Shares

When you open a share dealing account with Charles Hanover Investments, either advisory or execution only, you will gain access to over 19,000 equities on 36 global exchanges via an award winning platform. Whether you wish to deal on an Execution Only basis or utilise the wealth of experience available through the Charles Hanover Investments team we are able to offer a service to maximise your investment potential.

 

Equities have long been the core of investment portfolios and we see no reason to change this, whether you are seeking a yield, focusing on capital appreciation, or combining the two in a total return strategy we are here to assist you.

 

Our trading and research specialists will be on hand to provide you with the latest developments on global equities and investment strategies to meet your investment objectives. The proactive nature of Charles Hanover Investments equity advisors will give you the reassurance that you are receiving innovative and professional research in a concise and timely manner. We feel the knowledge of our team sets us apart from the competition, we strive to explore niches that may be overlooked by many.

 

Please contact a member of our team for the range of shares you are able to deal in and discuss your specific requirements in more detail.

Funds

Investment Trusts

 

Investment Trusts originated in the Victorian era and have remained a popular and effective choice ever since. Cash is raised through an initial share sale, capital is then allocated to companies by the appointed fund manager.

 

Investment Trusts offer diversification to investors who may not have the time to select companies themselves and into areas that they may not be

particularly familiar with. Investment Trusts can be selected for their geographical focus such as ‘Asia Pacific excluding Japan’, or the type of companies they invest in, a common mandate is ‘Smaller Companies’. Investment Trusts are also differentiated by the objective the manager has, this is usually ‘growth’ or ‘income’.

 

 

 

Unlike Open-Ended Investment Companies (OEICs) and Unit Trusts, Investment Trusts trade on exchanges and the price of your investment can be easily calculated. It is possible to buy or sell your investment any time the exchange is open just like a stock whereas OEICs and unit trusts are calculated daily.

 

Investment Trust returns are dictated by the supply and demand of individual shares in the funds on an exchange. As the share price of and Investment Trust fluctuates a discount or premium to the Net Asset Value (NAV) of the funds is created. Some view the discount or premium as a gauge to the value of the Investment Trust.

Exchange Traded Funds

 

Exchange traded funds (ETFs) are similar to Investment Trusts as they can be bought and sold through stock exchanges. An ETF can track a particular index, commodity, or basket of stocks.

 

This makes them an ideal selection for investors that are aiming to gain diversification without paying the high fees of more traditional funds like OEICs and Unit Trusts.

 

 

 

As an example there are many ETFs that track the FTSE 100 index and for those that desire emerging markets exposure there are ETFs that track stock markets in such countries.

 

Investors who want to take positions in commodities such as gold or oil and want an alternative to trading derivatives will find ETFs that provide the opportunity to do so.

 

SIPPs

Self-Invested Personal Pension plans (SIPPs) are designed for investors who want flexibility and control over their investment strategy for their retirement funds. A pension is one of the most tax efficient ways of saving for your retirement. There are significant tax reliefs available such as up to 45% income tax relief on contributions, and investments within the SIPP are free from Capital Gains Tax (CGT) and Income Tax. After the age of 55 you are able to take a 25% tax free lump sum from the pension, with further withdrawals available at your marginal rate of income tax. The tax benefits will depend on your circumstances and tax rules are subject to change by the government.

Charles Hanover Investments are able to assist clients in setting up a new SIPP, or in pooling together various pension plans clients might have from different providers. Within the SIPP wrapper clients gain full access to the broad range of investment products and client services Charles Hanover offers, covering advisory and execution only dealing on shares, ETFs, and CFDs with unparalleled direct access to their account 24 hours a day, 7 days a week.

 

ISAs

The Charles Hanover Individual Savings Accounts (ISAs) provide a tax efficient wrapper where clients can invest up to the annual limit without the need to pay Capital Gains Tax or further tax on income from investments within the account. Our team are wellversed in assisting clients to consolidate their stocks and shares ISA holdings from other providers, and are here to provide a seamless transfer process.

 

Within the ISA wrapper clients gain access to a broad range of investment products covering 25 global exchanges for Stocks, ETFs, ETCs and Investment Trusts.

 

Please note that under current HMRC guidance derivatives are not available within the ISA accounts.

CFDs

A CFD, or Contract for Difference, is an agreement between two parties to exchange the difference between the opening price and closing price of a contract.

 

CFDs were developed in the early 90’s and initially were exclusively available to institutional traders and hedge funds. At the turn of the millennium CFDs became available for private clients to gain access to the same levels of leverage and cost efficiencies historically only available to the institutions.

 

Unlike many derivatives, CFDs are very simple to understand. Anyone who has dealt or invested in shares will have no trouble picking up the basics. The key features of CFDs are that they are stamp duty exempt, traded on margin, and provide the ability to short sell, which is to make money in a falling market. As CFDs are traded on margin there is a small finance charge for each night the position is held open, all detailed below.

No Stamp Duty

CFD trades are not subject to stamp duty and as such the trader can mitigate the 0.5% tax on each trade, on the below example the cost savings are clear:

 

Share trade:

£50,000 purchase of Barclays Plc shares, stamp duty = £250

 

CFD Trade:

£50,000 CFD of Barclays Plc shares, stamp duty = £0

Traded on Margin

Rather than paying for the full amount of the trade, CFDs require an initial margin, or deposit to gain exposure to the trade, this is referred to as a % of the traded value, i.e. Barclays is a 10% margin stock, as such:

 

Share trade: £50,000 purchase on Barclays, requires £50,000

CFD Trade: £50,000 purchase on Barclays, requires £5,000 (10%)

 

Financing

For each night a CFD position is held open a small finance charge is applied at 3 month Libor +/- 3%.

CFD Buy (“going long”) Example:

 

In the below example, an investor wishes to buy (go long) £50,000 of Barclays shares with an entry price of 250p, Charles Hanover offers clients the opportunity to trade Barclays on 10% margin, meaning the client only needs to invest £5,000:

 

Opening the trade:

 

Closing the trade with a profit

After holding the position for 4 nights (opened on a Monday, close on a Friday) Barclays has risen to 260p, the investor decides to close the position and realises a profit of 10p per share held. In this example the stamp duty saving is clear when compared to the financing cost, and the power of leverage produces the greatly improved returns from the initial capital invested:

Closing the trade with a loss:

Using the same timescale, if Barclays share price had fallen to 240p after the 4 night holding period and the investor decided to limit their loss closing the position crystallising a loss of 10p per share, the numbers are as below:

From these examples it is clear that CFDs provide improved cost efficiencies on shorter timescale trades maximising net profits and minimising losses. It should also be noted that whilst utilising leverage results magnified profits, the same is also true for losses.

 

Short Selling

Short selling allows a CFD trader to make money through speculating on a share price going down crystallising profits on the difference between the opening and the closing price of the trade. In effect they are selling something at a high price, in anticipation of buying back the stock at a lower price and banking a profit.

CFD Short (“going short”) Example:

 

In the below example, an investor is anticipating the price of Morrisons shares will decline and therefore chooses to short sell £50,000 of Morrisons shares with an entry price of 200p. Charles Hanover offers clients the ability to trade Morrisons on 10% margin, meaning the client needs £5,000 to open the trade. Through a traditional stockbroker this service would not be available meaning the client would not be able to take advantage of the anticipated decline in Morrisons share price.

 

Opening the trade:

 

Closing the trade with a profit:

After holding the position for 4 nights (opened on a Monday, closed on a Friday) Morrisons has fallen to 190p, the investor decides to close the position and realises a profit of 10p per share held:

Closing the trade with a loss:

Using the same timescale, if Morrisons share price had risen to 210p after the 4 night holding period and the investor decided to limit their loss closing the position crystallising a loss of 10p per share, the numbers are as below:

A note on financing - When going long CFD financing is charged at 3 month LIBOR + 3%, and when going short the client is credited with 3 month LIBOR -3%. In a low rate environment such as has been witnessed since late 2009 negative overnight financing credit can occur, this means clients pay a lower level of financing to be short.

Risk Warning: Trading Contracts for Differences (CFDs), Futures and spread betting carries a high level of risk to your capital, and is not suitable for all investors. Only speculate with money you can afford to lose. Trading or placing any bets can result in consumers incurring liabilities in excess of their initial stake. Please ensure you fully understand the risks, and seek independent advice if necessary. CH Markets is a trading name of Equitrade Markets Ltd (FCA No. 441877), a company authorised and regulated by the Financial Conduct Authority for the conduct of investment business in Shares, Spread Betting, CFDs, Futures, Options and Rolling Spot Foreign Exchange.

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