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Check your online investment money went into shares not cash

asiangirl laptop shockThe real killer with investing is figuring out how to do it. The admin! Even as an investment nerd I’m regularly scratching my head over which website to use to get my money in the market.

These days, if you want to invest, you’ll end up using a so-called platform online. These are a wonderful innovation because you can see all your investments and Isas (shares, investment funds, even bonds) in one place plus all the data about how they’ve done. Among the most popular are those from Fidelity*, Hargreaves Lansdown and Interactive Investor.

But these whizzy facilities have one disadvantage: the interest rate they pay on cash balances. For many platforms that is zero or close to it. A little cheeky when your money could be earning 1.5% with the new top-paying Marcus easy access account or more if you sign up for a fixed term with no withdrawals.

This is important to know if you load the cash on to the site and then forget to choose a fund or other investment to put it in. Or get distracted halfway through the process and never finish it (like my friend, PV, thanks for the story!). Imagine her horror when instead of making out like a bandit in shares over the past few years, she’d actually earned practically zero in cash. 

In the worst case scenario, a platform not only pays no interest on your cash but also applies the platform fee to your cash. As fees are usually more than the interest paid, you end up with a loss.

Other times you might lose out are when you want to move into cash temporarily if the stock market is having a wobble. Or if your money is parked in cash pending investment or reinvestment, especially when these events take longer than expected. Transferring pensions into drawdown, for example, can take weeks or even months.

As a flavour of what’s available, Hargreaves Lansdown pays 0.10% on up to £4,999 and 0.15% on anything over. Meanwhile Bestinvest pays zero as does AJ Bell, unless you’ve got over fifty grand invested, in which case (for AJ Bell only) it’s 0.05%.

Admittedly, the platforms are for investments, not cash. They don’t want to encourage you to hang about in cash and to get into shares or funds straight away. Even so, I think it’s a little unfair. So check you’re fully invested and, if not, consider moving that money elsewhere if you want to keep it in cash.

See our SMM guide to finding the best savings rates here.

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Sunday, 09 December 2018