Should you trade stocks for free with Revolut? – Who? New
Revolut’s commission-free stock trading feature is now available to all clients, giving more people the opportunity to get on the stock market for free. But are there any downsides?
The rollout comes a month after Revolut launched commission-free trading for its Metal clients, allowing them to buy and sell 300 US stocks.
Here, we take a look at how Revolut’s stock trading feature works and the caveats new clients should watch out for.
What is Revolut?
Revolut is a London-based digital-only banking app launched in 2015.
It offers three types of accounts, all of which come with a prepaid Mastercard that lets you spend abroad in over 150 currencies and exchange money in 29 currencies in the app.
Customers can opt for a free standard account, the Revolut Premium account for Â£ 6.99 per month or the Revolut Metal account for Â£ 12.99 per month.
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Revolut expands its free stock trading functionality
Revolut has now opened up its free stock trading functionality to its Standard and Premium customers.
If you have a free standard account, you will be able to complete three free transactions per month.
Revolut Premium customers will be able to complete eight free transactions per month, while those with a Revolut Metal account will be able to complete unlimited free transactions per month using the feature.
Revolut also added 150 more US stocks to the platform, including Groupon and Worldpay. This means that investors can now have a choice of over 450 stocks to buy and sell.
There is no minimum account required, which means you can buy fractional shares for as little as $ 1. This can be especially useful if you don’t have enough money to buy a full stake in a business.
All customers will also be able to download a monthly statement directly from the app.
Is the Revolut platform completely free?
Revolut’s stock trading platform is not completement free. All Revolut clients who use the platform will be charged an annual custody fee of 0.01% of their portfolio.
Standard and Premium customers will also incur a fee of Â£ 1 for each transaction made in addition to their free quota.
Since Revolut only allows you to select two US exchanges, your selection of companies to invest in will be limited. Trading in US stocks also means that you will need to pay 15% withholding tax on any dividends you earn (in addition, you will need to complete a W-8BEN form).
As you will be buying and selling in US dollars, you will need to be careful with exchange rates. All currency transactions are carried out through Revolut’s multi-currency wallet using their exchange rates.
Are FSCS investments protected?
Revolut is not a bank and money held with Revolut is not protected by the Financial Services Compensation Scheme (FSCS).
Instead, your money is subject to Revolut’s protection terms. Under these terms, any money you hold at Revolut will be either:
- Placed in a ring-fenced account that is segregated from company money
- Invested in low risk assets held in a separate account
This means that if Revolut goes bankrupt, it will have to repay you from the reserved funds before repaying other debts.
Neither Revolut’s terms nor the FSCS will compensate you if the value of your investments goes down.
How does Revolut compare?
Compared to some of the major investment platforms, Revolut’s offering looks very cheap.
Hargreaves Lansdown, for example, charges up to Â£ 11.95 per order, although that drops to Â£ 5.95 for more frequent investors. Other companies such as AJ Bell, Barclays and Interactive Investor charge between Â£ 4.95 and Â£ 10 per trade.
However, these fund supermarkets give you access to a much wider range of investments and stock exchanges.
In addition, unlike Revolut, these platforms allow you to invest in tax-free wrappers such as a stock and share Isa or a Sipp. This means that you don’t have to pay dividend or capital gains tax when you sell investments.
Some commission-free platforms offer Isas, such as Trading 212 and Freetrade, as well as access to UK stocks and funds.
Is commission-free stock trading worth it?
Commission-free stock trading platforms, such as Revolut, can serve as a basic introduction to the world of stock picking for people who want to get started with investing easily.
It is important to keep in mind that the service and investment choice offered by such platforms is much more limited than the main paid investment platforms.
If you are just starting to invest, it is essential that you do your research and invest in a variety of different assets, rather than putting all your money in stocks.
For more information, listen to Which? The Money Podcast episode below where we discuss the pros and cons of free stock trading platforms.
You can also check out our guides on investing platforms and how investing works for more tips and advice.