Low interest rates have inspired thousands of Brits to consider investing in the stock market in a bid to keep pace with inflation. Their first concern is finding high-quality broker accounts for beginners.
This guide to the best broker for beginners UK rounds up the various options at your disposal. We will explain the strengths and weaknesses of each online broker, and help you make an informed decision. Our best broker for beginners UK also explains the different broker accounts you can choose from.
A broker is a firm that acts as an intermediary between an investor and a securities exchange. Once you are registered with a high-quality online broker, you can buy and sell a large range of stocks, funds, bonds and other assets.
The best broker for beginners UK will execute trades on your behalf. They often provide market research, analytical tools and fund screener functions to help you make informed decisions, but standard brokers do not offer investment advice.
You can opt for a full-service broker that manages your equities portfolio on your behalf, but you will have to pay higher commissions for that level of service. Most brokers are compensated through fees and/or commissions. You can generally expect to pay £5 to £15 per trade, although it can be cheaper to buy funds, and you can occasionally benefit from commission free trades.
It is currently a bad time to be a saver. Interest rates are miserable, meaning your money will just sit in the bank without really appreciating in value. Meanwhile, the real rate of inflation is soaring.
The official inflation rates are not particularly scary, but governments use substitution, weighting and hedonics to mask the real levels of inflation, and they also fail to take account of shrinkflation. It essentially means that the cost of living is rising far quicker than the official inflation rate.
That is pretty obvious to the average consumer. Grocery prices continue to soar. House prices have skyrocketed. Energy costs are always going up, as are train fares. Yet wages are not rising in line with these price hikes.
The only way you can beat this real inflation is to “own” it. You can do that by investing in the companies that are benefiting from rising prices and growing accordingly. There are no guarantees that your money will increase if you invest in stocks, but the average stock market return was 9.2% per year between 2010 and 2020.
The S&P 500 provided an average annual return of 13.6% during that time. If you had invested £1,000 in a fund that tracked the S&P 500, it would have been worth £3,579.20 a decade later. If you had added £1,000 per year, you would have earned £22,543.72 by the end of the decade.
That is due to the magic of compound interest. Essentially, it means that the profit you earn one year earns you profit the following year, and so on.
Low interest rates have forced people to invest in equities in order to preserve their spending power. However, it can be daunting, so you need to spend some time researching the best trading broker for beginners. UK investors have a number of options to choose from, and they are detailed in this best broker for beginners UK guide
The best broker for beginners UK should have several key attributes:
The best broker accounts for beginners must be easy to use. Investing in equities and other assets can be intimidating when you start out, but a user-friendly broker will remove the fear factor by providing clear instructions to walk you through the trading process. The site should benefit from a clean design, helpful shortcuts and an effective search function. You should be able to buy and sell shares with minimal fuss, and you should then be able to manage your portfolio and check its performance with ease.
An onerous fee structure can seriously dent any profits you might make when investing in the stock market. Brokers often charge ongoing fees for hosting your account, and a commission fee every time you make a trade, so the cost of investing can soar quite quickly. It is therefore advisable to look for low fees when seeking the best broker for beginners UK.
Beginners often want to dip a toe in when investing for the first time, as opposed to making a large initial deposit. A broker that offers low minimum deposits is ideal for beginners. You can often invest as little as £100 as an up-front fee, or £25 per month on an ongoing basis. That allows you to begin your investing journey with a degree of caution, and then ramp up deposits as you grow more experienced. However, some brokers require you to deposit a lump sum of £1,000 or more when you open an account, so they may not be suitable for certain beginners.
Finding a site with high-quality customer service should be a key factor in your hunt for the best broker for beginners. UK brokers should offer customer support during all trading times and via multiple channels. The representatives should be able to explain any part of the trading process in clear, concise and friendly terms.
You will often store a significant chunk of your savings in your broker account, so you should demand watertight security. The site should use aggressive SSL encryption software, and ideally provide features like two-factor authentication during the sign-in process.
The leading broker accounts for beginners will help you analyse the performance of your portfolio via a range of tools. You should be able to see which investments have performed well and which investments have not fared so well, with clear charts. Comprehensive information about each stock should also be available.
The best broker for beginners UK will provide you with a range of educational tools that help you succeed. That can take the form of blog posts, videos, webinars and more. Some brokers have weekly magazines or newsletters that they send out to customers.
The best online brokers have invested in slick and polished apps that allow investors to conduct trades from the palms of their hands. The app should be laid out in a clean and intuitive fashion, while still providing a wealth of helpful features. Check out our guide to the best Bitcoin app to find out more.
Before you figure out which broker is best for beginners, you need to consider the type of dealing account you will set up. These are your main choices:
This is a great option for UK investors. You can deposit up to £20,000 per financial year into a stocks and shares ISA, and use it to invest in shares, bonds and funds. Any profits you make will be tax free. You can withdraw the funds at any time, which gives stocks and shares ISAs a distinct advantage over pensions.
You should only consider a general investment account if you have maxed out your ISA allowance for the year. This is a general account whereby you can buy and sell equities, and you can make a withdrawal at any time, but you will be taxed on any profits you earn. A general investment account could also be referred to as a dealing account.
A self-invested personal pension is designed to help you retire in style. For every £80 you put in, the government will add £20. You can also claim a further £20 if you are a higher earner (meaning you pay the highest tax band on a portion of your salary). You can use the funds in your SIPP to invest in the stock market, but you cannot access your funds until you are at least 55 years old.
You can pay up to £4,000 per year into a LISA, and the government will match it with £1,000. This money can then be used to invest in shares. However, you can only withdraw it when you either buy your first home or reach the age of 60. LISAs can be opened by savers aged 18 to 39, and you can pay £4,000 per year into them until the age of 50.
There are also junior ISAs for children, but the four options listed above are your main options. Now you know the best broker accounts for beginners, it is time to examine the leading contenders in the battle to be named the best broker for beginners UK. What is a good online broker for beginners?
This Bristol-based firm is the UK’s largest direct investment platform, ahead of AJ Bell. It is listed on the London Stock Exchange, and it is a constituent of the FTSE 100 Index. You can set up a stocks and shares ISA, a SIPP, a LISA or a general dealing account. It also has ready-made private pension portfolios.
Hargreaves Lansdown is a large and established firm with an impeccable reputation. Its customer service is second to none, and its online platform is highly sophisticated. There are no security concerns, and it also offers high-quality research and a great mobile app.
The trading fees are more expensive at Hargreaves Lansdown than those on offer at some of its competitors. The charting tools and educational resources are pretty average.
YouInvest is a high-quality desktop site and app that allows you to open a SIPP, stocks and shares ISA, general dealing account or LISA. It is operated by Manchester-based firm AJ Bell, which was set up by Andy Bell and Nicholas Littlefair in 1995. It is a constituent of the FTSE 250 Index and listed on the LSE.
The fees are cheaper than Hargreaves Landsown’s, but it offers a similarly broad range of investment options. You can also enjoy a weekly magazine, called Shares, and plenty of educational videos. Invest in mutual funds for just £1.50.
Trades cost £9.95, which is higher than some rivals, although they are just £4.95 if you made 10 or more trades in the previous calendar month. There are no price alerts and you cannot really customise the site, while charting is limited. It does not have a bond selection.
Interactive Investor is the UK’s largest flat-fee investment platform, with more than £35 billion in assets under management. It was also set up in 1995 and it is headquartered in Manchester, with offices in London and Leeds. It offers trading accounts, stocks and shares ISAs, SIPPs, junior stocks and shares ISAs, company accounts and pension trading accounts.
It is a very user-friendly site with rapid deposits and withdrawals and excellent customer service. Interactive Investor might well be the best broker for beginners in the UK with a limited budget, although some find that it is more suited to experienced investors.
The stock selection is average, and there is a monthly account fee. It offers fewer mutual funds than AJ Bell YouInvest and Hargreaves Lansdown, and fewer bonds than Hargreaves Lansdown. The charting tools are pretty poor. You have to pay a £9.99 monthly fee, which is better suited to investors with a large account balance.
eToro is a low-cost and easy-to-use platform. If you are wondering, which broker is best for beginners, chances are you will be considering eToro. That is down to its high-profile marketing campaigns, which often feature Alec Baldwin and a sock puppet.
eToro is an Israeli firm with offices in Cyprus, the UK, the USA and Australia. It is famous for copy trading and crypto investing, but it also operates a traditional online brokerage. You can check out our crypto trading beginners guide and day trading guide for beginners if you want to understand more about the instruments that eToro allows you to trade,
You might be wondering “Can I buy Bitcoin with a credit card at eToro?”. You can find out this information and more in our latest eToro brokerage review.
You can use eToro to trade commission-free on some of the world’s largest stock exchanges, with no limits. It is one of the best brokers for beginners UK if you want a low-cost site. If you have ever wondered what is CFD in trading or what is Forex trading, you can read our guides and then start trading with ease at eToro.
Non-trading fees are high, customer support could be improved and the site is not as user-friendly as some of its competitors. The fiat currency is dollars, withdrawals can be slow and it does not offer ISAs and SIPPs.
This Boston-based company has a dedicated UK website that offers stocks and shares ISAs, SIPPs and general dealing accounts.
The platform is user-friendly and you can trade stocks, ETF and options for £10. Customer service is very strong, and there are plenty of educational tools on offer. It has a wide selection of research providers too. Its 0.35% headline rate platform charge is cheaper than various rivals.
Fidelity is perhaps not ideal for beginners, as there is a £45 annual fee for anyone with less than £7,500 invested. That is pretty steep. Beginners with a large sum to invest can benefit from signing up with Fidelity, but everyone else might consider AJ Bell or Hargreaves Lansdown instead.
It is difficult to say which is the best broker for beginners UK, because each site has different strengths and weaknesses. You might prefer the lower fees on offer at eToro, or you might be swayed by the world-class customer service at Hargreaves Lansdown. Remember that there are other investment options too, such as trading CFDs at Plus 500 or IG, or investing in funds at Vanguard.
The top broker accounts for beginners remain the same – stocks and shares ISAs and SIPPs are ideal for the majority of investors – but the best broker for beginners UK is a personal choice. Yet you should always stick to large, regulated brokers and avoid any deals that sound too good to be true.
Searching for the best broker accounts for beginners in the UK? eToro continues to win new customers in the UK thanks to its bold marketing, broad range of services and attractive fee structure. However, Hargreaves Lansdown, AJ Bell YouInvest and Interactive Investor remain the largest brokers, and the best platform really depends upon your needs. To find out which broker is best suited to you, be sure to read our broker reviews at TradersBest.
You should start by working out the level of trading you plan to conduct and figuring out your priorities. Some brokers are more cost-effective for investors with modest budgets, whereas others work out best for investors with larger amounts to invest. Some are better for customer service, while others excel when it comes to the breadth of trading instruments, so you can quickly find your perfect match if you work out your key requirements. To help you find the best broker accounts for beginners, we’ve compiled a collection of useful trading guides here at TradersBest.
UK investors can put up to £20,000 a year into a stocks and shares ISA and enjoy tax-free benefits. There are also considerable benefits to opening a SIPP. The prevailing wisdom is that equities are risky assets and bonds are less risky, but offer higher potential rewards, and you can adjust your portfolio accordingly, but it is generally advisable to remain diversified at all times. For more advice on what to invest in right now, be sure to consult our guides here at TradersBest.
Trading financial products carries a high risk to your capital, especially trading leverage products such as CFDs. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Between 74-89% of retail investor accounts lose money when trading CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
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