Top 10 Most Popular ETFs

Our favourite investment product is the Exchange Traded Fund, and it is possible to beat the market by investing in these extremely versatile funds if you pick the right ETFs. But which ETFs should you choose?

 

Deciding exactly where to invest can be a difficult task, particularly if you’re trying to beat the market. There’s a lot of forces at play causing certain industries, countries, and asset classes to vastly outperform others.

 

For inspiration we can look at the most popular ETFs bought, and Interactive Investor publish the Top 10 every month. So, in this post we’re going to look at the most popular ETFs traded by UK investors in September 2020.

 

Rather than just reel off a list in rank order, for the purpose of this post we’ve grouped all 10 ETFs into 4 discrete groups, and you can find the full list in rank order at the end of this post.

 

UK ETFs

#1 iShares Core FTSE 100 ETF (ISF) and #2 Vanguard FTSE 100 ETF (VUKE)

The 2 ETFs most frequently bought in September were both FTSE 100 trackers. These are essentially the same fund, albeit from different ETF providers, with both giving investors exposure to the largest 100 listed UK companies.

 

This is a core component of our world portfolio that we frequently talk about, and FTSE 100 trackers are likely to be central to any UK investor’s portfolio.

 

FTSE 100 stocks typically make up about 4-5% of global market capitalisation but as we’re based in the UK, we generally overweight it to perhaps around 15%. Historically, many UK investors will have been fully invested in UK stocks, but this strategy has proven to be disastrous in recent years as other major markets have left the UK in their dust.

 

Of course, large companies tend to have global revenues rather than be dependent on 1 country and FTSE 100 stocks are no different with about 75% of the FSTE 100’s revenue coming from outside the UK.

 

However, with many of the stocks in the FTSE reporting in GBP or being vulnerable to UK political decisions, the FTSE has been far from immune to Brexit jitters and the actions taken by Boris in the fight against coronavirus. Also, the FTSE is crammed full of Oil and Banking stocks, which just so happen to have been terrible investments recently.

 

Both ETFs have a tiny Ongoing Charge (OCF) of just 0.07% and both provide similar returns. The iShares ETF has a year-to-date total return of -17.5% and the Vanguard ETF has returned -17.3%. Looking at 1-year returns can often be misleading but sadly the 3-year returns are similarly depressing with the iShares ETF returning -10.4% and the Vanguard ETF returning -10.3%.

 

Personally, we don’t think it matters which of these 2 ETFs you invest in, as they cost the same, have similar tracking differences and will ultimately have similar returns. We can totally understand why these 2 ETFs are topping the leader board right now, with UK stocks overall looking irresistibly cheap.

 

#5 WisdomTree FTSE 100 3x Daily ETP (3UKL)

I don’t think we’ve ever mentioned leveraged Exchange Traded Products before because they are really intended for those looking to speculate on short term movements of an index and we don’t personally use them because of this. We’re surprised that the Top 5 most popular ETFs includes such a speculative product.

 

They are not meant to be held for longer than 1 day and should only be used by sophisticated investors. If you do intend to use them make sure you understand them.

 

The WisdomTree FTSE 100 3x Daily ETP aims to offer investors three times the movements of the FTSE 100 and achieves this through complex derivatives. This means that if the FTSE 100 goes up by 2% in 1 day, the ETF will provide a return of 6%. However, it also works the other way, making these products very risky.

 

The fact that this is sitting in 5th place suggests that investors are very bullish about the FTSE 100 right now.

 

It’s important to note that daily ETPs rebalance daily and do not track an index over a longer period. So, if the FTSE 100 increased by 5% over a year, the 3xDaily ETP will not return 15%.

 

We can’t explain it fully in this post, so just take our word for it but you can check out this interesting article from Interactive Investor where they explain it very well.

 

#10 – L&G FTSE 100 Super Short Strategy (Daily 2x) ETF (SUK2)

Conversely to the bullish investments just mentioned, it seems that a lot of investors are still keen on shorting the FTSE 100. This ETF is intended to reflect twice the daily percentage change in the level of the FTSE 100 on an inverse basis. This means that if the FTSE 100 goes down by 2% in 1 day, the ETF will provide a positive return of 4%. However, it also works the other way.

 

We have to say that this seems very brave as the FTSE 100 has already had a dire year and we wouldn’t have thought it can fall much further. But who really knows? That’s why we invest for the long term.

 

While we don’t currently hold any short positions, which means to profit from a decline in share prices, we can certainly see the appeal, especially if you believe you can time the market. As stocks tend to rise over time, you really are going against the grain when you invest with these types of products.

 

Energy Sector

#3 – iShares Global Clean Energy ETF (INRG)

This is one of the most surprising ETFs on the list. It first entered the top 10 in August but was even more popular in September. We’re not surprised that it’s popular, but we’re surprised that more people were buying it than investments in the US stock market such as the S&P 500, and other major markets.

 

This ETF tracks the S&P Global Clean Energy Index for a pricey fee of 0.65%. This ETF will give you direct investment in 30 global clean energy companies and to be fair it has been kicking ass in 2020, despite most stocks around the world performing very poorly.

 

This ETF is having a blinder, with a 62% gain this year and a 124% gain in the past 3 years.

 

We can’t say we know much about the underlying stocks in the ETF, but we do know that there is a huge green political movement worldwide, which is no doubt helping these stocks immensely.

 

For instance, Boris has just announced arguably unrealistic plans to power all UK homes with wind by 2030 and other countries will no doubt have similar plans, such as Biden’s clean energy plan in the US. While we think these sorts of plans are ambitious, it cannot be denied that the direction is towards renewable energy and away from dirty energy.

 

However, we still believe oil and gas will be the predominant fuel energy source for years to come. Moreover, this ETF contains many stocks that may be trading at very excessive prices. Many of the companies are loss making and yet are being valued at billions of dollars, driven more by momentum and ideology than by current profitability.

 

Commodities

#4 – iShares Physical Gold ETC (SGLN) and #6 – iShares Physical Silver ETC (SSLN)

It comes as no surprise that both gold and silver make the top 10 in the current climate. They tend to be popular investments in normal times but with so much uncertainty surrounding global markets this year it’s no wonder gold and silver make the list as money has been pouring into precious metals.

 

Both these investments have performed very well in 2020 so far with the gold ETC up 20% and the silver ETC up 30%.

 

Both these Exchange Traded Commodities will give you direct exposure into the metal they track and will be physically held. That means that the metal physically exists and is safely stored in a vault.

 

We both invest the iShares Physical Gold ETC ourselves as it should be a good hedge against economic turmoil and inflation over the long term.

 

US

#7 – Invesco EQQQ NASDAQ-100 ETF (EQQQ), #8 – Vanguard S&P 500 ETF (VUSA) and #9 – WisdomTree S&P 500 VIX Short-Term Futures 2.25x Daily Leveraged ETP (VIXL)

We’re not surprised to see Nasdaq-100 and S&P 500 trackers in the top 10. If anything, we would have expected them to be even more popular.

 

The S&P 500 ETF gets you exposure to 500 large US stocks such as Amazon, Microsoft, Coca-Cola and Johnson and Johnson. It is an integral part of our core portfolios and costs just 0.07%. It has also had an awesome year so far considering the economic climate, and returned 9%.

 

The Nasdaq-100 ETF includes 100 of the largest US and international non-financial securities listed on the NASDAQ stock market, so will have a lot of crossover with the S&P 500. Most notably this ETF includes Tesla but the S&P 500 currently does not.

 

This Nasdaq-100 ETF has had a sensational year, returning 41.2% due to the concentration of tech stocks within the index. Information technology stocks make up 48% of the index and these have smashed all other stocks in 2020, largely thanks to Covid.

 

Unfortunately, this ETF comes in at a pricey 0.30% OCF, which we feel is too high for the investments it holds. We don’t mind paying a premium price on an ETF if it gives exposure to more obscure investments, but these are all massive companies and so should be cheaper.

 

And finally, the S&P 500 VIX ETP provides 2.25 times the daily performance of the S&P 500 VIX Short-Term Futures Index ER.

 

VIX and S&P500 generally move in opposite directions, but the correlation is far from -1. This index measures volatility in the S&P and this particular ETP will amplify those movements by 2.25x. For example, if the index that the ETP is tracking rises by 1% over a day, then the ETP will rise by 2.25%, excluding fees. However, if the index falls by 1% over a day, then the ETP will fall by 2.25%, excluding fees.

 

The ETP is very expensive with an OCF of 0.99% and a Daily Swap Rate of 0.01181%, which will soon add up if you held it for a while.

 

Personally, we would never invest in this as we feel that these types of investments are far too complex and shouldn’t be used by retail investors unless you really know what you’re doing. You can lose a lot of money, fast.

 

The Full Table

As promised below is the full table of the top 10 most popular ETFs traded on Interactive Investor in rank order, with 1-year and 3-year performances.

 

Many of these ETFs won’t be available on free trading apps but can be bought on premium Investing platforms such as Interactive Investor. We get a small commission if you use this link at no additional cost to you, which helps to fund this website. Thanks to anyone that uses it.

 

What are your favourite ETFs? Let us know in the comments section.

 

And as always don’t forget to check out the Money Unshackled Offers page where we bring you thousands of pounds of awesome offers when you sign up to various investing platforms and services. Find the Offers page here.

The US Election Impact On Stocks and ETFs (UK Perspective)

Trump vs Biden. Republicans vs Democrats. The result of the election on 3rd November in the world’s biggest market, America, is sure to have an impact on your investments.

 

In fact, it’s in the top 3 most cited risk factors to global stock valuations, alongside the coronavirus and a tech bubble pop.

 

We got a taste of the market jitters to come last week when President Trump tested positive for Covid-19. The S&P 500 and the Dow both lost 2% per cent, and oil prices also slipped further into the abyss.

 

What the market is hating on here, is uncertainty. Stocks don’t have a party affiliation, they don’t really care who the president is. What they like is stability, and the right market conditions to grow and thrive.

 

Here we’re sketching out an objective view of what November is likely to look like in the stock market under either president, without political bias, and most importantly – how it impacts your money.

 

How Politics Shapes Stock Markets

Politics impacts the stock market in 2 key ways – firstly, it is a headline grabbing source of uncertainty, which the market hates above all else; and secondly, the ideologies of the people in power affect which laws get passed, which either help or hinder companies to prosper and grow profits for you, the shareholder.

 

The ideal market conditions for your stocks and ETFs to grow is under a free market with just the right amount of regulation, and just the right amount of taxation.

 

Too much or too little of either and you run into problems, but a new president usually tries to make sweeping reforms in the opposite direction of their predecessor.

 

How Investors Are Thinking

The vast majority of investors — 93% — expect the result will affect the stock market, according to a recent survey from asset manager Hartford Funds. 84% said this will impact their investing habits.

 

There is a lot of emotion around this election; understandably, given how the culture wars have split the country in two, and this emotion is leaking into the stock market.

 

45% of investors surveyed said they plan to make changes before the election, and 62% indicated they would be waiting to make changes after the fact, once the dust has settled. Who is right?

 

Uncertainty and Volatility

We’ve already seen buckets of volatility in 2020, which has been fantastic for traders, but perhaps more gut wrenching on occasion for long term investors. Here’s what Winter has pencilled in for your portfolios:

 

  • 3rd Nov 2020 – The US Election
  • 1st Jan 2021 – Proper Brexit happens, with either a Deal or No Deal
  • Probably every week to come – a coronavirus development

 

Needless to say, uncertainty is the only thing which is certain. We’ve discussed before how to invest around Covid, and Brexit is a matter mainly for EU and UK stocks.

 

The upcoming battle which will have the largest predictable effects on US stocks is the election.

 

If Trump Wins Again

Major polling outfit FiveThirtyEight were among the only pollsters in 2016 to give Trump decent odds of victory, but even then, they only gave him around a 30% chance.

 

This time around they again have the Democrat candidate as most likely to win, but are still giving Trump around a 1 in 5 chance – which isn’t zero.  And remember how barely any pollsters thought Brexit stood a chance in 2016?

 

If President Trump pulls off a blinder and defies the polls again, the market would probably quite like it. It would mean stability, and more of the same.

 

Even industries that may conceivably fare better under a Biden premiership would at least be able to carry on as before, with no material changes.

 

Small-cap stocks would likely rally on the news. These tend to be the most negatively impacted by market volatility, and even by the anticipation of market volatility.

 

The fossil energy sector is likely to do well – relatively speaking, that is, as it’s doing pretty poorly right now.

 

Trump’s White House is very pro-American oil, while Biden has promised some very green policies sure to upset the oil companies.

 

Big Tech would also be poised to keep doing well under Trump. While the tech giants have been threatened with tighter regulation under the Trump regime, Biden and the Democrats are expected to take a much firmer hand in what they see as bringing Big Tech under control.

 

Tech companies are very capable of growing and innovating if left unhindered, so less regulation is a good thing for the shareholders of these stocks.

 

One thing you can expect under a Trump presidency is a brake on global growth overall. His famous “America First” policy and rhetoric against China is sure to hinder trade between the nations of the East and West.

 

For shareholders of American stocks, the ones poised to perform best under Trump are those with a mostly American presence.

 

Global companies floated in New York will continue to be hindered by the war of words with China.

 

If Biden And The Democrats Win

If Democratic presidential nominee Joe Biden wins, and there is also a Democratic majority in Congress – elections happen there at the same time – then things change… bigly.

 

Rapid and wide-ranging economic reforms happen when a new president enters office, if they are also backed up by their own people in Congress – which is the equivalent of the UK’s Parliament. The elections for Congressmen and women are also happening on November 3rd.

 

Under this scenario, deemed the most likely outcome by the pollsters, the market will probably sell off.

 

Wealth management firm Hightower think this could be by around 4%, mainly in anticipation of Biden’s tax policies, but we wouldn’t be surprised if the sell-off were even higher, given the fear in the markets and other elements in play that cause uncertainty like Covid.

 

Initially, Covid-19 will make it difficult for Biden to ramp up taxes on already-struggling companies. Unless there is a vaccine, we think these policies are likely to be deferred into 2022.

 

But the specter of tax rises will hang over the markets and continue the sense of uncertainty about just when exactly the hit will come.

 

If there is a dip after the election, we will likely buy into it.

 

A result for Biden is a result you can take advantage of. While it is likely to cause your existing stocks to fall in the short term, this isn’t an issue for long term investors.

 

But if we see a big fall on November 3rd, we will be drawing on a chunk of our cash war-chest to buy that fall. We won’t use it all though, as there is still a possibility of bigger dips in the future from Covid.

 

Specific companies expected to do the worst from a Biden victory include pharmaceutical companies and the FAANG stocks – Facebook, Amazon, Apple, Netflix and Alphabet.

 

Big Pharma is viewed with just as much distrust by Biden’s team as Big Tech, with both of these sectors likely to take a hit from increased government regulation.

 

But if there is a Democratic sweep of both the presidency and Congress, sectors like clean energy and industrials could benefit from a new focus on infrastructure.

 

A big part of Biden’s playbook is tax and spend, which includes heavy subsidising of the clean energy industry, with renewable energy stocks like Renewable Energy Group (REGI) set to benefit directly, and some tech companies like Tesla (TSLA) benefitting indirectly from a greater push by government towards battery technologies and so on.

 

That’s not to say that a tax and spend policy is the best way to drive innovation – we generally favour the free market approach over government subsidy.

 

But we’re all-for governments using their resources to help technology to advance – if that technology has a practical economic use.

 

America Selects Their 2 Greatest Fighters

So, of the 330 million citizens of the United States, the 2 most popular were whittled down from the masses, of which the most qualified will become President.

 

At least, we assume this must be how it works! In any case, it’s not just about these 2 champions of the American people.

 

We also have the elections for Congress, which we’ve already alluded to, which are just as important for how the stock market goes over the next 4 years.

 

FiveThirtyEight and most other pollsters have a Democrat win in both houses of Congress as being the most likely outcome, but only just.

 

Congress is currently split between both parties, each in charge of one of the two houses.

 

Stock markets love this, because nothing gets done. Remember Trump’s Wall? It didn’t get built, because there was a divided Congress.

 

For a President to make any serious changes, it needs to be signed off first by the 2 Houses of Congress.

 

And when both houses are stuck shouting at each other, no laws get passed, and the market is free to do what it does best – make money.

 

We had a similar brief period of respite in the UK Property Investing market, during the Hung Parliament of Theresa May.

 

Any new law for Landlords is inevitably a bad one, and our fellow property investors were able to enjoy a year or so without government fiddling.

 

A Biden victory, or even a Trump one, would likely be met by the markets with a shrug of the shoulders, if it coincided with the result of the Congressional election being another split.

 

For major change to come, America needs all 3 ducks in a row – the President, and the 2 Houses of Congress.

 

What Past Elections Tell Us

Even though the stock market has boomed during President Trump’s – a Republican’s – first term, it’s not to say it wouldn’t boom under a president from the Democrat party either.

 

Dating back to 1933, a Democratic president on average presides over a higher U.S. stock market than a Republican one, despite some of the big hitters being Republicans.

 

But if you strip away some outliers, such as the dot com bust, there’s practically zero difference between them in equity returns.

 

According to Hightower, if you’d put $10,000 into the market around any Election Day, 10 years later it would have gained value.

 

In this, history tells us it is wrong to choose not to invest in America just because you don’t like the president. History tells us it’s wise to invest in America long term regardless of the president.

 

How The Market is Already Positioned

Unlike the pollsters, the market is too uncertain about the result of this election, and is proceeding with caution.

 

We’ve seen investment funds taking money out of tech stocks – those most likely to suffer in the short term from a Democrat victory – and increasing their holdings in cash.

 

We’re positioning ourselves by being ready to buy the dip if there is a sweep by the Democrats, and we are not too heavily weighted towards any of the industries most likely to be impacted by either outcome.

 

It may be time to take profits on some winners, if you hold stocks in any of the industries mentioned in this video – unless you’re in it for the long haul.

 

Being undiversified going into this election is a bad idea. Be wary of the sectors most likely to move on either outcome – tech, clean energy, dirty energy, pharma, and infrastructure.

 

But a properly diversified long-term portfolio has nothing to fear from this election!

 

How are you positioning yourself for the election? Let us know in the comments below.

 

You can invest in all of these stocks with Stake – an investment app specialising in US stocks. Stake offers fractional investing too, so you can easily afford to buy highly priced stocks. And Stake are also giving away a free US stock worth up to $100 to everyone who signs up via our link, which can be found on the Money Unshackled Offers page here.

Gaming Industry & Stocks Set To Level Up

The video games industry is now larger than the movie and music industry combined. It doesn’t get the same attention as those industries, but maybe it should. There are over two billion gamers across the world. That is 26% of the world’s population and it should come as no surprise that all manner of gaming and tech companies are battling it out to gain as much market share as possible.

 

There’s so much going on right now with the imminent release of new consoles, new games, new technologies and new ways to play, that we’re asking the question – should we be investing in the gaming industry?

 

Here we can see the growth of the global video games market according to Statitsta.com. Since this forecast we now know that the market is even bigger than this, largely thanks to Covid.

YouTube Video > > >

With people locked up inside their homes many have found respite by grabbing a controller and immersing themselves into gaming.

 

For investors, this incredible growth is an awesome opportunity, so we’re looking at the future of the gaming industry, how you can invest and profit from the surge in its popularity, and 3 gaming stocks & 1 gaming ETF that we are think are set to level up.

 

The Future of Gaming

#1 – Console Wars

It’s really exciting times right now as we’re about to witness a new console war with the imminent release of Microsoft’s new Xbox console and Sony’s PlayStation 5. Microsoft has said the Xbox Series X will be four times more powerful than its current Xbox One X console and no doubt the PS5 will be equally impressive.

 

According to Sony, the inclusion of a solid-state drive will give the console 100x faster loading speeds compared to a hard drive. With faster load speeds we’re expecting these console improvements to lead to even greater gamer satisfaction and therefore far more spending on games and downloadable content.

 

The release of faster and more powerful consoles has in the past fuelled growth in the video game industry overall, as increased marketing and gaming quality leads to a new generation of players.

 

#2 – Cloud Gaming

Cloud gaming is a new way to play games and according to Mordor Intelligence, a market research company, the emergence of cloud gaming will be driving the global market growth in the industry.

 

Thanks to advances in cloud technology a gamer will be able to play games on a mobile or other device that normally would be far too graphically intensive. Rather than the local device doing all the computational work, this is instead handled by the cloud server, where all the games are stored.

 

This new sector is also seen as a serious competitor for the traditional game market, but we see it as complimentary to console gaming rather than cannibalising it and this is a viewpoint shared by Microsoft. In a post their chief vice president described their new cloud gaming service as, “a vision for game-streaming technology that will complement our console hardware and give gamers more choices in how and where they play.”

 

This type of technology is still very new and will make giant leaps over the next few years but surely by bringing true console-quality gaming to mobile devices we’re on the cusp of a revolutionary change in the gaming industry.

 

Not everyone can afford a gaming console or gaming PC and not everyone wants one but almost everyone on the planet has a mobile phone, which will soon be able to handle the best games the gaming industry has to offer. Even in developing countries everyone has a phone, but not necessarily a console. Cloud gaming could be a gateway into the adoption of gaming across the globe.

 

#3 – Smartphone Gaming

Smartphone gaming has exploded in the past few years. According to Newzoo, a gaming insight company, the mobile gaming market is worth $68.5 billion or 45% of the global games market.

 

We knew that mobile gaming was huge, but this is mind blowing. Interestingly, Apple, who do not even make games, is the fourth-biggest public gaming company in the world due to its operation of the App Store. Apple managed a record $22.2billion in revenue from gaming apps in the App Store during the first half of 2020.

 

What strikes us is just how much money is floating around the mobile gaming industry.

 

We’ve personally have never been particularly keen on mobile games because most of them seem to implement the freemium model, where paying more allows you to advance through the game rather than based on skill alone. However, based on the revenue figures it seems that many gamers are more than happy to pay.

 

The top gross mobile game in July 2020 according to Sensortower.com game is Battlegrounds (PUBG) from Tencent and generated $208 million in July alone. Honor of Kings came in second, which is another Tencent game. The next top grossing game was Monster Strike from Mixi, followed by Pokémon Go from Niantic and Roblox from Roblox Corporation.

 

If you’re interested in investing in mobile gaming our tip to you guys would be to check out what the top games are and then research those companies. Another good source of information is your own kids. What games are they playing and who makes them? Get in early before the rest of the world can see what’s happening.

 

#4- eSports

eSports is competitive and organised gaming. Gaming competitions have long been part of the video game culture, but this was largely between amateurs until the late 2000’s. A lot has changed since then as it has experienced a surge in popularity with participation by professional gamers and events being live streamed.

 

The increasing availability of online streaming media platforms such as YouTube and Twitch have been a driving factor in the growth and promotion of esports competitions. FYI, Alphabet (more commonly known as Google) own YouTube and Amazon owns Twitch in case you were tempted to invest.

 

Industry revenues will rise from $776 million in 2018 to an expected $1.6 billion in 2023. According to Statista.com, the majority of these revenues come from sponsorships and advertising, and the rest from media rights, publisher fees, merchandise and tickets, digital, and streaming.

 

In terms of revenues, Asia and North America represent the two largest eSports markets, with China alone accounting for almost 20% of the market.

 

Gaming Stocks Set To Level Up

If that wasn’t enough to get you excited about the gaming industry let’s take a look at some massive US gaming stocks that could be set to level up.

 

#1 – Take-Two Interactive (TTWO)

Take-Two Interactive Software develops, produces, and markets interactive software specialising in video games. The company creates video games for consoles, handheld systems, personal computers, smart phones, and tablets.

 

The market cap of Take Two is $19bn and revenues continue to climb yearly, surpassing $3bn in 2020. EPS is growing at breakneck speed and could well continue for years to come. The icing on the cake is they have no debt and are in a cash positive position with net cash of $2.3bn.

 

The company owns 2 major publishing labels, Rockstar Games and 2K. Take-Two’s combined portfolio includes franchises such as BioShock, Borderlands, Grand Theft Auto, NBA 2K, and Red Dead among many others.

 

GTA is the third highest selling video game franchise of all time and is practically a guaranteed best seller whenever it releases a new game. GTA V is the best-selling game of the decade in the United States and has consistently sat in the top 20 best-earning titles for 74 consecutive months since release.

 

Moreover, Take Two have a 50% share in professional esports organization NBA 2K League, so could be a great stock if you believe esports is set to skyrocket.

 

#2 – Activision Blizzard (ATVI)

Activision Blizzard is America’s largest video game software company by revenue and combines three main developing and publishing divisions.

 

The company’s Market cap is $63bn, and is seeing revenue growing fast every year with EPS following suit. The operating margins are also very healthy and there is even a very small dividend, which is growing at an annual compound growth rate of 13.1%.

 

They own King Digital, which mostly does mobile games such as Candy Crush Saga. Activision has primarily been focused on console platforms, and Blizzard has been responsible for some of the biggest hits in PC gaming. This company has all major platforms covered.

 

Their major games include Call of Duty, Guitar Hero, Tony Hawk’s, World of Warcraft, and Overwatch among many others. Many of their franchises such as Call of Duty and have also been very popular as eSports.

 

#3 – Electronic Arts (EA)

EA is a gaming juggernaut with a market cap of $38bn. The company develops, publishes, and markets video game software for consoles, personal computers, mobile phones, and tablets.

 

EA develops and publishes games of established franchises including Battlefield, The Sims, Medal of Honor, Star Wars and let’s not forget their EA Sports titles of FIFA, Madden NFL and so many more.

 

Sports games such as FIFA are huge money spinners as they essentially release the same game every year, and yet fans still rush out to buy it. As casual gamers ourselves we would usually wait to buy games until they’re cheaper but even we can’t do this with sports games as you have to have the latest players.

 

Stockopedia are rating this very strongly in both quality and Momentum and the revenue has been growing year after year. It has excellent operating margins as so many software companies do, and like the other 3 stocks we’ve looked at, are sitting on a big pile of cash.

 

VanEck Vectors Video Gaming and eSports UCITS ETF (ESPO)

The 3 stocks we’ve discussed are ones that we think are particularly well placed to take advantage of cloud gaming but if picking individual stocks isn’t your thing, then you could instead opt for the VanEck Vectors Gaming ETF. This ETF is available both in London and in the US and gives you direct access to the 25 largest companies with at least 50% of their revenues from video gaming and eSports.

 

It is globally diversified with big weightings in the US, Japan, China and Taiwan. It has some awesome stocks but as it only it focusses on the companies that generate most of their revenue from gaming, it does miss some huge players, like Microsoft.

 

Arguably, Microsoft are one of biggest gaming companies around and have just agreed to purchase Zenimax, the holding company for a number of great gaming studios for $7.5 billion. Game franchises such as Doom, Fallout and Elder Scrolls will all now fall under the Microsoft umbrella.

 

It’s worth pointing out that you don’t have to make games to be a gaming company. Nvidia who take top spot as the largest holding in the ETF make all the graphics cards for gaming PC’s, and AMD hardware will be present in the upcoming consoles.

 

Gaming stocks have had an awesome year so far with this ETF up an extraordinary 62%. It’s always scary investing after the fact, but we think the gaming industry will do well for years to come.

 

And our final tip – we think the gaming industry is set to benefit from a full-on shift to digital downloads of new games. As the new consoles will be pushing this more than ever before, the gaming companies will have lower distribution costs and customers will be more likely to download in-game items resulting in bumper profits across the industry.

 

You can invest in all of these stocks with Stake – an investment app specialising in US stocks. Stake offers fractional investing too, so you can easily afford to buy highly priced stocks. And Stake are also giving away a free US stock worth up to $100 to everyone who signs up via our link, which can be found on the Money Unshackled Offers page here.

What Investors Think About Covid And The Recovery

What do investors think will happen next with Covid and the stock market, with Winter fast approaching? Investing is as much about human emotion and anticipating the actions of other investors, as it is about picking fundamentally sound stocks, regions or assets.
 
In September, Bank of America surveyed 224 fund managers with $646 billion in assets under management to find out what THEY think is going to happen next in the markets.
 
Today we’re dissecting what these market leading investors think is coming, and how it can help us to invest through a likely turbulent market this Winter.
 

Fundamentally Optimistic

When asked the big question – when is a Covid vaccine going to arrive? – investors are predicting that a vaccine for Covid-19 will be available in the first quarter of 2021, with 37% believing a credible vaccine will be announced by 30 January 2021.
 
Let that sink in for a second. A majority of market plays are being based on the assumption that life will be returning to normal by March next year, and over a third of investors are looking as near-term as January.
 
To us, this is incredibly optimistic to the point of foolishness. But whether you’re an optimist – or a pessimist, like us, who believe a working vaccine is still many months away, if ever – knowing how the market thinks works in your favour. Many stocks will rise or fall depending on the outcome of that question.
 
A vaccine by Spring 2021 means planes are flying, office working resumes, physical shops survive, night-life isn’t curfewed, people keep their jobs and money moves around the banking and housing sectors.
 
No vaccine by Spring 2021 means the opposite of all these things.
 

The World Will Bounce Back

58% of investors say that a new bull market has begun, compared to just 25% in May, and the majority are predicting global growth will rise in the next 12 months.
 
For the first time since February, more investors are saying that the global economy is in an early cycle phase, rather than being in a recession.
 
Early cycle phases follow recessions, and it means that the world economy is starting a climb back to strength.
This may very well be true. The world is a big place, and not everywhere will close down their economy at the first sign of cases rising.
 
While here in the UK our first instinct is to economic shutdown, mass unemployment, and a removal of freedoms, in countries which realise they can’t afford the luxury of a second lockdown, they will allow their economies off the leash instead.
 
In many regions of the world, people will be allowed to continue making their livings and building their countries back to wealth.
 

Cash Jitters

It’s not all sunshine and rainbows though. While investors do on the whole think a recovery is more likely than not, they are not so confident as to put all of their money where their mouth is.
 
Cash levels rose amongst fund managers, up from 4.6% to 4.8%. This doesn’t sound like much, but we’re talking 4.8% on trillions of investable dollars here.
 
The normal range is between 4% – greed; and 5% – fear. 4.8% from 4.6% puts them 20 basis points closer to fear on the scared-ometer. Fund managers are hopeful, but edgy.
 

Rotating Away From Large Growth Stocks

Fund managers are rotating away from large cap growth stocks like the FAANG tech stocks, after the massive rally from March lows.
 
We think investors are turning away from big tech too early – it has a lot of room still to run, despite being at all-time highs, which we think is the sticking point for fund managers.
 
They struggle to justify buying big tech stocks when PE ratios are heading into the high double digits.
 
We’ve covered this plenty before but just to recap, there is a ton of growth opportunity still for all of the big tech companies, especially if you are more pessimistic about the covid situation than the market seems to be right now.
 
More lockdowns mean more opportunity for cyberspace to take over.
 

Tech Is Still There

Despite investors halting their purchases for tech, it is still there in their portfolios as the most popular positions overall.
 
Current investments into Tech are still the most crowded trade area of all time. The tech-heavy Nasdaq has surged 60% since March lows.
 

Value Stocks Are More Popular

Money has been flowing out of growth stocks, into value stocks – but on a targeted basis.
 
Value stocks, which are stocks with a low Price Earnings ratio, are more popular than stocks with higher Price Earnings ratios for the first time since the pandemic started.
 
However, value stocks whose industries are in particular trouble – energy companies and banks – are still being avoided.
 
This means it could be a good time to buy oil and banks, if you are a value investor and believe in their long-term potential. These stocks are being shunned by the market right now.
 
Oil stocks have returned to the lows last seen in March after shooting up over the summer.
 
We still believe the future needs oil – we just don’t need much of it right now while planes are not flying and cars are not commuting. It strikes us that the market is being short-sighted on oil, which is why we’re holding our positions in BP and Shell.

 

Small Caps Up

Fund managers are shunning large caps and turning to small caps, which we’ve been saying for some time now are the end of the market best poised for growth, as we prepare to enter a redesigned economy in 2021.
 
Only 14% of professional investors said they think large caps will outperform small caps, the lowest outlook on large-cap stocks since July 2018. So looking for small caps with strong fundamentals is growing in popularity.
 
There will be a flood of companies going bankrupt and entering the history books before this crisis is over.
 
Investors are picking the future winners from the small caps pool of stocks which will replace them.
 
A relatively undiscovered gem in Ben’s portfolio is Dotdigital (DOTD), a digital marketing platform. It’s a UK small cap tech company, with market cap of £408m, which soared on the news of harsher UK lockdown measures in late September.
 
Based on its fundamentals, it’s a very good bet to be one of the future winners. It’s a high-quality stock with great returns, with a strong track record on EPS and dividend growth.
 
It’s health scores on Stockopedia have it as incredibly safe – backed up by a big pile of cash. Hopefully we won’t be referring to it as a small cap for very long!
 
Start investing without any fees by using the Freetrade app, and you’ll be given a free share on sign-up worth up to £200 – when you use our link on the Offers Page.
 
Always do your you own research but if you are interested in Dotdigital you can find it on Freetrade along with thousands of other stocks and ETFs.
 

Biggest Risks

The biggest risks to the stock market are seen as: (1) a Covid second wave; (2) a tech bubble popping; and (3) the upcoming US election.
 
Obviously a second wave of Covid would cause a high level of disruption. As for a tech bubble, we don’t see that there is one.
 
Yes, all tech companies seem to be highly priced right now, but that is reflecting their future profit-making potential.
 
Some do have silly prices, and some will come to nothing, but a company like Amazon with a PE of 100 probably does have the potential to grow and grow. Did you know it’s only currently in 18 countries?
 
Its logo is on our TV screens, on piles of packages by our front doors, on our music players, our e-book readers, and all over cloud software being adopted by more and more companies every day.
 
As for the US election, this is another potential game changer. If Trump wins, it’s more of the same for the US stock market, which reacted favourably to his tax cuts and has seen 4 years of record growth.
 
If the Democrats get in, it might be worse for US stocks, if only in the sense that if something is already at an all-time high, changing the rules of the game are more likely make it fall. But they may do better with calming the trade wars with China – who knows.
 
But the Democrats are likely to increase taxes and regulations on big companies.
 

Investors Still Love America

Despite dialling down on tech and healthcare, the US is now even more favoured by investors than in preceding months.
 
The Eurozone, emerging markets, and UK are generally less popular, except for some UK value stocks.
 
We think investors need to be careful here. While we agree that the US is home to the world’s best companies, their awesomeness is very much priced in to share prices.
 
The PE ratio of the S&P500 is 24, while the UK’s FTSE 100 is just 15.
 
The UK is being shunned by investors right now, and we ourselves have been critical of the FTSE 100 for being full of dinosaur industries like mining and retail.
 
But it’s wrong to ignore the UK completely. When everyone else is shunning a market, it’s probably time to invest.

 

We’re currently having fun investing in individual UK stocks to get the Best Of British, without the turds.
 
But an arguably equal strategy would be go heavier into FTSE 100 and FTSE 250 ETFs now while prices are so suppressed.
 
Enough companies are being undervalued right now that we think making a small increase to your UK positions could be worthwhile, assuming you’re not already overly exposed.
 
Just be aware that it can take a long time for the market to re-rate stocks.
 
Do you think we’re approaching a crash or a recovery? What are you investing in to turn this to your advantage? Let us know in the comments below!

Second Lockdown – Invest To Win

Never before have we been so uncertain about the UK economy’s ability to pull through this pandemic. We know that it could if given the chance.
 
Over the summer, British companies with a fighting spirit reminiscent of the Blitz were more than capable of dusting themselves down, adapting, and coming out of lockdown strong.
 
But now the government is taking away freedoms again with another heavy round of lockdown measures set to cost the economy £250 million per day. It’s the first steps of Lockdown 2, and this time, it’s gonna be brutal.
 
We can argue all day about whether the health benefits of a 2nd lockdown exceed the health costs or not, and frankly, we don’t know. There is definitely a health cost in cancer patients missing appointments, unemployment causing families to choose between heat and food, depression and so on.
 
What we can be certain about is the devastating impact a lockdown has on the economy. Last time, 33% was wiped off the UK stock market. It has since recovered around 15%, but are we about to see those gains wiped out again?
 
It seems the government is so scared of being accused of not taking enough action to avoid a second peak that they are willing to gradually shut down the country again.
 
Winter is not even here yet, but 1/5th of the country have been living under full local lockdowns, and now the first of many expected new national measures have been announced – including curfews certain to kill off parts of the economy, ending jobs, reducing national spending power, and ultimately impacting all businesses.
 
So what does all this mean for investors? Do we just accept that our portfolios are likely to take a beating? Or can we act now to limit the damage? Or even to invest in some lockdown winners?
 
Don’t know where to start investing? Why not let a robo investing platform build a globally diversified portfolio for you, based on your unique profile? Open an account with Nutmeg via the link on the Offers Page, and you’ll get your first 6 months with zero management fees!
 

Shuffling Into Another Lockdown

Up until now we’ve been very bullish about the economic recovery, choosing to see the daily panic in the media as the usual hyped-up doom and gloom.
 
We saw policies like Eat-Out-To-Help-Out and the furlough scheme as expensive and untargeted, but also as a positive signal from the government that they wanted life to return to normal as soon as possible after the first lockdown – so we took some cheer from that.
 
These economic initiatives from chancellor Rishi Sunak have always been in contradiction with other government policies.
 
Rishi tells us all to go to the pub, socialise and buy a meal; now Boris tells us we are going to the pub too much and should stop socialising after 10pm.
 
With 1 in 5 people in local lockdowns, and these new draconian curfews, we see the UK heading day by day in the direction of another full-on lockdown, with all the economic impacts that brings.
 

Will There Really Be A Second Peak?

For months the media has been doing its thing of screaming in hysterics about cases rising.
 
However, normal people were left looking at the charts and not seeing what the big deal was. Cases were rising, but not deaths. Deaths were falling.
 
But if we look at deaths in September, the charts are now showing a real cause for concern – deaths are sadly creeping up for the first time since April, which means that a second peak of tragedy might be around the corner.
 

Alternatives To Lockdowns

The Swedish model of not locking down was widely mocked at the start of the pandemic, but as of September 2020 their approach seems to have worked remarkably well.
 
They didn’t lock down and coronavirus has been no worse there than in the UK, with deaths in both countries at 6 for every 10,000 people, or 0.06% of the population.
 
Could the same work in the UK? Sweden still has a strong economy, people still have their freedom, and lives are being protected through voluntary social distancing.
 

Forget The What-Ifs

Regardless of the alternatives, and what-if scenarios, the reality is that we are stuck with our government’s approach, and therefore probably stuck with lockdowns for the foreseeable future.
 
So – with that in mind, what do we do about that as investors?
 

What We As Investors Do Now

Scenario #1 – If Life Returns To Normal In 2021

While we had this scenario as the most likely outcome just days ago, with Lockdown 2 measures already being implemented before Winter has started, we now see this as unlikely – though still possible.
 
If you think life will return to normal in 2021, then now is the time to buy stocks which are plays on economic recovery.
 
These include amongst others the airlines and the housebuilders. Jet2 is the best of the UK airlines in our opinion, with incredible business fundamentals and a huge pile of cash to help see it through tough times. Before Covid, they were poised to fill the space left by Thomas Cook’s collapse and massively grow their revenue.
 
Redrow is the equivalent company in the housebuilding sector, with great fundamentals, at a rock bottom share price. This stock though is reliant on the government extending the help-to-buy scheme in 2021 – a scheme which accounts for over half its sales – and on land prices retaining their current high values.
 
We expect help-to-buy will be extended, but nothing is confirmed.
 
Both these stocks are dependent on business-as-usual activity in 2021. Jet2’s share price is very volatile right now, with big swings almost daily, moving on covid news.
 
If you’re are buying, wait until a bad news day to buy Jet2 stock.
 
Both these stocks were priced very temptingly at time of writing, but both depend on a sunny 2021 for near-term success. I personally own shares in both of these stocks.
 

Scenario #2 – If 2021 Sucks Too

Quite a lot changes if 2021 is also a write off. For one, the culture will have changed such that people no longer want to book holidays for fear they’ll be quarantined, or their destinations being placed under lockdown during their visit.
 
People will grow used to not going to the pub, and withdraw into virtual worlds. High street shopping will be an activity done in a past life, no longer needed or wanted.
 
Working from home will become the default position. If government policy on working from home changes with the wind –  “work from home, don’t work from home, work from home” – many companies will invest in making the move permanent, leaving city centre restaurants and other businesses which serve office workers dead in the water.
 
Money will stop flowing around certain parts of the economy, but will not stop entirely. Instead, more transactions will happen online, to the benefit of payment facilitation stocks like Paypal and Visa.
 
The UK stock market will slump, while fundamental rearrangements in the economy take place. High street retail will be killed off even more than it already has, the tourism industry will lag, and the price of oil will remain in the doldrums.
 
Taken together that’s a cocktail for the FTSE 100 to revisit the lows seen in the 1st lockdown.
 

What To Invest In If 2021 Is A Write Off

#1 – Tech Stocks

We touched on one area just now, being technology and fintech stocks. The UK itself has some sweet tech stocks hidden at the small and mid-cap end of the market.
 
But America has all the big tech companies. During the first lockdown, tech stocks boomed with the likes of Amazon, Netflix, Paypal, Visa, Zoom and Microsoft providing services to people and businesses who didn’t necessarily need them before.
 
The argument against relying on Tech to save the day in a second lockdown is that prices have held steady at close to all-time highs all summer, because nothing has fundamentally changed.
 
Many people are still either furloughed or working from home, or are still too scared to change their new online shopping habits back to leaving the house to get supplies.
 
So in the short term we expect a second lockdown would just consolidate and confirm the positions of these giant tech companies as masters of all they touch.
 
But longer term, tech innovations introduced during lockdowns will continue to be popular. People don’t want or need to commute on packed and dirty trains, nor spend their evenings sat in traffic. And companies realise they don’t need to pay for office space.
 
And the future of shopping will be shaped by E-commerce stocks like Amazon and online payment facilitation stocks like Paypal and Visa… coronavirus or not.
 

#2 – Defensive Stocks

Defensive stocks include things like national defence, cigarettes and consumer staples – things that are in demand regardless of whether there is a recession or not.
 
The advantage of defensive stocks is they also tend to be dividend champions, so while we’d hope that their share price would be somewhat protected, they also pay out big chunks of cash consistently to their shareholders.
 
In this way, you stand to at least get a cut of the profits regardless of what happens with the share price.
 

#3 – Global Trackers

These should be the core of your portfolio – globally diversified ETFs which invest in thousands of stocks around the world, for almost non-existent fees.
 
A favourite of ours is VWRL, a Vanguard fund which invests in 3,500 large and mid-cap stocks across 50 countries, weighted towards those with the largest markets like America.
 
If the UK commits financial suicide, it doesn’t mean the rest of the world has to.
 
But in the event of a global crash, it would make global trackers an even more attractive buy, as prices would fall across the board.
 
With ETFs, one of the best times to buy is during a crash because you can buy low, safe in the knowledge that the diversification they provide protects you from the risk of individual companies going bust.
 
Especially during uncertain times, it is wise to focus more on ETFs and less on individual stocks. We are still buying well researched individual stocks during this time, but the easy money during a crash is in ETFs.
 

#4 – Gold and Bonds?

Traditionally, the answer to a plummeting stock market is to have held a position in bonds. Bonds certainly saved a lot of portfolios back in March 2020 when stocks were crashing hard.
 
But bonds will not come to the rescue this time because bond prices are already at record highs and yields at record lows.
 
QE, or money printing by central banks, helped push up bond prices the first time around, but little has changed since then – banks are still printing, and bonds are still very expensive.
 
Gold is another recession hedge, which traditionally is good to hold before a crash. But gold too is already at record highs.
 
Could gold rise further during a winter of discontent? It probably could. But we are wary about placing too much of a reliance on an unproductive asset to save us.
 
We think it’s better to weather a storm with defensive stocks which at least pump out dividends.
 

What To Invest In If You’re Unsure?

None of us can predict the future accurately, and our best guesses can be upended by a meddling government or by an unpredictable pandemic.
 
There may even be many more lockdowns over the years ahead – as Julius Casear lamented, “All bad precedents begin as justifiable measures”.
 
Just stick to your target portfolio ETF allocations of Shares, commodities like Gold, Bonds, Property and so on, and stop trying to beat the market!
 
In 30 years time, the world as a whole will move forward – whether the early 2020s were a write-off or not!
 
How are you adapting your strategy to the increased likelihood of a second full lockdown? Let us know in the comments below.

How To Use Pensions Alongside Your S&S ISA and Retire Young

If you’re like us and want to retire young, then listening to the mainstream media drone on about paying into your pension will be to the detriment of your life goals.
 
In previous episodes we’ve talked about the magical £500,000 investment pot that should be able to pay you 20 grand every year until you kick the bucket.
 
However, if you had listened to conventional financial advisors you would have no access to this money if you retired young, as you thought the sensible approach was to save it into a pension.
 
You could even be a pension millionaire and still be living on the breadline as the money is locked away out of reach until old age!
 
Does this mean that pensions are completely useless for retiring young? We think in the right circumstances they can be very useful. But how much should you use them?
 
And what is the main alternative retirement savings vehicle? That’s what we’re talking about in this video. Let’s check it out:
Alternatively Watch The YouTube Video > > >

Free Pension / ISA Retirement Calculator Spreadsheet

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I Just Bought This Small Cap Stock – Stock Picking Step-By-Step [UK Market]

I’m really excited about this new video! I’ve just bought shares in small-cap stock CMC Markets PLC, to test out an improved Fundamental analysis method of stock picking that I’ve been studying, in what should be a vastly superior way of picking stocks to what we’ve used previously. 

 

Our plan is to steadily invest and grow a portfolio of market beating stocks, alongside of our existing ETF and property portfolios.

 

The stock I bought – CMC Markets PLC – is a FTSE SmallCap growth stock that has all the hallmarks of a company that is going places.

 

In this video we’ll walk you through:
  • the research involved in picking this particular stock out of the thousands available;
  • every test it had to pass through in order to interest me;
  • my long term plan for this stock, and;
  • what happened in the buying process.
 
Let’s check it out!

 

MU Ben

 

YouTube Video > > >

Free Stock Picking Assistor Spreadsheet (with worked example and blank template)

Try The Stock Picking Package We Use With A 14-Day Free Trial (+25% Off Thereafter!)

Trading 212 Invest/ISA Review and FAQs

Trading 212 is an incredible investing app – not just because it’s free but because it’s packed full of awesome features.
It’s a really exciting time in the UK investment app scene right now with lots of innovation and platform fees falling all the time – Trading 212 is at the forefront of this revolution.
We did a full review of Trading 212 back in 2019 and since then the app has gone from strength to strength. As a quick recap, Trading 212 offers zero fee investing in 3,000+ global stocks and ETFs, with no foreign exchange fees.
It also has zero fees for using an ISA and a feature we absolutely love is fractional investing. In his video, unless we say otherwise, we are only talking about the Invest and ISA Accounts.
Since our first review we’ve had hundreds of questions about Trading 212. So, today we are going to answer all of the most frequently asked questions such as:
Is Trading 212 a Scam? Do they pay dividends? If it’s free how do they make money? Should I go direct to Vanguard? And many others. All these and more coming up. Let’s check it out…
Editor’s note: We have lots of cashback offers worth hundreds of pounds on the Offers page – from time to time we have Trading 212 offers where they give you a free share, so it’s worth checking the offers page out. There are currently some great offers for competing apps including Freetrade and Stake, so maybe check these out as well!
YouTube Video > > >

Which Account Do I Use? CFD, Invest or ISA

When you download the app, you’ll have a choice of 3 different accounts or product types. We’re of the belief that most people should not go anywhere near CFDs. These are potentially dangerous financial instruments if you don’t know what you’re doing.
The CFD account is NOT free to use and 76% of retail investors (i.e. you and us) lose money when using this Trading 212 CFD account. We have an entire dedicated video about why to avoid CFD trading, which we’ll link to in the description below, so feel free to check that out later.
The Invest and ISA accounts are the same except the ISA is tax efficient. Although most beginners don’t have enough money invested to pay tax anyway. When you invest through the Invest and ISA account you own the underlying investment – you’re not just placing a bet!
Don't use the CFD section - most users lose money in there! The Invest and ISA sections are for proper investing

Is Trading 212 a Scam?

We’re not sure why people are saying that Trading 212 is a scam. They are authorised and regulated by the FCA. You can check this out for yourself but here we have done this for.
We have also used the app ourselves and know many other people who have had no issues whatsoever.
As we just mentioned, a lot of people lose money on CFDs, so are likely to be extremely disappointed and which we suspect is the root cause of this “scam” myth, but despite this the app has an incredible rating on Trustpilot.
Almost all the negative feedback seems to come from those using the CFD account, which you should only use with caution anyway. We’re not suggesting that there are no genuine complaints, but it seems that this is the minority.
In any case, as a regulated platform they must comply with complaints according to FCA requirements.

Is It Really Free?

Incredibly, yes. At least from fees that they directly control. A lot of things these days claim to be free but have hidden fees that you have to navigate around like a ninja.
Usually there’s a big heading that’s say ‘FREE’ that gets you excited and then you go straight to the T&Cs or fee section only to discover that it was a load of nonsense. Well in this case it’s true – it is free!
We’ve scoured the entire site and have personally used the app ourselves and have not been victim of any hidden nasties.
Of course, these is no such thing as completely free investing because you have to pay the bid/offer spread, which is a feature of the stock market.
All shares and ETFs have 2 prices – a buy and a sell price. The spread is what you would lose if you bought and immediately sold an investment.
You may also have to pay stamp duty or other taxes depending on what you’re buying.
And when you buy ETFs, you will pay a fee called the OCF, which costs typically around 0.10 to 0.30% of your holdings depending on the ETF – again, this fee is to the ETF provider, not Trading 212, and is outside of their control.
Freemium - the "mium" is Latin for "not really"

If Trading 212 Invest/ISA Is Free How Do They Make Money?

According to the co-founder, actual trading costs that they as a business incur are less than £1, so waiving trading commission does not have a detrimental effect. Charging for other services should more than cover for these shortfalls.
The most obvious service that they make money from is their CFD service. So, we would suggest that they are using free investing to entice people to their platform and then hoping they also go on to use this paid product.
Also, as with many online businesses, we would expect them to be currently going through an explosive growth stage where it’s really important to grow as quickly as possible. With size comes economies of scale and strength. Profits can be made later.
Trading 212 adopts a classic ‘freemium’ model – like mobile games or probably your bank current account. Your bank account is free, but they’ll charge you for additional services like overdrafts, loans and so on.
We would expect them to start introducing paid for premium services at some point. They often give little teasers of upcoming features and from what we’ve seen we wouldn’t mind paying a small amount for these if they were to charge.
Trading 212 now offers fractional trading

Should You Use Vanguard/X Platform Instead?

You would think that Vanguard’s own platform would be the cheapest place to buy its own funds, but this is not the case. Vanguard’s platform is incredibly cheap, but you cannot beat free.
However, price is not the only factor when choosing a platform. Investment choice along with additional services need to be considered.
Trading 212 doesn’t offer the extensive choice that you get with more premium platforms such as Interactive Investor. We both prefer to have more choice and are prepared to pay a little extra for this, but this doesn’t stop us from occasionally using Trading 212 and other free trading platforms.
Vanguard’s platform is amongst the cheapest place for the full range of Vanguard funds – Trading 212 for instance does not offer OEICs, so you cannot invest in the LifeStrategy range for example.
You can use multiple platforms, so you don’t have to commit to any 1, but you can only use 1 active Stocks and Shares ISA in any given tax year.

Do They Pay Dividends?

We’re not sure where this question comes from. We suspect it arises from the complexities of CFD Trading.
As you can see here, dividends for the Invest and ISA accounts are paid directly into your account balance. We can confirm this from our own experiences with the app.
Some ETFs are of the Accumulation variety, in which case dividends are not paid directly to you, rather they form part of the growth in the ETF price.
The ETFs that pay dividends to you directly are the Distributing variety. Check the ETF providers own site to find which type it is.
On Invest and ISA accounts, you own the shares and ETFs

Why Does The Share And ETF Prices Differ To The Real Price?

This is going to surprise beginners, if they even notice it, as the price you pay for the stock is very likely to be different to what you see on the screen prior to placing the order.
Stock prices change all the time and it should be expected that by the time the order is fulfilled it will have moved. This is the explanation they give and we know this will be part of the answer. However, we have noticed significant differences and we doubt this is the full explanation.
We have seen some people incorrectly state this to be a spread, but this is not the case. T212 don’t apply their own spreads on the Invest and ISA accounts and the actual market bid/offer spread is usually tiny.
From what we’ve worked out this is just an error or delayed price that the app is showing – perhaps due to extreme market volatility.
We tested this by taking a live ETF price from a different app and comparing it to Trading 212. In this case Trading 212 was over stating the share price by about 4%. The price had crashed that day, so it seemed that T212 was delayed somewhat.
However, the executed price from T212 was almost identical to the live price that we were expecting. This was correct and expected as prices move continually.
To sum all this up, we have no concerns in their executed prices, but the app does display incorrect prices on occasion, which is annoying.

Is It Okay To Invest In German Listed Stocks And ETFs?

Unfortunately, we don’t know for sure. Many foreign countries automatically apply a dividend withholding tax and we’re unsure if Germany does this but from what we’ve read, it does seem to withhold tax.
Unless we totally understand an investment, we don’t invest.
What do you think of Trading 212? Let us know in the comments section.

Tickr Review – Ethical Investing App

Today we’re reviewing the Tickr app, a simple investing app that let’s you invest easily into ethical funds. With its 3 themes of Disruptive Technology, Climate Change, and Equality, it’s a platform for people who want to make money from stocks while doing some good.
Does it have its drawbacks? Of course. But it fills a space in the market not covered by other investing apps. Should you invest via the Tickr app? Let’s check it out!
Editor’s note: Open an account with Tickr using the link on the Offers page and you will get some cash added to your account, currently £10. And for some clever marketing reason they will also plant 4 trees, when you use the link.
YouTube Video > > >

What Does Tickr Do

Tickr let’s you invest in one of 3 fund themes, or in a combo fund covering some of all 3; Climate Change, Disruptive Technology, and Equality.
It works by investing your money into a handful of ETFs – exchange traded funds – which closely align to the theme description. It also puts some of your money into bonds, both Green and Government.
As a very brief overview, an ETF is usually a collection of shares or bonds that have something in common, be it by sector or geography – a fund, but which is not usually actively managed, and so has low fees.
Let’s dig into one of Tickr’s theme’s – the one I picked to invest in – Disruptive Technology.
Tickr's 3 themes, and Combination option

ETFs In The Disruptive Technology Theme

We’ll use this theme as the example in this review; the other themes have the same basic structure – 2 to 4 subsectors with an ETF for each, supplemented by Green and Government bond ETFs. The Combo theme takes a couple of ETFs from each of the 3 main themes.
Disruptive Technology has 3 sub-themes: Automation & Robotics, which invests in the iShares Automation & Robotics UCITS ETF (RBOT); Digitalisation, which invests in the iShares Digitalisation UCITS ETF (DGTL); and Cyber Security, which invests in the L&G Cyber Security UCITS ETF (ISPY).

What Are The ETF Costs?

There are 2 types of cost on the platform – those charged by the ETF providers, and those charged by Tickr themselves. Let’s first look at the fees on the ETFs, called the Ongoing Charges Figure, or OCF.
When you choose a theme, you must then also choose between 3 risk ratings: Cautious, Balanced, and Adventurous – from least to most risky.
I chose Adventurous for it’s higher potential return, which has a higher average OCF than Balanced, which in turn has a higher average OCF than Cautious – due to the mix of stocks to bonds, with Tickr’s bond ETFs being cheaper than their stocks ETFs.
The range of OCFs on Tickr range between 0.25%-0.49% p.a – low enough that we don’t really care if one theme or risk level is slightly more expensive than another – they’re all pretty small.
The OCF fees you might pay on the app

What Other Costs Do Tickr Charge?

#1 – Monthly Fee

There is a £1 a month flat fee for holding an account, but the first month is free.
We quite like flat fees instead of percentage fees because we invest large amounts, but it’s no good if you’re only investing small amounts of, for example, £50 a month or less. £1 on £50 is effectively a 2% fee, which would act as a brake on your investment gains.

#2 – If Your Account Goes Over £3,000

If your account goes over £3,000 Tickr will add an additional 0.3% fee to the portion of your money that is above £3,000. For instance, if you invested £10,000 in the platform, the 0.3% would be applied to £7,000 of it – which would be £21 a year.

#3 – Round Ups

Tickr offer a service called Round Ups which we’ll cover shortly – there is no additional fee for those who join the platform after 17th March 2020.

No Transaction Charges

This is great – It means you can invest as often as you want without being penalised. There are also no fees for selling, or for withdrawals.

Changing Your Theme

You can change your theme at any point by going into My Account in the app, and clicking on My Fund.
However, to do this the app sells your existing holdings and buys into the new ones in the new theme, which can take up to 7 days.
This means you could make a gain or a loss on transfer as trades do not take place immediately – the market will likely have moved either up or down by the time your trades are executed.
Here the app shows you the geographies and ETF names you are invested in

Features Of The App

#1 – App Interface

As investors who want to own the world, one useful feature that we love is that the app tells you clearly which geographies your investment covers.
There’s a bit of info about the top companies in your themes, the split of your portfolio by sub-sector and how the different parts of your theme have performed, and which stock-ETFs you are investing in.
It doesn’t tell you which bonds you are investing in though, and we looked all over their website and app for info on this. We want to know what we are investing in.
So we contacted them and this is what they said the bonds were: Lyxor Green Bond (DR) UCITS ETF (CLMU) and iShares Global Govt Bond UCITS ETF (IGLH), both with OCFs of 0.25%. UK bonds make up less than 5% of these investments, so do your own research into them to check you’re happy with them.

#2 – Fractional Shares

It effectively has a fractional shares feature built in, as you can invest any amount you like – over £5 – into your theme ETFs.
You can’t do this on many traditional investment platforms. For instance, the L&G Cyber Security UCITS ETF (ISPY) costs around £13 to buy one unit on the open market, but you could invest £5 in Tickr and be invested in this Cyber Security ETF.

#3 – Monthly Investments

You can set this to anything from £5 upwards. Too many investors try and fail to time the market, but dripping equal amounts into the market on a regular basis over the long term has been shown to give better results.

#4 – Round Ups

Round-ups works by securely connecting to your bank, and rounding up the spare change on your transactions to the nearest £1.
Using an example from the app, spend £2.40 on a coffee, and the remaining £0.60 will be invested into your Tickr portfolio.
You can also apply a multiplier, which doubles, triples or quintuples the amount you invest via this method.
However – this Round-Ups service suffers from similar limitations as round-ups offerings on other apps.
It doesn’t happen in real-time. Instead, it keeps track of your round-ups over the week, and takes them all at once on a Monday. This could catch you off-guard with your household budget.
It would be much more expensive for Tickr to offer an instant round-ups service; which is likely why they don’t offer one.
Just click on your pie to deposit funds

Deposits and Withdrawals

Deposits are instant and the app makes it super easy to do – just tap on your portfolio pie and type in an amount to deposit.
Withdrawals are not instant, in fact they can take up to 12 working days – the funds are sold on the next available Wednesday and the cash processed the following Monday, which then takes 3-5 workings days to reach your bank account.

Do I Receive Dividends?

Dividends may be paid by the underlying ETFs in each theme but they will be automatically reinvested.

Is There An ISA?

Yes, and there’s no fee to use it – great if you want to use Tickr as your main investing app, as you will pay no UK taxes on your portfolio.

Better To Invest On A Do-It-Yourself Platform?

Tickr invests in ETFs which, in their words, have “a positive impact on the world”, most of which are not available on other free trading platforms. It’s the cheapest place we’ve found to buy these specific ETFs.
However, investing only in this range of ethical ETFs is not a fully diversified way to invest. Limiting yourself to only ethical investments means you could miss out on some excellent companies.
And there are other platforms available that do not charge any fees, such as Freetrade.
It is possible to build a global portfolio diversified by geography and by market sectors within the Freetrade app by buying just 7 ETFs, which we’ve covered in our World Portfolio series, linked to in the description below.
But we think Tickr is a great app for what it does – and you do feel good using it, seeing your trees getting planted and knowing you’re making a difference.
Are you using the Tickr app? What else do you want answered? Let us know in the comments below.

Problems with Day Trading | Short Term vs Long Term Investing

The stock market is one sexy playing field right now – not only are markets down to historically cheap prices for buying, but volatility is through the roof. The markets are all over the place!

Good news sees a tick upwards, bad news sees a tick downwards. The draw towards day trading in such times is strong – check out what happens if the stock market moves up and down by 2% over a 10 days period. If you always bought at the bottom of down day preceding an up day, you’d make 5 lots of 2%  – 10%! In 10 days!

With small daily stock price variations you could make huge percentage gains by Day Trading

That would be a good return for a whole year for a long-term investor, and you could do it in 10 days by day trading. Keep that up for a whole year and you’d return 3700% with compounding. £1,000 would become £37,000.

So why isn’t everyone doing this? Well, it’s not as easy as you might think to get it right…

Editor’s note: Start investing with a freebie – investment app Freetrade are giving a randomly chosen free share to each new customer who opens an account using the link on the Offers page – it could be worth up to £200, and all you have to do is open an account and top up by £1 – what are you waiting for?

YouTube Video > > >

Why Day-Trading?

Short-term investing has the potential to be highly rewarding; it’s more exciting and hands-on, and the potential for high, fast returns just may attract some investors. Who doesn’t like fast, easy money?

So why isn’t everyone chilling on their private yacht in Miami having played around with day trading for a few weeks? Well, market timing is very difficult to do.

You have to be right twice — once when you buy the stock, and again when you sell it.

Day trading does have the chance to make you very rich, and we’ll get to the best way to go about doing that – but let’s first briefly cover the problems with it.

What Stops You Winning at Day Trading

Day traders are focussed on return, not risk. But day trading is riddled with risk.

The risks involved mean that for most people, on a risk/reward ratio it is likely to be less rewarding than long-term investing into a decent global portfolio.

The Bid/Offer Spread can be a hindrance to day trading success

There are 2 major problems for Day Traders:

#1 – Trading Fees

The traditional stumbling block for a day trading strategy is trading fees. At around £10 per buy and £10 per sell, trading fees on the premium platforms such as Interactive Investor and Hargreaves Lansdown make day trading almost pointless for all but the richest of investors.

Even if you use CFD’s or spread betting to trade these are riddled with all manner of fees.

The free trading platforms such as Freetrade do not have this problem. There are no trading fees, but even on these platforms, you still have to contend with stamp duty, and the Bid/Offer Spread.

All stock trading platforms have 2 prices: a buy price, and a sell price.

The difference is called the Spread, and this is the amount of money you would lose if you bought a share and immediately sold it.

High Street retailer M&S has a fairly tight spread of 0.15%, while smaller companies on the UK AIM index can have much chunkier spreads like the 6.25% of City Pub Group. It’s the kind of cost that stacks up if you trade frequently, but which long term investors might barely notice.

#2 – Timing the Market

Let’s imagine a day trader who sunk his fortune into shares in the FSTE 100 on 26th February 2020, after markets crashed massively from around 7,500 in the days prior to 7,042. This would be a reasonable action from a Day Trading perspective.

But day traders can no more see the future than the rest of us, and could have no idea that the months following this day would see the markets drop off a cliff:

This day trader would have gotten half of his equation right at least – he did buy low, relative to recent highs.

But unfortunately, you have to get the “sell high” part right as well.

If You Insist on Day Trading – How to Lower Your Risk

How we would approach Day Trading is the same way we’d approach poker – we’d never put more than a twentieth of our total pot into any one transaction. Definitely don’t draw on all of your savings to Day Trade. Only trade what you can afford to lose.

The “risk” to a day trader is that the market doesn’t go up further than the price you paid for it for a long time, effectively becoming a long-term investment. We like to invest for the long term, but the kind of volatile stock you might pick as a day trader is probably not something you’d pick as your first choice for a long-term investment.

So; you could pick a stock that you think is volatile enough to rise quickly in the short term – buy it when it is lower than in previous days – and put in no more than a twentieth of your pot. If you’re right, a quick win is made. If you’re wrong, you have to decide whether to hold it for the long term, or to sell at a loss.

And selling at a loss is an emotional hurdle to overcome. You may end up selling your winners straight away but holding duds for a long time. By dividing your total pot into at least 20 parts, you could spread your risk over at least 20 trades.

Day Trading is more exciting - but the best results come from long term (often boring) investing

Day Trade Using ETFs

The biggest risk with shares is that they can go all the way to zero, and this is particularly so for traders who are looking to make a quick win from a falling share price they think might recover.

Maybe there’s a reason the price has fallen. Maybe what you’re buying is a company on its way to going bust.

When we look to make profits on a falling market, we buy ETFs. These are diversified across many companies, so the risk of it going to zero are slim-to-none. And we hope to make our profit when they revert back to their intrinsic value.

Maybe if a meteorite hit the earth wiping out all those companies at once. But then we’d have other things to worry about.

Long-Term Investing Advantages

We like to model our shares investing strategy on that of Warren Buffet, legendary long-term investor.

He returned around 20% per annum over his investment career.

There are 3 key advantages to investing for the long term over day trading. These are:

#1 – Passivity

Being a Day Trader is a career. You need to constantly hooked into The Matrix, aware of price movements happening in real-time and poised over your keyboard ready to take advantage of multiple micro-gains to make your profits worth the effort.

We can’t be bothered with all that. We’d rather be sat chilling at letting our well-balanced global investment portfolios do the work for us. And we can do this happily because of point #2.

Long term investor Warren Buffet did OK for himself...

#2 – Long-Term Does Better on Average

Long-term investing weighs risk against return, and does better on both counts.

Risk is reduced if you drip your money evenly and at regular intervals into the market, as the highs are offset against the lows and you invest at an average price.

In a famous study of individual investors’ behaviour, Berkeley University professors Barber and Odean found that the most active traders realized the lowest returns.

Their 2017 study found that 80% of active traders lost money and only 1% of them could be called predictably profitable – maybe some of our viewers fall into this 1%? If so, let us know!

Whereas long-term investors should average the returns of the global stock market, which has always gone up over the long term – and up big.

#3 – Dividends   

Dividends are what turn a long-term investment portfolio into a passive-income generating machine, and are a key reason why long-term investing beats day trading.

No matter the swings in stock prices, dividends across your portfolio will likely continue to get paid.

Investing during a recession gets you the best of both worlds. You’re buying when the market is down, locking in a cheap price, and can hold on to your asset for the long-term, reaping sweet dividends as you do so!

Do you trade frequently, or hold for the long term? Let us know your success stories in the comments below!