What is a brokerage account?
A brokerage account is used to trade or invest in securities in the financial markets. Having an account with an online brokerage has become popular in the UK. A share dealing account will enable you to buy and own shares outright. On the other hand, a leveraged trading account, like a spread betting or CFD trading account, will give you exposure to various markets that you can trade without taking ownership of the underlying assets.
Share dealing account
A share dealing account enables you to buy and sell stocks, exchange traded funds (ETFs) and investment trusts. You can also use it to re-invest any dividends you earn from company stocks that make for such a provision.
Leveraged trading account
When you trade on financial markets using leveraged trading accounts, you’ll be required to put down a deposit – called ‘margin’. When trading with leveraged products such as spread bets and CFDs, your margin deposit is much less than your full position size.
When trading on the price movements of the underlying assets, you’ll get exposure to 17,000+ markets. Some of the markets you can trade include:
How to pick a brokerage account
The type of account you open will depend on whether you want to trade or invest.
An investment account is more suited to someone who wants to buy and own shares for exposure in the long term.
A trading account, such as a spread betting account, would be suited to someone who wants to speculate on the short-term rise and fall of the market price movements.
So, if you want to buy and hold the assets and earn an income from dividends, then you’ll choose to invest. If, however, you prefer to have exposure to assets over the short term, then you’ll go with trading.
When choosing the best brokerage account for you, consider:
- Objectives and available period of activity
- Commitment time and energy
- Risk appetite and available capital
Types of brokerage accounts
With us, you’ll get to choose from several types of accounts to either trade or invest in various financial markets. Below is a summary of our account offering, which is made up of two main categories – share dealing for investing and leveraged trading:
Share dealing (investment)
Share dealing account
Invest in shares, ETFs and investment trusts
Stocks and shares (share dealing) ISA account
Invest up to a certain amount per tax period in shares and ETFs without paying tax on profits or income
IG Smart Portfolio
Invest in a diversified, fully managed investment portfolio that's built to suit your risk appetite
IG Smart ISA Portfolio account
Invest up to a certain amount per tax period into an IG Smart Portfolio – that's also tax-efficient
Spread betting account
Speculate on a wide variety of rising and falling markets such as forex, indices, shares, commodities, bonds and other asset classes with no capital gains tax on profits1
CFD trading account
Similar to a spread betting account, with a more traditional approach to trading. Profits can be balanced against losses as tax deductions1
Spread betting and CFD trading accounts
Use your spread betting and or CFD trading account to go long or short on the price market movements and get exposure to the underlying assets. The tax-free1 feature has made spread betting a popular choice in the UK. When spread betting, it can be easier to manage position sizes since you’d be trading per point vs per contract or lot, which is what would happen when you trade CFDs.
You don’t have to pay capital gains tax when trading on spread bets. And gains you make when trading CFDs can be used to offset losses you may incur. You also don’t pay stamp duty when trading spread bets or CFDs because you won’t take ownership of the underlying assets.1
Spread bets and CFDs are leveraged products, meaning you can open a position with an initial deposit – called margin – which is a fraction of the full value of your position. The profits and losses you make will still be based on the full size of your position, which can outweigh your margin. Trading with leverage has associated risks as compared to non-leveraged products like share dealing. Remember to manage your risk carefully.
With us, you can use your spread betting account to trade forwards in the shares, forex and ETF markets as well as futures when trading commodities and indices. With your CFD trading account, you can trade the spot price, futures and options of shares, ETFs, commodities, forex and indices markets.
If you’d like to trade intra-day, then you’ll find spread betting and CFD trading accounts are better suited for you. Both accounts are also suitable for trading in the short and medium term.
Share dealing and ISA share dealing accounts
You can use a share dealing account to buy and sell shares and ETFs. You’ll open this kind of account when your intention is to buy and hold stocks with hopes to sell once the stock’s price increases. When investing using a share dealing account, you can also earn dividends from the shares you own, provided the company makes for such a provision.
You can’t short a position on this type of account, meaning when stock prices fall, you won’t make a profit. So, if you’re looking for medium-to-long-term investment opportunities, then share dealing is more suited to you.
Another alternative is to open a share dealing ISA account, which offers a more liquid investment opportunity for stocks and shares. You’ll then be able to optimise returns since its more tax-efficient compared to a standard share dealing account. You can contribute up to £20,000 for the tax year and any profits you make are tax-free.1, 2
IG Smart Portfolios
IG Smart Portfolios are diversified and will give you an exposure to global markets, equity, fixed income, and alternative investments such as gold and property. Our Smart Portfolios are more suited for you if you’re looking for long-term diversified investments managed by experts. Assets under your portfolio will be based on pre-specified mandates and objectives.
Your portfolio will be built to suit your investment needs and risk appetite. The portfolio will also track iShares ETFs from the world’s largest asset manager – BlackRock. With us, you can choose from these five portfolios:
Each portfolio has different percentages allocated to markets to align risk constraints with return objectives.
Managed portfolios are also available as flexible ISA accounts. You can contribute up to £20,000 for the tax year. Profits gained are tax-free.1
1. Decide whether you want to trade or invest
Choose whether you’d like to trade or invest. If you’d like to trade, you‘ll have to open a spread betting or CFD trading account. However, if you decide that you want to invest, then you’ll open an investment account. Trading is leveraged and investing is traditional, where you’ll buy and own the asset outright.
2. Understand the charges and risks
It’s important to understand the costs that come with trading with your online broker. With us, creating an account comes at no charge, but once you open or trade a position, there will be costs involved. Direct charges you’ll likely incur are the spread, which occurs when you trade.
Other costs are the commission rates, which you’ll incur when you’re share dealing. With us, you’ll get a low-commission rates, some as low as $0 on US stocks.3
Also, remember that direct charges are payable on commissions when trading share CFDs. Keep in mind that even though trading spread bets is commission-free, you’ll still pay a spread.
Spread bets and CFDs are leveraged products, meaning you pay an initial margin that gives you increased exposure at a fraction of the full market value of the underlying asset. With leverage, your profits will be magnified when the market moves in your favour. But, if the market moves against you, you’ll make losses that might exceed your initial outlay. Make use of some of our risk management tools. Also ensure that you only invest an amount you’re comfortable losing.
3. Fill in an application form
Fill in an application form. We’ll then ask you a few questions to determine your trading or investing knowledge before proceeding with the next phase of the application.
4. Get verified
Once you’ve filled in your application form, it’ll need to be verified. This process usually takes a few days, at most.
5. Fund your account
When your application has been approved, you can credit your account with funds and start trading or investing. You can fund your account using a debit card, PayPal or bank transfer. With us, you can also add or withdraw funds from your account – for free.
1 Tax laws are subject to change and depend on individual circumstances. Tax law may differ in a jurisdiction other than the UK.
2 Invest up to £20,000 in an ISA in 2022/23 without incurring capital gains or income tax.
3 Trade in your share dealing account three or more times in the previous month to qualify for our best commission rates. Please note published rates are valid up to £25,000 notional value. See our full list of share dealing charges and fees.
4 Awarded ‘best finance app’, ‘best multi-platform provider’ and ‘best platform for active traders’ at the ADVFN International Financial Awards 2022.