Commission-free share trading and investing app Freetrade’s new cash investment facility which offers easy access and attractive interest rates now pay up to 5% for Plus account holders. This is 0.5% more than the 4.5% current Bank of England Interest Rates.
However, there are limitations:
- The high rate of interest only applies up to £4,000
- You need to pay a £9.99 account fee for a Plus account
- Free account holders on get 1% interest up to £1k
Freetrade cash investments
Freetrade clients will now be able to invest in a range of ETFs that track the overnight interest rate markets in both GBP and USD.
According to the fractional shares broker, these funds offer better rates than are available from the average easy-access savings account.
There are no lock-in periods or fixed terms, and the ETFs are SIPP and ISA eligible, allowing Freetrade customers to benefit from these higher interest rates within a tax-free wrapper.
Cash is back
Rising interest rates have turned cash back into an asset class and with UK inflation now running at 4.60% pa and thus below Bank of England base rates, investors can once again receive a positive real return on uninvested cash.
Freetrade is offering a minimum of five funds from ETF providers that include Lyxor and Xtracker.
Speaking about the new cash investment offering Freetrade’s Head of Communications, Alex Campbell said:
“With rising rates and volatile stock markets, cash or cash-like investments are increasingly looking like a sensible place for investors to park their cash. If a very low-risk fund can be expected to generate a return of over 5% over that period, investors can sit back and offset inflationary headwinds while they wait for investment opportunities to emerge. “
He added
“These funds offer investors greater flexibility than savings accounts and returns that track overnight lending rates, not the whims of banks. Unlike savings accounts, these ETFs can be bought and sold during market opening hours, their returns track the latest benchmark rates set by central banks, and they can be held with cash already inside a tax wrapper.”
Who are Freetrade?
Freetrade was founded by its CEO Adam Dodds back in 2016 and the firm now has more than 1.4 million customers.
It offers clients access to commission-free dealing in more than 6,000 stocks and ETFs via its app.
The firm is independently owned and has attracted 19,000 individual shareholders through crowdfunding.
Freetrade has also received funding from venture capital funds, most notably Molten, and Left Lane Capital.
Investing in cash
Cash is often overlooked as an asset class.
True many portfolios won’t always have large cash balances.
However, as traders and investors sell out of positions or top up their portfolios, they will have uninvested cash balances to manage.
The ETFs that Freetrade are offering could provide an efficient way to get the best returns on that money, particularly when high street banks are in no rush to pass on higher interest rates to savers and investors.
- Related Guide: Best brokers for getting interest on cash balances
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