Best Social Trading Platforms November 2022 – Forbes Advisor UK – Forbes

Best Social Trading Platforms November 2022 – Forbes Advisor UK – Forbes

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Published: Nov 24, 2022, 3:17pm
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Social trading has become a popular practice in the retail investment world. It refers to the exchange of information between private investors – from sharing and discussing investment ideas, to copying the trades of more-experienced investors.
The power of social trading made headline news last year when investors took on institutional short-sellers of stock in GameStop, a US video game retailer.
Using social media platforms such as Reddit, investors launched a co-ordinated buying spree of the company’s shares to drive up the price and trigger significant losses for hedge funds that held short positions.
Reflecting a growing appetite among investors to share views, several trading platforms have added social trading features to their core product offering. With a range of options now available, however, it can be daunting for investors to choose the platform that best suits their social trading needs.
To help, we’ve reviewed a number of platforms highlighting those that we think support the best social trading claims.

1
eToro
Invest in global and local stocks with ZERO commission

Explore over 2,500 stocks. Buy in bulk, or invest in fractional shares

1
eToro
On eToro’s Website
Your capital is at risk. Investments can go up and down in value, so you could get back less than you put in. Other fees apply. For more information, visit etoro.com/trading/fees
Stock market investing involves risk and is not suitable for everyone. The value of investments can fall as well as rise, and your capital is at risk. You may lose some or all of your money.
We researched a range of social trading platforms (November 2022). Our findings are listed below including a methodology explaining how we ranked a platform’s services.
No fee

No fee

High

No fee

No fee

High

eToro was founded in 2007 with the aim of creating a community for social investing, along with commission-free trading. It has 30 million customers across 100 countries.
It offers the choice of over 2,800 shares and 260 Exchange-Traded Funds (ETFs) in the UK, US and Europe.
eToro provides an extensive forum for investors to share views, which is delivered as a personalised news feed, rather than a stand-alone forum.
By way of example, there has been an average of 42,000 posts and 7,200 comments per day on the site over the last fortnight.
The ‘CopyTrader’ feature allows investors to copy top-performing traders by automatically replicating their trades. Certain criteria must be met to qualify as one of eToro’s highest-level traders and incentives are paid to these traders.
Its app is reasonably simple to use and provides a good level of technical analysis. Customers can also place trades online. In addition, it offers automated trading tools (such as trailing stop losses) and the option to buy fractional shares.
Accounts are held in US dollars and UK clients are charged a 0.5% currency conversion fee when funds are deposited. However, this fee is not charged if customers also open an eToro Money account and convert their funds to dollars before transferring it to their investment account. There is no charge for an eToro Money account.
There’s also a $5 withdrawal fee and an inactivity fee of $10 per month (after 12 months with no log-in activity).
Overall, eToro is likely to appeal to investors wanting both social and copy trading, as well as investors buying US shares as the account is held in dollars.
Portfolio of £10,000: £50
(no fee if hold eToro Money account)
No fee

No fee

High

No fee

No fee

High

Freetrade is a privately-owned UK company which raised money via crowdfunding in its early stages. It was one of the first platforms to offer commission-free trading and has over one million customers.
Freetrade offers the choice of over 1,500 shares and ETFs in the UK, Europe and the US. This includes shares from the FTSE 350, AIM 100, MSCI US Prime Market and selected European shares.
An extensive community forum is provided, covering share discussions, general investments and queries about the platform. There is a separate section for beginners to ask investing questions, which is well-supported by more experienced investors.
By way of example, there are around 6,600 posts in the share discussion category, with 3,000 replies and 89,000 views for the top post.
Its app is simple to use but automated trading tools (such as stop losses) are not included in its basic plan. Customers will need to upgrade to the standard plan (£4.99 per month) for a wider range of 6,000 shares, automated trading features and to receive interest on uninvested cash balances.
Overall, Freetrade may be a good option for investors looking for a low-cost platform with good provision for social trading.
Portfolio of £10,000: no fee
UK shares: £8 (0-2), £3 (3+) / US shares: £10 (0-2), no fee (3+) / Fees based on trades in previous month

£24 per quarter/£96 per year (if 0-2 trades in the quarter). / No charge if 3+ trades in the quarter

High

UK shares: £8 (0-2), £3 (3+) / US shares: £10 (0-2), no fee (3+) / Fees based on trades in previous month

£24 per quarter/£96 per year (if 0-2 trades in the quarter). / No charge if 3+ trades in the quarter

High

IG is a FTSE 250 company with over 300,000 clients in 20 countries. The platform is tailored towards more experienced traders and provides extensive technical analysis.
It offers one of the widest range of investments, with 13,200 UK, US, European and Australian shares and investment trusts, and 1,000 Exchange-Traded Funds (ETFs).
IG provides an extensive community forum, including share discussions, general investments, trading strategies and indices. There is a separate section for new investors to ask investing questions, with a good level of replies from more experienced investors and the company itself.
By way of example, there are around 6,900 posts in the share discussion category, with over 200 replies and 12,000 views for the top post.
Regular traders pay no custody fee, along with a low share trading fee for US and UK shares. However, lower-frequency traders will pay both share trading and platform fees.
Its app and website provide a high level of technical analysis, along with automated trading tools including limit orders.
Overall, IG may appeal to more confident traders wanting social trading combined with more complex investments and advanced trading tools.
Portfolio of £10,000: £160
No fee

No fee

Medium

No fee

No fee

Medium

Trading 212 is a UK fintech start-up offering commission-free trading and currently has 1.5 million clients.
It charges no trading or custody fees, along with the lowest foreign exchange fee of 0.15% for investors looking to buy overseas shares.
Customers have a choice of over 10,000 shares, investment trusts and ETFs from the UK, US and Europe.
Trading 212 provides a community forum, including share and ETF discussions and active trading strategies. The forum is well-supported in terms of replies from investors and the company.
By way of example, there are around 1,500 posts in the share and ETF discussion category, with over 800 replies and 17,000 views for the top post.
The app and website are easy-to-use and provide a good level of technical information and advanced trading tools including stop and limit orders.
Overall, Trading 212 combines low fees and an excellent choice of investments with a decent social trading offering.
Portfolio of £10,000: no fee
When coming up with our list of preferred social trading platforms, we focused on three criteria looking at whether platforms offered:
We looked at various features offered by platforms, focusing on social trading, fees and the range of investments that were available. We also considered trading tools (such as stop loss and limit orders) and weighed up foreign exchange fees on overseas shares (see FAQs below).
In addition, we checked whether a platform is authorised by the Financial Conduct Authority (FCA), the UK’s financial watchdog, and reviewed the level of FCA customer complaints.
Combining research with editorial judgement, we arrived at our Forbes Advisor star ratings.
We calculated overall trading and platform fees based on the following assumptions:
For dollar-only accounts, we applied a foreign exchange fee to convert the entire initial value of the portfolio into US dollars and assumed that no withdrawals were made.
The launch of zero-commission trading apps (see FAQs below), together with the rising popularity of online investment communities, has seen social trading shake up the investment industry over the last few years.
Social trading was at the heart of the so-called ‘meme stock’ revolution where investors attempted to make quick profits from buying unloved shares and then coordinating social media campaigns to drive up prices.
This often proved a successful strategy. For example, the price of GameStop shares rose by over 10,000% in a nine-month period (although its share price has subsequently fallen). The share prices of US theatre chain AMC and retailer Bed, Bath & Beyond were also boosted by social trading campaigns.
Social trading is also seen as a powerful tool in making financial markets more democratic, providing less-experienced investors with the opportunity to leverage the expertise of experienced traders.
Social traders believe this helps demystify investing, opening it up to a broader base of people who aren’t willing to pay for formal portfolio management services or access financial content.
The signs suggest social trading is here to stay. A survey for brokerage firm Exness found that social media was the primary source of information for millennial and Generation Z day traders, with over half of millennials and three-quarters of Gen Z investors regularly using sites such as Facebook, Twitter and Reddit.
Some trading platforms have made social trading a key part of their product offering, hosting comprehensive community forums for clients on their platforms. These provide the opportunity for investors to discuss trading strategies, together with the outlook for individual shares and wider stock markets.
The platforms themselves also participate in community forums, answering technical queries, sharing curated content in relevant channels and providing links to related discussions.
Three of our selected platforms (Freetrade, Trading 212 and IG) provide traditional forums in which investors can view all available topics, whereas eToro provides a personalised feed of community posts on investors’ home-pages.
Other platforms, such as eToro, have gone a step further with ‘copy trading’ where investors can automatically replicate the portfolios of other traders on the platform. This is explained in more detail in the Frequently Asked Questions below.

1
eToro
Invest in global and local stocks with ZERO commission

Explore over 2,500 stocks. Buy in bulk, or invest in fractional shares

1
eToro
On eToro’s Website
Your capital is at risk. Investments can go up and down in value, so you could get back less than you put in. Other fees apply. For more information, visit etoro.com/trading/fees
The biggest drawback of social trading is the risk of ‘pumping and dumping’, where investors promote shares they hold in a company. By ‘pumping’ or spreading false, misleading or exaggerated information about a company, investors are able to artificially inflate the share price beyond its underlying value. At this point, they ‘dump’ or sell their shares, before the shares fall back to their intrinsic value.
Investors may also be tempted to replicate another investor’s portfolio without considering whether they share the same appetite for risk and the overall split of assets beyond equity investments. This can encourage investors to replicate high-risk trades which aren’t suitable for their financial circumstances.
Social trading may also encourage ‘over-trading’, particularly when investors start chasing gains to offset their losses. As a result, investors are more exposed to short-term stock market volatility than with longer-term ‘buy and hold’ investment strategies. In addition, trading fees can mount up (unless the platform offers commission-free trading).
Although social trading forums can be a useful source of information, investors should carry out their own independent research before deciding whether to invest in a company.
Trading platforms offer investors a means of buying and selling stocks and shares, funds, investment trusts, exchange-traded products and other assets directly, rather than indirectly through a financial advisor. These platforms are sometimes referred to as DIY investment platforms, online brokerage accounts or share trading accounts.
Platforms provide software for investors to make their trades online via a website or app (for mobile devices). Some platforms may also offer telephone dealing.
Investors can view their investments online in real-time, enabling them to monitor their portfolio and make timely investment decisions. Trading platforms also offer other features such as watchlists of selected stocks and advanced technical analysis (charts that can help investors improve the profitability of their trades).
Copy trading is offered by only one of our selected platforms (eToro) and allows investors to replicate all of the currently-open trades of a particular trader.
Shares are bought in the same proportion as all of the open positions in the copied trader’s account, However, shares are bought at the prevailing market price at that time, not the price at which the copied trader originally purchased them. Any stop loss or other trading tools applied will also be replicated.
When the copied trader buys or sells shares, the same actions are automatically carried out in the copying investor’s account in real-time. Investors aren’t typically charged a fee for copy-trading as the platform will make money from the buy-sell spread on trades. Copied traders receive a fee from the platform.
The account opening process can usually be carried out online (or via the app) and may take as little as 10 minutes. The applicant will need to provide some basic information, such as bank account details, debit card details and National Insurance number.
Investors may have to supply further documents to support the verification of their identity, although these checks may be carried out electronically during the initial application process. When these checks are complete and funds have been received into the account, the investor is ready to start trading.
Investors can search by the company name or ‘ticker’ to select the shares they wish to purchase and UK shares can be traded from 8 am to 4.30 pm when the London Stock Exchange is open.
This depends on the platform, but many allow investors to open an account with as little as £1, or £25 per month (where platforms offer a monthly investment option). Investors will then need to add further funds to their account to cover the value of any share purchases.
We’ve looked at general trading accounts that allow investors to buy and sell shares, however, there are a variety of tax-efficient alternatives. All but one (eToro) of the trading platforms listed also offer Individual Savings Account (ISA) accounts, however share trading and platform fees are typically higher for ISAs.
ISAs are a type of ‘tax wrapper’, allowing investors to pay no income tax on dividends and no capital gains tax on any profit made on buying and selling shares.
There are various types of fees charged by trading platforms:
Share trading fee
This is a flat fee charged by a platform each time investors buy or sell shares. Some platforms do not impose a share trading fee and this is known as ‘commission-free’ trading).
Many trading platforms charge a flat fee of around £3-10 per trade. Trading fees are usually higher for US or other overseas shares.
Platform fee
This is an annual fee, sometimes called a custody fee, that’s charged for holding the shares on a trading platform. Our chosen trading platforms do not charge platform fees, other than IG for less-frequent traders (who make fewer than three trades per quarter).
In terms of the wider market, some platforms charge a flat platform fee and others charge a percentage-based fee, typically 0.25% to 0.45% of the portfolio value.
There are two types of percentage-based platform fees:
These fees will usually be taken out of any cash held on the account or can be paid directly by debit card. If unpaid, a provider – as a last resort – may sell shares held by investors to cover platform fees.
Check which types of investments incur a platform fee as some platforms charge for holding funds, but not shares. Platform fees that charge for holding shares may be capped at a maximum annual amount.
Foreign exchange fees
Most platforms charge a foreign exchange fee when investors buy or sell shares denominated in a currency other than pounds sterling. Also referred to as a foreign currency conversion fee, this typically varies from 0.1% to 0.5%.
A small number of platforms allow investors to hold foreign currency in their accounts, enabling them to convert it once and use this money for buying shares (and holding the proceeds from selling shares) in the local currency.
Other fees
Some platforms charge inactivity fees and withdrawal fees (for accounts held in an overseas currency) and fees for trading by telephone.
Although not technically a fee, platforms also make money on the buy-sell spread on shares. For example, an investor might be looking to buy a share with a buy-sell spread of 100-102 pence. This means that they would pay 102 pence to buy a share, and receive 100 pence to sell a share.
Some platforms may offer more competitive buy-sell spreads than others, and less-traded shares, such as FTSE Small Cap companies, typically have wider spreads compared with FTSE 100 companies.
Investors will be required to pay Stamp Duty Reserve Tax (SDRT) when they buy shares in the UK, calculated at 0.5% of the value of the transaction. This is not usually charged on buying overseas shares, although other taxes may be charged.
Investors may also have to pay Capital Gains Tax (CGT)  if they sell the shares for a higher price than the price paid. This is charged on the ‘profit’ (the gain made). The capital gains allowance is £12,300 for the current tax year.  This means that investors do not have to pay capital gains tax unless they make a total profit of more than £12,300 from their shares.
In addition, investors may have to pay income tax on any dividends received from their investments. However, as well as the personal allowance (£12,570 in the current tax year), investors have an additional dividend allowance of £2,000 (in the current tax year).
A limit order is an order to buy or sell shares at, or better than, a specified price. So if an investor set a buy limit order at 100 pence, it would only be executed if the price was 100 pence or lower.
Similarly, a sell limit order is only executed at that price or higher. It can be a good way of trying to obtain a good price for the share trade without having to monitor the share price in real time.
A ‘stop loss’ can also be a useful tool to limit the downside exposure from investing in shares. This is an order to sell shares if the price falls to, or below, a level set by the investor.
A ‘trailing loss’ or ‘trailing stop loss’ sets the price based on a specified percentage above or below the share price, rather than a single value. It’s a useful tool to lock in profits or limit losses, without investors having to manually reset the stop loss when the share price changes.
Trading in US shares, investors pay the usual share trading fee and relevant foreign currency exchange fee.
They are also required to complete a W-8BEN form (valid for three years) which allows them to benefit from a reduction in withholding tax for qualifying US dividends and interest from 30% to 15%. Holding US shares also carries exposure to foreign exchange risk – if the pound strengthens against the dollar, the shares will be worth less in sterling (and vice versa).
As with UK shares, any profit on US shares will be subject to CGT, unless the shares are held in an ISA or other tax-efficient wrappers such as a self-invested personal pension.
When choosing a trading platform, investors should check the FCA register to ensure that the provider is authorised. This means that they have access to the Financial Ombudsman Service and the Financial Services Compensation Scheme (FSCS) if an issue arises.
The Financial Ombudsman Service will consider complaints against trading providers and may be able to resolve a complaint if the firm fails to deal with it properly.
The Financial Services Compensation Scheme will consider claims if a provider goes out of business and owes investors money. This only covers certain investment products, but where this applies the scheme can pay up to £85,000 per investor.
It’s worth checking the protection offered by the investment trading platform – some platforms are structured so that investments are held in ‘trust’ to protect them in the event of the firm running into financial difficulties.
Investing in shares can be a good way to produce higher returns than cash-based investments. However, a ‘buy and hold’ strategy is a lower-risk option than regular trading. In either case, investments can go down as well as up, and investors may not get their money back.
Investing in a diversified portfolio of shares via a fund, investment trust or exchange-traded fund, may help to reduce an investor’s exposure to an individual company underperforming. Where doubts exist, seek independent financial advice.
Having worked in investment banking for over 20 years, I have turned my skills and experience to writing about all areas of personal finance. My aim is to help people develop the confidence and knowledge to take control of their own finances.

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Apk Bazar

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