In short, between the time your order is placed and the time it’s traded, markets can move slightly. To account for these small price movements, we leave a small cash buffer when buying ETFs.
This buffer- known as fractional dealing residual cash- ensures that your transactions settle smoothly and we don’t accidentally over-invest if ETF prices increase during execution.
For DIY portfolios:
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The cash buffer is usually between 0.5% and 2%.
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This applies to your initial orders because we aggregate all client trades, take a quoted price from the market, then execute the order. The ETF price can change slightly in that short window, so we leave a small margin to avoid overspending.
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The residual cash is later reinvested automatically so every penny is put to work in your portfolio (unless the remaining amount is under £1 and you have AutoInvest switched off).
For Managed portfolios:
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The buffer is typically between 0.25% and 1.5%.
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A small amount of cash may also be held aside for management fees and trading flexibility, not just for dealing purposes.
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Like DIY portfolios, any remaining residual cash is invested over time to maintain your target allocations as closely as possible.
Because prices move continually while we seek the best execution, there can occasionally be a small amount of cash left uninvested after trading.