What’s the deal?
Interactive Investor (II), the online stockbroker, is offering commission-free share purchases through its Portfolio Builder regular investment service until June 30 2010. Investors can buy any UK share, including Aim companies and exchange traded funds (ETFs), for no dealing fee.
Users select one of four dates in a month for their purchase, and can invest as little as £20, with no maximum. There is no requirement to invest every month, and scheduled purchases can be cancelled up until the day before.
The offer is available within II’s individual savings accounts (Isas) and self-invested personal pensions (Sipps) as well as for standard dealing accounts.
Is this good?
The commission waiver is a rare opportunity to buy shares without paying a dealing charge. The Portfolio Builder service normally charges a flat £1.50 per trade, while II’s standard commission is £10. Investors buying ETFs also pay no stamp duty.
The offer is attractive for investing smaller sums, where commissions could otherwise make purchases uneconomic.
Building up a shareholding with regular purchases offsets the risk of bad market timing, while the ability to stop and restart the plan at any point provides flexibility, for example to cancel a purchase when prices are high. Some lump sum investors might also want to use the service to make a single share purchase at no charge.
What’s the catch?
Investors are dealing blind – they do not know the actual price they are buying at, which, in volatile markets, could be disadvantageous.
Also, while purchases are free, sales are at the broker’s usual £10 rate.
What’s the alternative?
Other brokers, including TD Waterhouse, Selftrade and Halifax Share Dealing (which provides Interactive Investors’ service), have similar regular investment plans charging £1.50 per purchase.
Many investment trusts also offer low-cost monthly purchase deals.
How do I find out more?
www.iii.co.uk
