September 2019 – Monthly Update

Well. This is a little later than I intended. We’re now halfway through October, which means I’ve not only made pulling together the figures more of a ball ache than normal, but things (including the strategy for October onwards) have moved on a bit. The effect will mainly start to show up in the October update (which will hopefully be a little less, well… tardy), but let me explain. Two things in particular to update; broker switch and asset allocation thinking.

Broker switch

While I’ve been pretty happy with Charles Stanley Direct (CSD) for funds, it’s been bumming me out that their dealing fees for share dealing and ETFs are relatively high. My previous experiences with shifting S&S ISAs between brokers have not been the best, to put it lightly, so I was only going to move the account again if it was really worthwhile.

Well, after starting a switch on the 25th September, I was up and running with my transferred ISA on the new platform on 7th October which, from previous experience, is pretty quick! So, who is my new platform?



Quick disclaimer for full transparency – I am a Freetrade shareholder.

Freetrade is (currently) an app-only broker that allows you to buy a range of UK and US stocks and ETFs for free once a day, or at live market prices for £1. This is similar to brokers like RobinHood in the US (and now Charles Schwab and TD Ameritrade among others) but does not do this on the basis of what is known as “payment for order flow” or “PFOF”, which is banned by regulation in the EU (and UK). PFOF supports free trading in the US by allowing brokers to receive commissions for directing client orders (“client flows”) to certain counterparties or trading venues. This allows them to make money from the counterparty, while cutting trading costs for the client.

However. No free lunch in the US. This preferential distribution of client orders often means that brokerage clients in the US do not get to buy at the best prices available in the market. This is in contrast to the “best execution” requirements in the EU, which require, under a piece of legislation known as MiFID II, investment firms to take “all sufficient steps” to obtain the best available execution for the client. This obligation goes beyond a best price, but I’ll leave it there to avoid sending you into a regulation-related coma.

The basic point is this: Freetrade offers free trading under best execution rules without selling your order to the highest bidder. You are therefore not subsidising your broker by paying higher prices.

So, what swung it for me?


  • Opportunity to invest, keeping fees (a major drag on portfolio performance) at a minimum.
  • Ability to buy individual equities in small volumes cost-effectively (something that is not viable with most other brokers).
  • Ability to cost-effectively use ETFs rather than be restrained to OEICs (mutual funds) for cost reasons .
  • The opportunity to reconfigure the portfolio using ETFs and individual equities.
  • Supporting a company I have invested in and completely believe in what they’re trying to do.
  • The app is constantly being improved, with new features being added all of the time.
  • As with all other regulated brokers, Freetrade is covered by the FSCS and subject to CASS rules (legal segregation of client assets from those of the firm).

There are, however, some things to think about if you are considering Freetrade (and if you are – using this link gets us both one free random share of anything up to £80 in value!).


  • Freetrade is still an early-stage company and the complexity of building a broker from the ground up should not be underestimated. There will always be a few teething issues or rough edges as they develop into a more mature company. If you expect perfection, then Freetrade is not for you (yet).
  • The stock and ETF universe is not as broad as more mature brokers but is still plenty wide-enough to cover the majority of use-cases. More securities are added all the time and this is set to pick up pace once the new investment platform is rolled out. That said, if you’re primarily a passive ETF investor then it’s likely to easily cover your needs.
  • Things like topping up your account take a bit longer than with most other brokers at the moment because its done by manual bank transfer – it’s a little quicker if you use Apple Pay but this can only be done to a lifetime maximum of £1000, which is low. That said, the introduction of the new investment platform will apparently introduce the ability to make quicker subscriptions (presumably by card).
  • Some of the metrics that are very useful (such as TWRR) have not yet been added but these are apparently in the pipeline.

That’s the background to the broker switch and it also gave me the chance to rethink my asset allocation. With the exception of the Stewart India Fund, the returns on the funds selected in the CSD ISA were pretty good – the portfolio returned roughly 10.5% annualised and that period included the Q4 2018 dip. However, funds are not available on Freetrade, so I had to rethink my approach.

Asset Allocation Rethink

Although it’s good to have the option of buying individual equities (and this was a reason for the broker switch), I don’t really want to move away from a passive core to the portfolio. Freetrade carries a decent selection of ETFs covering most markets, sectors and themes (e.g. Clean Energy, Water, Tech) and the plan is to base the core of the portfolio around a small number of ETFs for the longer term.

In the immediate term, the bulk (97%) of it has gone into the GBP version of Vanguard’s FTSE All World ETF (or “VRWL”) at 0.25% OCF. In my view, for a low maintenance equity component of your portfolio you can’t do much better. VRWL gives you exposure to around 3000 global companies weighted to the global market, and avoids the home bias that is present in the Lifestrategy series. This lets me keep it super simple for now and then build out from there.

In addition I’ve started to build a position in the JP Morgan Emerging Markets Bond ETF (currently 2.7% but aiming for 5% of the portfolio in the medium term). The bond markets are a little odd at the moment – all the negative yields on sovereign debt has caused some concern that we are in a bubble. A proportion of my legacy pension is in GILTS anyway, so I’m largely covered as far as my developed economy sovereign debt goes. No need to extend it further.

I decided to start building up some EM debt investments after reading a couple of articles that suggested that the risk/reward ratio in these markets is now preferable to developed sovereign debt. As ever – this is not advice and it’s important to do your own research. My own position in this area will never be a large percentage of the portfolio.

I haven’t given up on water as a thematic investment either – the water fund held with CSD did very nicely. The closest equivalent on Freetrade is the iShares IH20 ETF and in the medium term I will look to have around 10% of the portfolio invested in that ETF.

Finally, I will start to build small % positions in some individual equities that I think are well placed. At the moment, of those I’m interested in only Legal and General and Dominos (Pizza) are available on Freetrade and I’ve picked up small amounts of both.

Allocation from October-onwards

Thanks to an unexpected windfall this month I can also readjust my strategy. Previously it was focused on building up cash levels to provide a buffer. As this windfall has successfully achieved that objective it can now go back to investing as much as possible of the monthly savings rate in the S&S ISA.

In addition, some small investments are being made via Crowdcube to continue to (sensibly) build up the unlisted portfolio. The latest this month has been a small stake in Patch Plants (helped by the tax breaks from the EIS scheme – again, make sure you do your research if you want to use these) and there are a couple more interesting opportunities on the horizon.

So, even though we’re halfway through October, let’s briefly just cover off last month’s figures.

Net worth changes for September 2019

September’s number is:

£117,005.61 (+£4,196 on August 2019)

A good rise this month – I managed to hit a 45.5% savings rate (factoring in the equity portion of the mortgage payment) by paying a little more attention to outgoings, which is a nice surprise. The remainder is due to the monthly SIPP contribution from my employer and some market gains.

What have I been reading in the blogosphere/media this week?

Right, time to enjoy the holiday sun. Hopefully the October update will be more timely.


One thought on “September 2019 – Monthly Update

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