Best Brokers for long-term investing (buy-and-hold) for UK Investors

The buy-and-hold strategy is one of the most prominent investment styles in the financial market. As the name suggests, this strategy involves buying and holding assets for a long time, even possibly indefinitely.

Long-term investors commonly employ this strategy. Read on to discover what it is and how to find the right broker for your needs.

Buy and Hold Best Stockbrokers

What is the buy & hold investment strategy?

The buy-and-hold investment strategy involves buying and holding assets for a long time—typically 10 years or longer, even indefinitely. The consensus is that a buy-and-hold strategy should last at least 5 years.

Those who employ the buy-and-hold investment strategy are looking for assets that are expected to perform well in the future and are quite stable (for instance, mature blue-chip stocks). Also, some investors may seek to buy assets during market downturnsc when their prices are low.

Once you buy the assets, the portfolio is passively managed – in other words, you won’t place other buy and sell orders; you just keep your portfolio intact regardless of the market cycle.

One benefit of this long-term strategy is that, as a passive investor, you don’t need to always be up-to-date with market developments and won’t incur high transaction fees because you won’t be placing frequent orders.

While all investments carry risks, a buy-and-hold strategy is considered less risky than other types of strategy. This is because, generally speaking, the economies grow over time, and your investments will also grow.

What features should a long-term investing broker have?

Not all brokers are suitable for long-term strategies. Many are most suitable for trading or placing more frequent trades. Here are some of the main aspects you should consider:

Custody fees

Custody fees are charges for holding and managing securities on behalf of UK investors. These fees are common in the investment industry and are associated with brokerage accounts or investment portfolios.

Ideally, there should be no custody fees.

Dividend collection fees

As a buy-and-hold investor, your portfolio will likely include some of the best dividend stocks. Therefore, choosing a broker that doesn’t charge any dividend-related fees is ideal. If you are interested in dividend payments, look at our best brokers to buy dividend stocks.

Inactivity fee

Many brokers charge an inactivity fee, usually after 12 months of no activity. However, in most cases, if you log in to your brokerage account at least once every 12 months, your account will be considered active and you won’t be charged any fee. Make sure you read the fine print to understand how the broker charges the inactivity fee.

Transaction fees

Transaction fees, like stock commissions, are important to consider. Check the fees before placing an order, as some brokers may charge a percentage of the transaction value while others may use a fixed-fee structure. Choosing one over the other depends on your strategy and capital.

Real assets

Finally, you will surely want to pick a broker that allows you to invest in real assets, not derivatives. Derivatives are mostly used in trading or hedging, as they come with additional costs (such as overnight fees).

Best brokers for long-term investing in the UK

1. Degiro UK

Degiro has a competitive transaction fee structure: £1.75 per transaction plus an additional £1 handling fee. They offer free custody services and do not charge fees for dividend processing. To learn more about Degiro’s offerings and services, you can read our “DEGIRO review” for detailed insight.

2. Interactive Brokers UK

Interactive Brokers charges transaction fees based on a percentage of the traded value, starting from 0.05%. They also have a minimum charge of £3 per order, which makes them a suitable choice for both small and large trades. Similar to Degiro, they provide free custody and dividend processing, which is attractive to investors who want to minimize their overhead costs.

3. eToro UK

eToro uses a variable spread fee structure that changes based on market conditions and the securities traded. The broker offers free custody and doesn’t charge any fees for dividend distributions, catering to the needs of a wide range of investors. For more information about eToro’s trading platform and services, prospective and current users can refer to the “eToro review”.

BrokerTransaction costCustodyDividendsMore information
 Degiro£1.75 + handling £1FreeFreeDEGIRO review
 Interactive BrokersFrom 0.05% of the traded value (min. £3 per order)FreeFreeInteractive Brokers review
 eToroVariable spreadFreeFreeeToro review

Best brokers for buy & hold strategy for international investments

1. Interactive Brokers

Interactive Brokers is renowned for its affordable trading options, particularly in the U.S. market. The commission starts from as low as $0.005 per share, with a minimum charge of $1. They offer flexible currency conversion fees that vary based on market conditions and the trader’s specific requirements.

2. eToro

eToro sets itself apart from other trading platforms by not charging any commissions on trades. Instead, it employs a variable spread fee model that adjusts according to the market conditions. However, it’s important to note that eToro does have a higher currency conversion fee of 0.50%. This is something that investors need to consider when trading in different currencies.

3. Degiro

For trading in U.S. stocks, Degiro charges a fee of €1 plus an additional €1, and for trading in European stocks, the fee starts from €3.9 plus €1. They also charge a currency conversion fee of 0.25%, which is comparatively low compared to other brokerage firms.

BrokerCommissionCurrency conversion feeMore information
DegiroUS: €1 + €1
Europe from:
€3,9 + €1
0.25%DEGIRO review
eToroVariable spread, no fees0.50%eToro review
Interactive Brokers$0.005/share (minimum $1) for US stocksVariableInteractive Brokers review

Summary

Overall, the buy-and-hold investment strategy is popular, beginner-friendly, and low-risk for many investors. Meanwhile, many prefer to combine it with dividend investing to generate passive income.

FAQs

Is buying and holding a good strategy for beginners?

Buy and hold is a straightforward strategy that doesn’t require constant market monitoring or trading. It’s suitable for beginners who wish to grow their wealth over time without the complexities of active trading.

How effective is buy & hold in the UK market?

Historically, the buy-and-hold strategy has been effective in the UK, especially in stock markets. Over the long term, markets have risen, rewarding patient investors. However, past performance is not always indicative of future results.

How long should I hold my investments?

This varies based on individual financial goals and market conditions, but generally, buy-and-hold investors look at holding periods of several years to decades.

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