your investment goals are is key here because some online stockbrokers do not offer this range of account types.
That can mean you are stuck with an account that you don’t want now or, later on down the line, that you end up having to use a separate investment app to open the account type you need.
The most basic accounts on offer are:
General investment account (GIA) - Often referred to as a share dealing account. This is a basic account that lets you invest in exchanged-traded funds, shares or any other assets that a broker offers.
Individual Savings Account (ISA) - These are tax-efficient investment accounts. You tend to have to pay more fees when you open ISA accounts because of the tax benefits they confer. Otherwise they are similar to a GIA.
Self-Invested Personal Pension (SIPP) - A SIPP pension account lets you manage your own investments for your retirement. Like ISAs, they offer some tax efficiency which means they are usually pricier than GIAs.
Investment App Fees: How much does it cost to trade on my phone?
All investment apps charge fees in one form or another.
But there is no uniform pricing and some will charge more than others.
Fees are really important to understand because they will ultimately end up eating into your investments.
These are the main ones to be on the lookout for.
Monthly / annual fees
Depending on what type of account you hold, a broker may charge you a fee on a monthly or annual basis.
This is often known as a custodial or platform fee but it can have other names too.
The important distinction here is whether you play a flat fee or one based on the size of your portfolio.
For example, you might pay £3 a month to open an ISA with one trading app.
Alternatively you could pay something like an annual 0.45% fee that’s calculated using the value of your portfolio.
A 0.45% fee may seem appealing initially. But you have to remember that the fee will increase in size as your portfolio grows.
That is not true of a flat fee, which will remain the same regardless of the value of your investments.
Some UK investment apps will make you pay every time you place a trade.
These are known as trading commissions.
Other apps don’t make you pay any commission when you trade.
This may seem like a no-brainer in terms of decision making but it could be the case that a broker, which does make you pay commissions, offers some other sort of service that you do want.
If you are in the UK and invest in US or EU stocks, the investment app you’re using has to make a currency conversion.
You are paying in pounds but the stock you’re buying needs to be paid for in dollars or euros.
This is an area where you are practically guaranteed to have to pay some sort of fee.
And even though the percentages may seem small, the differences can be huge.
For example, if you make a £10,000 investment with a 0.45% FX fee, you’ll be paying £45 in costs.
Compare that to a 1.5% FX fee. It’s a small percentage increase but that same £10,000 trade would cost you £150 — a difference of more than £100.
So pay attention to FX fees because they pay attention to you!
Minimum deposit to start trading
Some investment apps will put a minimum deposit amount that you need to start investing.
If you are just starting out, it may mean that you can only afford to deposit £100 or less per month.
That would mean a minimum deposit becomes an annoyance, so make sure those caps aren’t there if that is the case.
There can always be other fees that online stock brokers charge, so keep an eye out for them.
The best UK stock trading apps provide transparent pricing on their website, which is a good place to look before opening an account.
There are some less scrupulous players out there in the market.
For example, some companies will charge you so-called ‘inactivity fees’ on cash you keep with them but don’t use to trade. This can often add up to large sums of cash and the company won’t make it clear that you have to pay.
Payments, deposits and withdrawals
It may seem like a minor issue when deciding which is the best trading app for you, but payments are really important.
A slow, shoddy payments offering can mean it takes ages to get money into and out of your account.
That could mean you miss out on good investment opportunities or aren’t able to get cash out in an emergency, although you should really always keep cash for such scenarios.
Checking whether the app offers services such as Apple Pay or Google Pay, as well as banking integrations is a good start.
Whatever the case, ensuring the investment app you’re using has good payment solutions in place is going to make your life much less stressful.
Platform stability for trading high volumes
Big events in the market generally lead to a surge in trading volumes.
If things get really crazy, that can mean the technological architecture supporting a stocks and shares app stops working as it should.
This can be infuriating for obvious reasons. You may not be able to buy or sell stocks. It could end up preventing you from depositing cash quickly.
Even the best investment apps, UK or otherwise, will have problems. This is particularly the case if there’s an unexpected event that puts a lot of pressure on trading systems.
But you can still look at historical performance and see which app has done best in times of trouble. History may not repeat itself but ensuring that a firm is transparent and supports its clients when the going gets tough is generally a good sign.
How are trades placed?
How your trades are placed isn’t likely to affect you too much, especially if you’re a long-term investor.
That doesn’t mean it’s completely unimportant though.
For example, if the investment app you are using is a member of an exchange, like the London Stock Exchange, they can connect you directly to market participants on the exchange.
If they are not, it means they’ll have to use a third-party company to give them that access.
This can mean that, if the third-party has a problem, the trading app has limited ability to get access to the market back.
Any introductory offers?
Some trading apps make offers, such as free shares, to new customers.
That might be through a referral link given to you by a friend or via a website.
These should not be the defining decision making factor in where you open an account. If a broker offers everything you need and also has a welcome offer, that’s great.
But just choosing a company because it has a neat welcome offer may mean you end up using a service that isn’t suited to you.
Aside from this, be very wary of so-called ‘trading’ companies offering ‘welcome bonuses’.
The companies offering them are nearly all offering high-risk products that are more similar to gambling than trading or investing. Such practices have also been made illegal in the European Union and UK.
Human customer service
Customer service is one of those things that you tend to not think about until you need it.
And if it’s of a poor quality, you feel it straight away.
Some investment apps only offer automated responses to handle your problems. That may be enough for you.
But most people tend to prefer dealing with a real human being.
So if you are one of those people then it’s worth making sure the trading app you’re signing up to has human customer service. Otherwise you may regret it down the line.
Tools, research and data available
Investors, regardless of their level of experience, tend to use some different tools when they invest.
There are lots of things to consider here but some of the key features that you may want in an investment app include:
Trade types - Instant orders are great but the odds are stop-losses and limit-orders are going to be useful to you at some point when you invest. And if you know you want to use them then make sure the trading app you’re using has them.
Fundamentals - P/E ratios, dividend yields and market caps are probably not going to be the ultimate decision makers in your investment process. But they’re definitely nice to have and if a trading app doesn’t have them then that could end up being annoying.
Graphs - Detailed charts and graphs are generally what day traders, using technical analysis, like to look at. But most investors will still like to see some detail to the graphs they can access in-app. If a trading app doesn’t offer any graphs, that’s probably a bad sign.
App usability, design and functionality
This may seem like a simple one but, when you’re looking for the best trading app, make sure that it’s actually easy to use.
There is a practical element to this. You want to be able to deposit, invest and withdraw funds easily.
And a simple app doesn’t necessarily mean that it’s only for newbie investors.
Some investment apps may seem complicated because they’re allegdly designed for more advanced traders.
But often this isn’t the case and it may be to hide some less scrupulous intentions.
For instance, if it’s very easy to deposit money but the option to withdraw cash is hidden away somewhere in the app, that doesn’t suggest that the company you’re investing with has the best of intentions.
That’s not to say you should be conspiratorial, just that an app’s design can often tell you a lot about how a company treats its customers.
Are your assets safe?
When you buy a stock or deposit cash with a trading app, those assets need to be kept somewhere.
And it’s commonly seen as being much better for customers if assets are segregated from a company’s. Or in simple terms, your money is not kept alongside the trading app’s.
That’s because mixing funds can put your money or stocks at risk if a company is mismanaged.
Another key point to be aware of for the best UK investment apps is whether you are covered by the Financial Services Compensation Scheme.
The great thing about the development of mobile investment apps is that there are products now on offer which it wouldn’t have been possible to provide a couple of decades ago.
These are generally add-ons that may not be the most vital part of helping you figure out which app to use but that can be nice enough to have that they become a deciding factor.
This could include things like:
A web browser application - Managing all of your investments on a mobile app can be tricky. Having a web browser application often helps you get a picture of your investments and how they’re performing.
Auto-invest services - Some people like to deposit a set amount to their account each month and invest it in a specific way. Auto-deposit and invest services can let you do this.
Categorise investments - Even if you have a smaller portfolio, you may want to be able to categorise your holdings in a particular way so that you can have a better overview of them.
What to do once you found the best app for you?
Once you’ve figured out which is the best stock trading app for you, the process for getting started is quite straightforward.
You’ll have to...
Download and install the app
This should be simple enough!
Open an account and get verified
UK investment apps require a variety of information to open your account. The process shouldn’t take long but you are likely to need a few bits on information, such as your National Insurance number.
Deposit funds and start investing
Any deposited funds should arrive into your account quickly. Once they’re there you’ll be able to invest.
Finding the best investment app in the UK can be hard. There are lots of apps out there and if you’re new to investing then it can be tricky to say which is right for you.
To sum up, the key things you’ll want to look at are:
- Does the app offer the assets you want to invest in?
- Does the app offer the type of account you need?
- Does the app cater to investors with your level of experience?
- Are they a reputable company that’s going to keep your assets safe?
The odds are there are still going to be quite a lot of companies that fit those criteria, so once you’ve narrowed down to them, you’ll want to look at:
- Who offers the best value for money?
- Who provides the sort of customer service you want?
- Who provides all of the in-app features you’d like to see?
This is not an exhaustive list - as our guide shows - but these are the absolute bare-bones things that you should be looking at.
Investing ultimately entails you putting your money on the line. You want to make sure you’re doing that with the right company before you open an account with anybody.
At Freetrade, we think investing should be open to everyone. It shouldn’t be complicated, and it shouldn’t cost the earth. Our investment app makes buying and selling shares simple for both beginners and experienced investors and keeps costs low. So download the app and start investing today. Choose from a general investment account, a tax-efficient stocks and shares ISA or SIPP, and a Freetrade Plus account.