Trading 212 vs Stocks shares Isa

vitamin_joe

HansOndabush said:

If I knew what 'pan' meant, I might be able to reply?

diss, put down, evaluate negatively

eg "Madonna's amateurish acting in the film was poorly received by the public, and panned by the critics"

edit- posted at the same time as grumiofoundation

bowlhead99

HansOndabush said:

If I knew what 'pan' meant, I might be able to reply?

already answered but just for fun -

verb (used with object): panned, panning.

Informal. to criticize severely, as in a review of a play.
e.g. "I read the review of last night's Macbeth in the local paper - they really panned it!"
I understand this meaning has been in use for about a hundred years, and probably ultimately derives from the 1800s gold rush term "to wash gravel or sand in a pan in search of gold". The 'criticize severely' use likely developed from the notion in contemporary slang expressions of the 1800s / early 1900s such as 'on the pan'; rather than just a reference to being carefully scrutinized, that term was generally taken to mean "under reprimand or criticism".
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The general problem with using a service where you're not paying much if anything for the service is what happens when the provider realises that it can't or doesn't want to sustain the service. In 'good' situations this can just mean your account being migrated to another service provider with some notice and choice about it, while in bad situations (such as the provider going out of business), you lose access to your assets for a period of months or perhaps over a year while an administrator comes in to sift through the wreckage and arranges for some other provider to take on the records and the ongoing service. SVS Securities is a recent example of a failure with a huge ongoing thread on this board, lots of hassle even though the FSCS covered the costs of administration in that case.

Both T212 and Freetrade aim to offer fee-free trading (putting them in the bucket of brokers where they aren't making much from you), and both offer complex-to-implement innovative features such as fractional share dealing, while an investee company's registrar is only going to recognise whole units of shares as capable of being registered. So if they go bust, any incoming broker who wants to take over the business has to have systems and processes to handle the fact that seventeen different people may have a claim to part of one amazon share for which it will act as nominee, and may want to trade it on the market at different times. 

As a consequence, one might imagine that if they go bust, there would be a very limited set of suitors among the rival brokers who would have both the capability to handle the accounts and the inclination to take over a book of thousands of customers who had got used to having something for nothing. A lack of suitable service providers with the desire to take over the existing book of business was one reason the SVS customers ended up with their assets in limbo for a year while it got sorted out.

If you're thinking about using either of these 'trade for free, or super-low-cost' brokerages, you might think T212 to have more longevity because at least their free trading service is being bankrolled by a profitable CFD trading business, while Freetrade doesn't really have a profitable business and just keeps going back to its financial backers to fund the ongoing operating costs as it grows to whatever critical mass it needs to make profit or be sold to some bigger group. But while T212's profitable business (the CFD side) has the banner '76% of retail investor accounts lose money when trading CFDs with this provider', it is not just a complete gravy train for them because they take exposure onto their own account rather than hedging it all out, and could have some major financial shock if something crazy happened in the markets.

So, you can certainly make the argument that such providers should be avoided for your 'main' investing of serious amounts of money, due to risk and hassle that could come around due to operational or financial failure; other mainstream providers have much bigger balance sheets and longer track records. If I had to suggest one of the two it would be freetrade, as am an investor in it, but that's a self-interested view that you can disregard due to bias. Unlike 'Hans', I don't have any concern that T212 "don't know what a share certificate is", but we have been there before with a previous incarnation.  https://forums.moneysavingexpert.com/discussion/comment/77849541#Comment_77849541

gollum007

bowlhead99 said:

If you're thinking about using either of these 'trade for free, or super-low-cost' brokerages, you might think T212 to have more longevity because at least their free trading service is being bankrolled by a profitable CFD trading business, while Freetrade doesn't really have a profitable business and just keeps going back to its financial backers to fund the ongoing operating costs as it grows to whatever critical mass it needs to make profit or be sold to some bigger group. But while T212's profitable business (the CFD side) has the banner '76% of retail investor accounts lose money when trading CFDs with this provider', it is not just a complete gravy train for them because they take exposure onto their own account rather than hedging it all out, and could have some major financial shock if something crazy happened in the markets.

With regards to Trading212 and CFDs, this is an enlightening little mess:

https://community.trading212.com/t/cfd-upcoming-increase-in-margin-requirements-postponed-for-01-12-2020/28729

Edit: And another one....

https://community.trading212.com/t/no-cfd-long-positions/34114/13

It very much feels to me as though the CFD business is in (regulatory induced IMHO) trouble. I halfway wonder if the Invest side of things is being built up as an exit strategy in the event of consumer CFDs being banned, but I can't see the monteization strategy other than the somewhat dubious share lending practices, which aren't ever going to cover the full free costs.

DireEmblem

I have never had an issue with 213, and even comparing market prices and fees afterwards have always appeared reasonable.  That is not even taking into consideration other companies can charge a trade and foreign FX fees.  They are also FSCS protected, so your first 85k should be safe, and even if you held more, the custodian is interactive brokers.

If people are concerned with their profitability, then a simple answer for small time investors would be a fixed % holding fee, with an upper maximum fee of x quid so it is still a worthwhile service for higher net worth individuals.

TBH, they may actually make enough from the bid/ask spread of their book is of sufficient size.  If their setup is smart enough, they could charge market rates to customers without commission, but place their transactions on their own nominee record only.  That could avoid the need for additional fees to break even, and I am not even sure as outsiders we have sufficient information to work that one out.

Anyhow back to the point - it is great for users looking to trade small amounts on ETFs, Investment Trusts and shares.

jimjames

lon_85 said:

Hi guys 

I'm new to stocks and shares just started trading 5 shares with a few hundred pounds in the Trading 212 app - I know that we have 20k tax free allowance in stocks and shares isa but was wondering if that is better? Although its tax fee need to pay set up fees and trading charges etc The trading 212 app has no fees but I still need to pay tax on my returns which is only £50 so far 

Out of interest why do you need to pay tax on your £50, have you already exceeded your CGT allowance (which seems unlikely)?

lon_85

Sorry that was more of a question - I guess if I'm not going to be making more than £12300(cgt allowance) In 212 I won't need to worry about the tax element hence I don't really need to open s&s isa as that is only worth the set up fees and charges if we r going to be investing larger sums with returns higher than 12300 to make use of the tax free- is that correct?- so far I'm a beginner so just started with small amount to see how it works in 212 with returns of £50 only so far (invested £250) but will be buying more on Monday -  Good question re: capital gains tax -no I haven't gone over the £12300 allowance. I haven't sold anything else which gave me profits.

I did see etoro trading app as well but that seemed to be for more experienced investors..other trading platforms had a lot of fees so just went with 212..

So shall I keep my existing LISA and Cash ISA - 4k lisa + 16k cash isa 
Continue trading in 212 - max 10-15k probably 

OR
Keep LISA and open s&s in 212 and invest 16k in there do my main investing there - it will be long term I'm not experienced yet to do day trading or penny stocks yet

Stocks and shares isa have fees so I'm just trying to work out if it will be worth it even though its tax free - will the tax free element outweigh the charges to maintain the account?

Sorry for the qs this is really confusing for me 

bowlhead99

lon_85 said:

Stocks and shares isa have fees so I'm just trying to work out if it will be worth it even though its tax free - will the tax free element outweigh the charges to maintain the account?

Sorry for the qs this is really confusing for me 

If you are not making enough income or gain to need to pay any tax, then the 'tax free' element is not going to 'outweigh' the charges in pounds and pence, because a charge of anything greater than £0 is going to be higher than the tax saved.

However, doing your investing somewhere that's entirely tax free  (like inside an ISA or pension) does mean you don't need to worry about any tax recordkeeping to prove that you don't owe any tax on the buys or sells or on the income received into the account from the investments).

For example:
- you buy a fund or portfolio of shares today outside an ISA, and put a bit more money into them later, and across this tax year and the next you've invested about £20k.
- In a decade's time you've been lucky and achieved growth of almost 10% a year so you have £52k. You then decide you want to sell about half of the investments to do something with the money.
- On average, the £26k of shares you're selling (half your portfolio) had cost £10k (half the original cost), so you have a £16k gain when you cash it in, which may or may not be bigger than your annual CGT exemption at that time. 

Sounds simple on the face of it. But you'll perhaps have multiple investments bought at different times and prices, especially if you are receiving and reinvesting dividends along the way, and to minimise your tax bill you may need to strategically decide which particular investments to sell, whether you can wait to hold off on selling some of them until the following tax year to reset the annual exemption (while risking the shares you plan to sell plummeting in value) etc. 

If you've been using up some of your annual exemptions by 'cashing out' gains along the way, the  built-up gain when you get to ten years from now not be as high as that, because the investments you hold at that point might only be a couple of years old.  But you will need to have good records to work it all out.

So, doing all the investments inside an ISA cuts out any potential tax and all the associated planning and recordkeeping that might otherwise be needed to prove whether or not there is a tax bill.

DireEmblem

If I were you, I would be topping up your LISA first, ISA second, and by the sounds of things, limit what you 'trade' in 212, to say no more than 10% of all funds at most.  Your LISA depending on its purpose should be cash if you're looking to buy your first property in the next few years to avoid volatility.  Your ISA I would probably just hold a cheap global index equity tracker.

Then track your 'trading' luck in 212, and see if it outperforms a global tracker.  If it does, then you have more funds to trade and grow.  If it doesn't, then you have hopefully limited it to 10% of all your funds.

Most people cant beat the returns of a global equity tracker long term.