It isn’t every day you get offered something for free, so investors will be looking very closely at the new “free” share dealing service from Vodafone (LSE: VOD). There is always a catch when a large business brandishes that four-letter word, but in the case of the Vodafone Share Account there are tangible benefits as well, at least for small investors.

Free For Those With 50 Shares

Vodafone is sending an information pack to around 400,000 private investors and employees in the UK and Ireland who hold 1,000 or fewer of its shares, explaining how they can either sell their holdings or buy more if they prefer. Many will have ended up with such tiny holdings because they held stock in companies that Vodafone took over. The telecoms giant would like to “tidy” them off its register, to spare itself the effort of sending dividend notifications, statements and invitations to annual meetings. Well, we all relish a bit of spring cleaning at this time of year. 

The “free” part of the deal will only apply to those holding 50 shares or less, who can use the service to offload them at no cost. With Vodafone trading at around 210p, this will only apply to those holding shares to a total value of just over £100. Given that investors who hold paper-based share certificates could face minimum dealing charges ranging from £30 to £60 for a one-off trade, which would swallow most of a £100 holding and probably involve an effortful trip to the local high street bank, the deal is a decent one.

Everybody Else Pays Up To £30

The Vodafone Share Account isn’t free for everybody though. Those selling between 51 and 1,000 shares will pay 15p per share, subject to a maximum transaction charge of £30, plus 0.5% stamp duty. Shareholders with paper certificates will pay 25p a share, again subject to a maximum £30. This could still swallow a hefty percentage of the returns for somebody with, say, 60 shares.

Alternatively, small shareholders can choose to sell their entire holding and donate the proceeds to charity via ShareGift instead, at no extra cost.

You Can Buy Too

If you reckon Vodafone is a good investment right now, you can also buy more shares through the account. You can buy shares worth between £1,000 and £10,000 for a single transaction fee of £30, plus stamp duty. This is a bit pricey, given that you can trade for £10 on a host of sites (including the Fool’s), but comparisons are unfair because for most it will be a one-off trade. The Vodafone Share Account is not open to those who bought their shares through an online stockbroker and therefore hold them in a nominee account.

My concern is that somebody who doesn’t own any other shares would be crazy to invest thousands of pounds in a single company stock. Although I personally rate Vodafone as a ‘buy’ right now, you should only buy individual company stocks as part of a balanced portfolio. It would be far wiser to spread smaller sums between four or five different companies instead. Otherwise you risk losing a lot more than £30.

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Harvey Jones has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.