Until recently, the idea of ​​managing your stocks from your mobile device – in effect, having a trading room in your pocket – would have seemed like a fanciful idea.

But today’s smartphones make it a reality. Private investors are increasingly using trading apps, not just to execute occasional stock trades, but to manage entire investment portfolios.

Whether you’re new to buying stocks or a seasoned stock market investor, here’s a look at the rise of trading apps and how to choose one that suits your needs.

To start

For those looking to invest through the stock market, the days of “calling your broker” are long gone.

Most investors who want to buy and sell stocks, build an investment fund portfolio, or trade sophisticated instruments such as “contracts for difference” now do so through an online trading account.

Over the past two decades, investment platforms representing some of the biggest names in stock exchange and fund management have responded to this need, primarily with services aimed at a desktop or laptop-oriented clientele.

Over the past two years, however, there has been a noticeable shift from desktop trading to mobile trading by private investors.

Two factors contributed to accelerating this phenomenon. First, the evolution of increasingly powerful smartphones, and second, the increase in the number of stock trading apps.

The numbers are significant. According to App Radar analysts, there were around 3.1 million Android downloads of the top 10 UK investment apps via Google Play Store in 2020/21.

App Radar does not log iOS numbers, which represent Apple users. But it says the split between Android and iOS downloads is about 50/50. Taking this into account, App Radar estimates that, overall, there are now around nine million people using trading apps in the UK.

Rise of applications

Some of the newer investment trading services offered by “neo-brokers” are only available through a mobile app.

To keep pace, providers of traditional desktop investment platforms have developed their own trading apps that customers can use.

Britain’s largest traditional platform, Hargreaves Lansdown, says its app had nearly 700,000 users by the end of 2021. It says more than a quarter of a million customers use its app daily.

One of its competitors, AJ Bell, announced last November the launch in 2022 of Dodl, an application aimed at the youngest. One of the main features of Dodl is that it will allow investors to buy shares “commission-free”.

Commission-free trading has become a major selling point for trading apps that depend on other fees to make their money. See below for more information on trading fees in general.

Fees, however, should not be the sole focus of an investment app user.

Which trading app should I choose?

By keeping the amount you pay to trade and invest to a minimum, you will ultimately increase the returns of your underlying investments.

But, as with so many decisions about our finances, when it comes to choosing a trading app, there’s no clear choice that’s right for everyone. Much of the decision will come down to what you are looking for from a service.

Besides fees, there are a number of other considerations you should keep in mind to get the most out of your trading app experience. These include:

  • How user-friendly do you find the app?
  • What investments do you want to trade? Stocks, funds or more sophisticated investments?
  • If you’re new to investing, does the app let you practice trading or trade virtually before you get started?
  • Besides trading fees, what other administration fees does the app impose?
  • Is there a minimum investment?
  • Can you use the app to trade tax-efficiently through a stock and equity ISA?
  • Is your app regulated by the UK Financial Conduct Authority (FCA)?
  • Are there any additional benefits/rewards?

Trading apps for various scenarios

The market for trading apps is becoming increasingly crowded. Here is a selection of apps that cover a range of scenarios, from novice to more sophisticated investors.

1) eToro – good for beginners and social

eToro describes itself as a “bridge between the old investment world and the new” and claims to be “the only place where investors can hold traditional assets, such as stocks and commodities, alongside” new “assets such as Bitcoin cryptocurrency”.

The app offers a decent mobile experience and, along with many of its rivals, offers the added allure of commission-free transactions.

eToro also allows users to track and even copy trades from proven, legitimate investors. FCA regulated.

2) Freetrade – good for easy investing and guiding

Freetrade’s basic service offers commission-free trading and provides access to large and mid-cap stocks in the UK and US, as well as initial public offerings (IPOs) and acquisition companies with special purpose (SPAC).

It also offers limited access to a range of companies listed on the German, Finnish and Dutch markets.

Freetrade Plus costs users £9.99 per month, but offers considerably wider investment choice, including all other London-listed stocks as well as access to all other European stocks. FCA regulated.

3) Fidelity Personal Investments – good for funds

Fidelity allows investors to choose from over 2,500 funds, as well as stocks from the FTSE 100, FTSE 250, FTSE All-Share and FTSE AIM 100. Other investments available include investment trusts, stock market (ETF) and some Irish stocks.

The service allows a user to link family members’ accounts to see everything in one place, while a watchlist tracks the performance of up to 50 investments at once. FCA regulated.

4) Trade212 – good for practicing trades using virtual money

Trading 212 offers unlimited commission-free trading with access to over 10,000 stocks and ETFs from the UK, US, Germany, France, Spain, Netherlands and other markets.

For those looking for more sophisticated investments, Trading 212 also offers over 3,000 contracts for difference (CFDs) on stocks, forex, gold, oil and indices.

Users can start with a lifetime free practice account that uses virtual money. FCA regulated.

5) GI – good for more experienced investors

IG allows users to trade in over 17,000 global markets, including stocks, indices, options, and commodities.

It offers interactive charts, news, automatic trading alerts and real-time signals. Users can spread bets or trade CFDs on commodities, and options trading is available on various assets timed daily, weekly, and monthly. FCA regulated.

Trading fees

The investment space is cluttered with fees and charges that vary from provider to provider, so it can be confusing for investors – whether app-based or desktop – to figure out what they will actually pay.

When it comes to buying and selling stocks, some providers charge a fixed fee per transaction. Others structure their fees to benefit users who trade the markets more frequently.

Users may also find themselves charged based on the size of their investment. Accounts provided by long-standing platform providers often come with a monthly subscription or administration fee.

If you plan to buy stocks overseas – for example, you want exposure to US dollar-listed tech stocks – you will likely be charged a foreign exchange fee for doing so.

Meanwhile, if you’re an infrequent trader – say you take a year between trades – your account could be hit with “inactivity” fees.

Several app providers promote their “commission-free” trading status. It’s a welcome and increasingly popular option in the investment space. But keep in mind that just because transactions are commission-free, it doesn’t necessarily follow that your account will be completely fee-free.

Brokers make their money in other ways, such as withdrawal fees and currency conversion fees.

Before signing up for a particular investment app, figure out what type of investor you plan to be. Having an idea of ​​how much you will invest, how often you plan to trade, and which markets you will focus on can help you determine the best and most profitable app for your needs.

If protecting your investments from tax is a major concern, make sure your provider has the option of offering a stock and equity ISA – a package that allows an annual allowance of £20,000 to be spent. stocks and funds to grow tax-free.

Beware of “blind” trade

Two of the main attractions of investing through an app are the ability to trade quickly and, assuming you choose the right provider, at little or no cost.

At first glance, this looks like a winning combination with the potential to improve your portfolio returns. However, research from a team at the Leibniz Institute in Frankfurt indicates that it’s still important to err on the side of caution, even when you have the investment power of a small trading room sitting in the palm of your hand.

Academics suggest that the move to app-based trading may do financial investors more harm than good if they’re not careful.

The researchers followed the transaction of 15,000 customers of two large German retail banks over several years. They found that when people traded through a mobile app, they were 8% more likely to buy “riskier lottery-like stocks” than when they bought through a computer.

Trades placed through apps were also 12% more likely to be “old gainer” stocks, in other words, those that had seen a recent rise. The researcher concluded that “our findings caution against the indiscriminate use of smartphones as a key technology for increasing access to financial markets.”