Here are some alternative platforms to Trading212. Note that returns are not comparable as I have been investing into some of these platforms on a discretionary basis.
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What is Trading212?
Founded in 2006, Trading212 are a commission-free broker that trades in the UK and other countries via web and internet phone apps. The environment for trading has changed significantly in the past decade and there has been a race to the bottom as far as fees have been concerned. Trading212 have been one of the companies driving this change and have been heavily promotional in the past couple of years. They are regulated by the FCA and benefit from FSCS protection. Being regulated in the UK, they also offer clients the ability to hold their investments in the tax-free ISA wrapper.
There are several features of Trading212 which make them more appealing to new users. Their platform contains much more in the way of educational content and material than other execution-only services such as Degiro. They also offer dealing in fractional shares – as the name implies, allowing users the ability to own less than one share. This is not so relevant for UK shares but in the US where companies such as Amazon have share prices in the thousands of dollars, this is helpful.
A recent new innovation that will also appeal to newbies is the use of ‘Pies’, which are a type of hybrid auto-invest system which manages diversification of funds as share prices rise and fall. As an added twist and similar to EToro, you also view performances of other users pies and choose to copy them for yourself. This adds a degree of social interaction to the site.
Trading212 offers two distinct accounts aside from the ISA. The invest account allows the straightforward purchase of major global stocks and exchange traded funds. They also operate CFD accounts on products such as currencies, commodities, equities, indices and cryptocurrencies. This allows users a more leveraged bet meaning that you can win (or lose) more than your deposited amount.
Although a name that may not be as recognisable as traded counterparts such as IGIndex or Hargreaves Lansdown, Trading212 has proved to be very popular. For some time, its app has been the most downloaded in its category in the app stores and is highly rated with plenty of satisfied users.
Are Trading 212 profitable?
Trading212 is a trading name of Trading212 UK Ltd and Trading 212 Ltd. The UK accounts cover activities from users in the UK and EU. The latest accounts are slightly out of date now as the cover the period to 31 December 2019 and clearly many things could have changed beyond that point.
However, the accounts show that the business had swung to a loss of £307k compared to a profit of £1.8m from the year before. The chief cause of this was a reduction in revenue which halves from approximately £4m to £2m. This was not entirely a surprise as regulations which came in over a year ago restricted the amounts of leverage platforms could offer. This affected platforms such as Trading212 which had a greater proportion of ‘recreational’ traders.
Since this point the company have moved their focus to providing commission-free stockbroking. The loss for the year was paid for out of cash reserves which had shrunk to £1.6m.
Trading212 Sign Up Offer
Trading212 offer a modest sign-up offer in line with many platforms. For users that sign up, verify their account and make a deposit, they can gain a free share. This free share is chosen at random and has a value of up to £100. With some shares on the market having a very low valuation this may not end up being lucrative. However, the commission-free nature of the platform means you could theoretically sell this share for no fee and take the cash alternative.
Trading212 Review: Operating Model
Trading212 works much in line with other low-cost sites such as Degiro. You will need to sign up, and verify your account. The process for this is generally very fast. There are three types of account. The Invest account is the straightforward share dealing one. The CFD account offers leverage on a range of different products; you will need to self-certify and answer a few questions before access is granted. Lastly, the ISA account allows you to hold investments in a tax-free wrapper. You will need your taxation details to open this account.
Trading212 can be operated either via the internet site or via its app, available in both Android and Apple stores. Using both the Invest and CFD accounts there is a very wide (although not comprehensive) selection of stocks to purchase. Other products such as commodities, indices and forex can be purchased via CFD.
A new innovation to the Invest side is the use of Pies. This allows the use of fractional shares to make up a ‘pie’ which can be automatically re-balanced as values change. This feature offers some alternative to passive investing funds and may be attractive to users.
The most attractive feature of Trading212 is the no fees claim. This is largely true, although there are some parts of this which are not as well disclosed. Transfers by debit or credit card are only free up to the first £2,000, after which a 0.7% charge applies. Buying shares in other currencies also attracts a 0.15% forex charge. The CFD product has a higher charge for currency (0.5%) and also has an implied interest charge depending on your product.
Unlike other fee-free platforms, Trading212 also allows you to set market orders, allowing you to queue for a specific price instead of accepting the current one. Their charts also have a decent amount of technical analysis tools attached to them.
How are funds protected?
Trading212 are regulated by the FCA in the UK meaning that client funds are kept in a segregated account and are protected by the Financial Services Compensation Scheme. In addition customer positions are held in custody with Interactive Brokers – the largest firm in the world by volume of trades. In the event of failure, it is possible but not guaranteed that positions could simply be maintained instead of liquidated.
Unlike some brokers such as Degiro, Trading212 do offer CFDs. This opens up an additional element of risk as the company will be the counterparty to the trade. In many cases customer business can provide a natural hedge (equal long and shorts) but this may add a certain volatility to profits.
Trading212 Review Pros:
There are many things to like about Trading212. Some are:
- Low fees. Trading212 offers genuinely fee-free trading in your home markets (although you may still have to pay taxes such as stamp duty). There is a modest currency charge rate for other markets.
- You can purchase fractional shares, which is very useful for those companies which have a much higher cost. There is also a wide range of products available, some of which can be held in the tax-free ISA wrapper.
- The user-face is very friendly. There are many tutorials available and the pies feature allows an innovative way for you to create your own auto-invest portfolio which is automatically balanced.
- The company is regulated in the UK and qualifies under the Financial Services Compensation Scheme.
Trading212 Review Cons:
There are also some things to be aware of:
- There is a charge for card deposits after you hit £2000 – for larger traders this may act as some disincentive as other platforms offer this facility free.
- Compared to other sites is a less comprehensive range of stocks to be traded, although virtually all major markets will be covered.
- Fees still apply to some of their products. CFDs are not fee free and the leverage is still charged for.
- Technical analysis on their mobile app is lacking although this can be seen on the website.
Conclusion of Trading212 Review
Trading212 has evolved from a smaller player into one that is in widespread use and has many accounts. Whilst the company is not as large as some of the bigger FTSE-quoted platforms, it does offer much lower fees with some purchases being genuinely free. The protection for customers is also good with the company having FSCS protection and trades being held at Interactive Brokers.
Currently they also offer a sign-up bonus of one share at random for signing up and verifiyng your account. Click here to find out more.
Disclaimer: This Trading212 review represents my own opinions and should not be substituted for investment advice. Please research before you invest with any firm.