When you start investing, you’re very likely to come across specialist websites called investment platforms to help you invest in funds or shares. But what are the best investment platforms for beginners?
These are like online supermarkets where you can choose from a range of investments, including funds, shares and bonds. Some investment platforms are aimed at investors who have financial advisers and others cater for investors who are ‘self-directed’, or prepared to make the decisions on their own.
If you have a financial adviser, they will choose a platform for you. But self-directed "DIY" investors will find there are more than 30 investment platforms to choose from. These firms all offer slightly different investment choices, product ranges and fee structures. To help you make the choice, MoneyWeek picks six to consider.
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The best investment platforms
1. Moneybox – Best platform if you need motivation
If you want to start investing with very small amounts and think you’ll need some motivational support to keep going once you’ve started, consider Moneybox, which comes with an excellent app and keeps investing simple.
Moneybox’s main differentiator is an engaging ‘round-up’ feature on the app that allows you to round up all spending to the nearest pound and put the difference into investments. You can start with just £1 and only need to choose between three diversified ‘Starting Options’ - Cautious, Balanced and Adventurous. These options are made up of a range of diversified tracker funds, with different risk levels and asset allocations for each option.
A downside is the platform fee of 0.45 per cent (£45 on an investment of £10,000) is more expensive than some competitors.
2. Moneyfarm – if you want human help
If you need some help with investing, Moneyfarm is hard to beat. After you spend a few minutes filling out an online questionnaire, it matches you to suitable investment portfolios that it builds and manages in-house.
The Moneyfarm questionnaire is detailed, so new investors might find it a bit complicated. However, customers also have the option to speak to one of the firms’ investment consultants to get free guidance on making investment choices.
The downsides are that Moneyfarm doesn’t offer a Lifetime ISA and its fees, starting at 0.75 per cent of investments for the first £10,000 invested, are very pricey.
3. AJ Bell Dodl – best for price
For beginners, AJ Bell attempts to ‘take the fear out of investing’ with an investment app called Dodl that charges an attractive 0.15 per cent, less than the AJ Bell’s main investment platform. On portfolios under £40,000, 0.15 per cent is hard to beat.
However, Dodl is a pared-down offering compared to AJ Bell’s main investment platform, with investment choice limited to seven different investment portfolios, 10 themed investments and 80 popular UK and US shares.
4. Vanguard – best for simplicity
This is a simple, budget service, that charges a low fee of 0.15 per cent a year. By only offering investments in 86 Vanguard funds, it’s a reduced product offering compared to other platforms, but Vanguard’s LifeStrategy and Target Retirement Fund (TRF) ranges, are like ready-made portfolios and popular with investors on other platforms too.
There’s a tool to help you choose funds, which starts by asking 6 questions to help us understand your attitude to risk. But if you need extra help, Vanguard also offers a Managed ISA with ‘guidance from real human experts’ which charges 0.60 per cent a year.
There’s no app yet for UK investors, though Vanguard says one is in the pipeline.
5. Interactive investor – flat fees champion
The firm is best known for flat fees in pounds and pence. For investors with up to £50,000, its Investor Essentials plan costs £4.99 a month, while its Pension Essentials charges £5.99 a month. On a portfolio of up to £50,000, these would be £59.88 and £71.88 a year, respectively.
Once you go above £50,000, you move to the Investor Plan, at £11.99 a month, and the Pension Builder plan, which is £12.99 monthly. The big advantage is these fees stay the same as your portfolio grows, making it great value for bigger portfolios. The platform does charge extra for trading (buying and selling) investments, but you can make free regular monthly investments.
For beginner investors, interactive investor recommends six low-cost ‘Quick-Start’ funds with different risk levels and sustainable options and has recently launched its Managed ISA portfolios. But if you’re ready to start learning beyond this, there’s an enormous amount of educational content and ideas and a good app.
6. Trading 212 – the wild card
This platform has a popular and highly-rated investing app that offers commission-free trading. The company makes its money through risky CFD (contracts for difference) trading and foreign exchange fees on overseas shares, allowing it to charge no fees or low fees for other investing activities.
Although you can only invest in shares and Exchange Traded Funds (ETFs), it offers a wide range with access to over 13,000 investments. It has a free ISA but no pension.
How do investment platforms work?
Investment platforms allow you to hold a collection of investments, shares, bonds and investment funds for example, online all in one place which cuts down on the hassle and administration time involved in holding investments with different firms. They also give you the means and flexibility to change the mix of your investments at the touch of a button, often via a mobile app.
In most cases, the platforms provide options to not only hold your investments in a general taxable investment account but also in tax-efficient wrappers such as Individual Savings Accounts (ISAs) and Self-invested Personal Pensions (SIPPs). These tax wrappers are important because they allow your investments to grow free of the taxes on income and growth that they might otherwise incur. In the case of pension accounts, your investments benefit from upfront income tax relief.
There’s usually lots of educational content provided for free. So it’s perfectly possible to visit one platform to get some investment ideas, and then use another platform to buy and sell your chosen investments.
What to look for in an investment platform
Range
You should consider product and investment range, alongside the cost of investing. Some people might feel a good app is essential, others might focus on customer service rankings too – if that's you then Trustpilot is a good place to check these out.
Tax wrappers
Although you may not need all the tax wrappers when you’re starting out, it may be important to have them available as you progress with your investments. It’s important that an investing platform offers an ISA and SIPP wrapper. If you’re under 40, the Lifetime ISA may be important to you. Parents might want the option of Junior ISAs too.
Type of platform
Platform suitability also depends on your level of confidence. Are you a ‘do it for me’ customer, who would like guidance to make your choice? Or do you want to learn to do your investing by yourself? Or do you think you can quickly learn?
Fees
Most investment platforms operate on a "percentage fees" charging model, where the platform charges a certain percentage of your investments held on the platform each year, usually broken down into monthly payments. A minority of platforms charge fixed fees, specified in pounds and pence. On top of this, there may be transaction charges for buying and selling certain investments.
Don’t underestimate the importance of charges. Even small differences in fees can make a big difference to the outcome over a 25-year investment career due to the compounding effect.
For example, you invest a lump sum of £20,000 and plan to add £200 a month to this. If your platform charges 0.25 per cent, over 25 years, with average investment growth of 6 per cent a year, the fund would be worth £211,970 (per the financial education website CandidMoney.com). But with a platform that charges 0.45 per cent, your fund would be worth £204,487. That’s a difference of £7,483.
On larger investment sums, the effect is magnified and could be the difference between you retiring in comfort or not.
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