UK’s Biggest Stock Broker Launches New Service for Beginner Investors
Hargreaves Lansdown, the UK’s biggest online stockbroker has launched a new specialist service focused on investing for beginners with little money. The ‘Simply Invest’ service is designed to offer the simplest possible way for beginner investors to gain exposure to and experience of the stock market. Account holders can start investing from as little as £25 a month with no minimum lock-in period and the option to start, stop and pause payments should financial circumstances change. A Simply Invest account can be held in either an ISA, SIPP or as a standard stock broking account outside of either tax efficient wrapper.
While beginner investors using the new service will also be able to graduate to the full range of funds and shares offered through the online investment platform ‘as and when they feel confident to do so’, Simply Invest payments will be made into the Legal & General UK Index fund. The fund passively tracks the FTSE All-Share index which includes every company listed on the main London Stock Exchange. This means that returns or losses will directly mirror those of the wider UK stock market. The L&G fund usually charges 0.1% per year in fees but Simply Invest clients will take advantage of a discounted 0.04% a year fee.
Is Simply Invest a Good Option for Beginner Investors with Limited Resources?
Hargreaves Lansdown is not the only online investment platform provider to offer a service or product tailor-made for beginner investors with little or limited money to spare each month. How does Simply Invest compare with other options available on the market?
Mark Polson of investment platform consultancy The Langcat, comments to The Telegraph that while Hargreaves Landsdown offers investors some handy resources and tools, it is by no means the cheapest provider in the UK. While investing into the L&G fund means saving most of its 0.1% annual fee, there is no discount on HL’s own 0.45% annual account fee. This means that overall costs will be around 30% higher than would be the case if the same fund were held without a discount on cheaper platforms that often charge around 0.25% annually to host an investment account. Polson comments that while for the average beginner investment account this difference won’t add up to a lot of hard cash if taken as an isolated year, over the lifetime of the investment account it will have a material impact on potential returns.
Mr Polson also questions whether limiting an investment portfolio’s exposure to only the UK stock market is necessarily the best approach. The companies listed on the London Stock Exchange represent only 6% of global equities markets. Also, while many UK companies, especially the larger ones that make up the FTSE 100, generate much of their revenues globally, a London Stock Exchange tracker fund does inherently mean returns are closely tied to the success of the UK economy. As a general rule, studies demonstrate that well diversified portfolios show better long term performance than less diversified alternatives. Mr Polson suggests that global tracker funds might offer better risk diversification than one that puts all of its eggs in the basket of the London Stock Exchange.
The new Hargreaves Lansdown product is certainly one option for beginner investors and offers an easy and flexible introduction to investment on a limited budget. However, the drawbacks mentioned do once again highlight that investors, from beginners to those with more experience, are best served to shop around and compare fees and products. The best option will differ from individual to individual and as with any consumer-facing product or service it can pay to do a little a research rather than opting for the first offer presented.
Please remember that financial investments may rise or fall and past performance does not guarantee future performance in respect of income or capital growth; you may not get back the amount you invested.
There is no obligation to purchase anything but, if you decide to do so, you are strongly advised to consult a professional adviser before making any investment decisions.