Forex trading has been around since the 1970s but only recently started gaining more traction as UK millennials began taking advantage of this method of making money. Largely, this happened due to ETF platforms in the UK that allowed so many to participate in trading. According to the Bank for Settlements, the forex trading industry has exploded with a daily trading volume growing from roughly in 1995 to a staggering in 2016, with most of the world’s traders based in the UK or the USA.The United Kingdom leads the way with about 280,000 daily online traders, making Britain the country with the highest volume of traders in all of Europe. The United Kingdom also contributes to around 43.1% of the world’s foreign exchange turnover, making it the largest foreign exchange trading hub.
With forex trading becoming more and more accessible, we’ve decided to take a look at the best ETF platforms in the UK available for those of us who are keen to dabble in forex trading.
ETFs, or Exchange-traded Funds, are an excellent way for a newcomer or inexperienced trader to get acquainted with forex trading. It is also a great way to diversify asset portfolios within a single investment. Currency ETFs (CETFs) usually track baskets of currencies, enabling investors to gain experience in the forex market without taking huge risks by trading in one currency.
The lower risk factor is one of the main driving forces in keeping ETFs at the top of the field for beginner investors.
How does an ETF work?
ETFs are a type of fund that hold various underlying assets. These assets could include various currencies or stocks. These are different from stocks in that there are multiple assets, usually between five and 15, within a single ETF.
This feature is also what makes ETFs a popular choice with those wishing to diversify their investment portfolios. Instead of buying a single share and risking it all on one asset, you buy smaller shares in a few companies, thereby diversifying your portfolio and minimising your risk.
It is called an ETF because it is traded on an exchange similar to stocks. Unlike stocks, the price of an ETF will change throughout the day as its shares are bought and sold.
Are ETFs a Good Investment?
ETFs are an excellent investment if you are new to trading or would like to diversify from your stock portfolio. Because ETFs require less capital than mutual funds, they are more affordable. ETFs trade like stock, so their prices fluctuate as they are bought and sold throughout the day. This significant level of liquidity makes it easier to buy and sell ETFs on the market daily.
ETFs also have a tax advantage. Because they usually have a lower portfolio turnover than, for example, mutual funds, they offer a smaller percentage of tax liability than similar funds.
List of the best ETF Platforms in the UK
There are quite a few ETF trading platforms in the UK, all catering to various needs and experience levels. We have selected a few of the top ETF platforms to give you an idea of what can be expected, whether you are foreign to forex trading or not.
Libertex
If you’re looking for simplicity in design and a glitch-free trading experience, then Libertex might be the answer for all your ETF trading needs. With a seamless, easy-to-navigate format, Libertex gives you the option to trade everything from cryptocurrencies to ETFs to indices and commodities.
What gives Libertex their unique edge is that they have 0% spreads. They have chosen instead to work on a commission-based pricing model (as little as 0.1% for ETFs) making Libertex one of the cheapest ETF brokers around. The diversity of their portfolio means you can trade on some of the best ETFs available, including iShares MSCI United Kingdom ETF, the SPDR S&P 500 ETF and the Vanguard FTSE Europe ETF.
The Libertex app is a convenient tool for any trader as it offers educational resources such as webinars and beginner video tutorials. The app is also compatible with MT4.
The minimum deposit is just £10 and is also supported by a whole host of payment methods, including PayPal and Skrill.
Pros:
- Demo account available.
- £10 minimum deposit.
- PayPal supported.
- Commision fees are comparatively low.
Cons:
- Few advanced trading tools.
IG
If you’re looking for a solid reputation and years of service, then IG might be the ETF broker for you. When you register as an ETF trader, you will gain access to over 12,000 traditional assets, including but not limited to investment funds, mutual funds and index-tracker funds. If ETF trading is all you’re here for, then IG still boasts over 2,000 markets to choose from, all backed by industry giants such as Invesco and iShare.
When it comes to the fees for ETF trading, matters get a little more complicated. ETF dealing fees will cost you £8 per trade, payable every time you invest and sell. It’s worth mentioning that when you place more than three trades in a month, this can come down to. There is also a maintenance fee which varies depending on your ETF but is hardly ever more than 0.5% annually.
To get started, you’ll need a minimum deposit of £250. IG supports bank transfers and credit/debit cards.
Pros:
- Reliable reputation as trusted broker.
- Research department is excellent.
- 12,000+ traditional assets.
- Multiple account types.
Cons:
- Large minimum deposit of £250.
- $15 minimum commission charged on US stocks.
Plus500
Plus500 stands out from the other trading platforms in the UK by offering CFDs when trading ETFs, instead of traditional assets. It means that you don’t have to own the ETF stocks you are trading but will speculate whether the value of the stocks will go up and down. You will have the option of a buy order or sell order and you can choose which is best based on your research and prediction of the movement of the stock.
Trading ETFs this way gives you a 1:5 leverage but it is important to remember how volatile and high-risk trading can be before staking your capital on it. Luckily, Plus500 doesn’t charge any commissions on CFD trades and you only have to pay for the spread.
In order to trade on Plus500 you have to open a brokerage account with a minimum deposit of £100. You can then use the demo account to hone your skills before putting your money up to trade with. Or you can deposit money via bank transfer, debit/credit card, or PayPal to start trading live.
Pros:
- No commission on CFD trading.
- Leverage up to 1:5.
- Tons of markets to trade on with financial instruments.
- Quick and easy sign-up and deposit.
Cons:
- Not suitable for new traders.
eToro
When it comes to helping amateur investors, eToro leads the way. Now the home base for over 13 million investors worldwide, the main attraction point for eToro is the ability for you to trade on a commission-free basis. This means that you won’t have to spend any money on fees when buying shares, ETFs or cryptocurrencies. You also have access to 150+ ETFs that are available as tradable assets.
eToro retains its status as a firm favourite with beginner traders due to the copy trading tools. This allows you to interact with other traders, ask advice from them, and inquire about various trades made. When it comes to copy trades, eToro will enable you to copy their top investors’ portfolios. This creates an environment of learning and a social dynamic that many newcomers find appealing.
To get started with eToro, you will need a minimum deposit of around £160 with a minimum investment per ETF of just over £40. eToro also supports a host of UK payment methods, including debit/credit card, e-wallet or bank transfer. Put simply, eToro is unparalleled when it comes to customer satisfaction for its user-friendly service. If you’re new to ETFs, we suggest giving eToro a run for your money.
Pros:
- Copy trade function.
- Multiple payment methods.
- 1,700+ stocks and 150 ETFs.
- User-friendly.
Cons:
- Not ideal for those who prefer to carry out technical analysis.
Conclusion
ETF trading is a good way for new UK traders to get used to trading and try their hand at short-term investing. This type of trading has been steadily gaining popularity in the UK and we think you might enjoy trying out the trading platforms in the UK mentioned above. Each of them is different but with a bit of research, we are sure you will find a platform to suit all of your needs.