Investing the DIY way

Investment in stocks and shares was once the realm of wealthy and large institutions but a particular feature of the market in recent years has been the growth in the number of online execution-only investment platforms. These platforms allow people to buy a range of different assets including funds, bonds, equities, even currencies, and to manage their own portfolio at a fraction of the cost charged by traditional brokers.

Their key advantage is extremely low cost when compared to traditional broker fees. Having an account with a stockbroker is not cheap. Minimum commissions usually come in at about €100 per transaction and increase depending on the amount involved in the trade. However, for this you are getting advice from experts as well as the execution of the transaction and other services.

This is prohibitively expensive for an individual who wants to buy a few hundred euro worth of shares in their favourite bookmaker or airline every now and then. However, these people can now choose from a range of online platforms which allow them to execute their own transactions, but crucially come without any advice.

One such Irish platform is the Davy Select service from Davy Stockbrokers. Its basic service offers commissions of just 0.5 per cent per transaction on shares and exchanged traded funds (ETFs) subject to a minimum fee of €14.99.

Another platform which has made a strong impact in Ireland is Degiro. The company currently offers a service across 18 European markets and has amassed almost quarter of a million customers. Again, the cost advantages it offers are quite striking. For example, an Irish person purchasing €1,000 worth of Bank of Ireland shares on degiro.ie will pay just €2.40 in trading. The advantage is even more pronounced when it comes to US shares. An Irish person buying €2,000 worth of Apple shares with Degiro would pay just 55 cent in fees.

These self-directed platforms have proven particularly popular with Irish people, according to Paul Laverty, head of business development for UK and Ireland with Degiro. “We see more interest in investing online in Ireland than in the other markets where we operate,” he says.

Technology-driven

He believes the general interest in online or self-directed investment is at least in part technology-driven. “It is much easier to find financial information now,” he says. “Even 20 years ago you would have had to go to a broker or adviser to get information but now you can go online and get a wealth of market information, including trading updates and so on.”?

There is also the simplicity of setting up an account and trading. “It can take just 10 minutes to set up an account with degiro.ie and people can begin trading immediately once they transfer funds to their account,” says Laverty.

David Fagan, chief operating officer of Davy Select agrees. “Technology platforms have driven down the cost and enabled self-service trading. The barriers to entry from an investor point of view have fallen.”?

He also sees other reasons for the increased interest in share trading. “There is a couple of things. People might have acquired shares through employment, membership of a co-op or whatever and want to trade them. Then you have other people who want to put together investment portfolios. With interest rates on cash so low, they are looking at assets which offer a better return.”

As these portfolios build, investors may decide to upgrade from self-directed platform services. “There is a cohort of investors who will get to the stage when they feel that they need advice when it comes to making decisions in relation to their portfolios,” says Fagan. “That’s a different service but it is relatively easy to move.”

For the future, Fagan sees platforms playing an increasingly important role in people’s overall financial planning. “It won’t be just about buying and holding shares or investments in funds. In future, people could hold their pensions on investment platform. The days of having a defined benefit pension which pays you a guaranteed pension on retirement are largely gone and people now have their own defined contribution pension plans and it will be possible to put these on platforms.”

In the meantime, however, more and more people are opting to take advantage of the low costs and ease of use offered by online platforms to build personal investment portfolios.