Is it wise to invest with your own bank?

There are still many people investing with their bank, and that is a shame! In our article on cheap investing, we show that there are considerable differences in investment costs between different brokers. The banks often offer the least favourable trading conditions at the highest cost. In this article, we look in more detail at alternatives to investing at the bank.

Why is investing with your bank often not a good idea?

Many people invest with their bank: this could be HSBC or Lloyds Bank, for example. Of course, this is simple: after all, you don’t have to open a new investment account when you already own a savings account with your bank. Yet, it is not a good decision to invest in stocks & bonds at your bank.

At HSBC, for example, you already pay a basic fee of £42 per year just to own an investing account. In addition, you pay £10.60 on each stock transaction. All this makes investing with a bank expensive and this is at the expense of the return and the possibility of spreading your risks.

It is ultimately cheaper to invest with an online broker. Most online brokers do not charge an annual fee for the use of the account; so if you do little with your account, it will cost you nothing. The costs of buying a share are often also lower.

Are there advantages to investing with your bank?

Do you get more when you invest at the bank? Actually, no; there are no good reasons justifying expensive investments at the bank. The possibilities are usually the same or more limited as those of another online broker. Only when personal contact is a factor, a bank can win from an online broker; at a bank like HSBC you can often visit a branch to open an account, for example.

Does it make much difference?

Some investors do not think it is worth switching. What does one percent of extra transaction costs make out in the bigger picture now? If you calculate the differences over the long term, that one per cent can make a huge difference.

This is because you also receive a return on investment. If you invest $100,000 at a yield of 6%, you will earn $574,349.12 after 30 years. If you pay 1% extra in costs and therefore achieve a return of 5%, you will have earned $432,194.24 after 30 years. Your total result will be more than 32% lower because of that one percent in transaction costs!

What are alternatives to investing with your bank?

It is now clear that investing in shares & bonds with your bank is often not the best idea. Fortunately, there are plenty of alternatives. In this part of the article we discuss other parties with whom you can invest on more favourable terms.

Buying shares without commissions

When you invest small amounts, it is attractive to be able to buy stocks without commissions. After all, even a fixed commission of £2 on a stock transaction can significantly reduce your return when you want to buy shares with an amount of £100.

At eToro you can buy & sell shares without commissions. This allows you to spread your risks by buying multiple shares even with a small amount of money. With eToro, you pay no service costs, which makes investing with eToro a lot more attractive than investing with your bank. Use the button below to directly open an account with eToro:

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Trading in index funds without commissions

If you prefer to invest in ETF’s, you can opt for DEGIRO. At DEGIRO you can buy both local and international stocks at reasonable rates. Even more attractive is the fact that you can buy and sell investment funds from the core selection without transaction costs. Cost savings certainly mean a higher return in the long term! Use the button below to directly open an account with DEGIRO:

For active trading

If you prefer to actively speculate on the markets, you need a different type of broker. With a CFD broker you can actively speculate on both price rises and falls. A normal equity broker is not very suitable for this: because you pay transaction cost, your return quickly decreases.

One example of a good broker for active trading is Plus500. With Plus500 you trade in derivatives on shares, so you do not physically buy the stock. This means that you do not pay any fixed commissions on your investments, allowing you to actively speculate regardless of your investment amount. It is possible to try Plus500 free of charge by means of a demo. Please click on the button below to try Plus500’s features directly for free with a demo:

80% of retail CFD accounts lose money.80% of retail CFD accounts lose money.80% of retail CFD accounts lose money.

Discover what’s right for you

Ultimately, it is important to choose a broker that suits you well. That is why it is wise to compare the different brokers with each other. Determine for yourself what you find most important about a broker and make a choice based on your selection criteria. In our overview of brokers you will find several good brokers that may suit you.

Don’t forget, creating a demo is free and completely risk-free. So, first try which broker you like and then get started with the big money!

Try trading risk free?


Alex Mostert Avatar
Over Alex Mostert

When I was 16, I secretly bought my first stock. Since that ‘proud moment’ I have been managing for over 10 years. It is my goal to educate people about financial freedom. After my studies business administration and psychology, I decided to put all my time in developing this website. Since I love to travel, I work from all over the world. Click here to read more about! Don’t hesitate to leave a comment under this article.

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