New investors ditch Hargreaves for free-trading sites

There are concerns that new investors were being too risky by just investing in stocks

Trading 212 has overtaken Hargreaves Lansdown as the trading site of choice for new investors, research has shown.

Boring Money, a research firm, surveyed 6,500 investors and found nearly a quarter who began investing less than a year ago put their cash with Trading 212.

One in 10 invested with Moneybox while Hargreaves was the third most popular. Britain’s biggest broker was top choice for savers who began investing between one and 10 years ago.

One in 10 of the nascent investors have solely put their money into stocks in the past 12 months, research showed.

Holly Mackay, of Boring Money, said this was a concern given these new savers had no experience of stock markets other than through the pandemic.

They were being too risky by just investing in stocks, she added. Trading 212 users cannot buy funds, but can purchase stocks, cryptocurrencies and make spread bets via “contracts for difference”, although exchange-traded funds and investment trusts are available.

Figures from the company showed eight of the top 10 most-held investments were individual companies, although the other two are ETFs. In comparison, around half of the money with Hargreaves Lansdown is held in funds, not including trusts or ETFs.

Ms Mackay said investors could have been fooled by seeing short-term wins such as American company GameStop, or cryptocurrency’s violent rises.

This would give new, and potentially young, investors false confidence. Upstarts such as Trading 212 do not charge a monthly fee and derive most of their revenue from the “spread” – the difference between the buy and sell price of a stock.

Ms Mackay said: “Disrupters get a lot of their revenue from activity, so target people more likely to make more trades.”

Mike Barrett of the Lang Cat, a consultancy, said sensible investing was about “buying and holding”. “The concern I have with some trading services is they offer risky investments such as CFDs which have no place in financial plans,” he added.

A spokesman for Hargreaves Lansdown said it was “encouraging” to see more younger people investing, adding that the firm “actively engages with investors to encourage good long-term investing habits”.

Trading 212 could not be contacted for comment.