The case for joining the web's wheeler-dealers
Sam Dunn on how you can save by buying and selling shares online
Sunday 27 July 2003
It seems a long time since the golden days of online share dealing. In 1999, at the height of the dot-com boom, the number of trades was doubling every three months. Then came the bear market and the deals dried up.
However, there are now signs that investors are making a tentative return. Between January and March this year, 500,000 trades were executed by private investors online, says Brian Mairs, spokesman for the Association of Private Client Investment Managers and Stockbrokers (Apcims). And its figures for the second quarter of 2003 are set to show another rise.
If you think shares have fallen as far as they are going to, and that now's the time to get back into the market, using the internet will save you a lot of money.
Buying and selling shares online is cheaper than using a broker's phone or mail service. Most brokers charge com- mission every time they execute a trade, plus an annual fee if you have an account with them. You will also have to pay stamp duty - 0.5 per cent of the value of the equities you buy. But if you go online, the fee is often waived and the commission reduced.
You will have to set up an account to register with the broker, and many will let you put your shares into an individual savings account (ISA), reducing your tax liability.
Independent financial adviser (IFA) Hargreaves Lansdown offers online share dealing under its Vantage service. Its minimum charge for a trade is £10, or 1 per cent of the transaction fee, up to a maximum of £50 per trade. The annual cost of dealing is 0.5 per cent of the value of shares kept in Vantage.
American Express has a service called Sharepeople, offering trading in 10 international stock markets including the US Nasdaq and the FTSE 100. There is no charge for setting up an account and no annual fee. For dealing, Share- people charges a flat rate of £12.50 unless you trade more than 25 times in a 90-day period; then it will charge you £9.50 per trade. You also get access to research on foreign stocks and an information centre. If you wish to keep your shares inside an ISA to protect them from capital gains tax, it will cost you 0.5 per cent of the investment per annum (capped at £100 a year).
But while there are some cheap dealing packages, beware of the risks of equities. Mr Mairs at Apcims says: "The first thing to decide if you want to invest in shares is whether you want advice or not. Advice is not expensive and will be cheaper than any mistake you might make if you aren't familiar with trading. But if you are confident about research and trading yourself, then don't let price be the only thing you look for. What is important is access to research."
Amanda Davidson, a partner at IFA Holden Meehan, says: "Look at how easy the site is to navigate and see if you want something that is more sophisticated. Information is important too: do you want historic performance?
"You should consider this as part of a wider portfolio, as buying individual shares is much more risky compared to unit trusts, where you have a pooled investment."
Independent Partners; request a free guide on NISAs from Hargreaves Lansdown
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