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Investing in shares isn’t for the elite or mega-rich, nor is it restricted to those ‘In The Know’.
Anyone can buy shares and make money.
You don’t have to be on the floor of the London Stock Exchange, either. Thanks to the advent of online brokers over the last few decades, you can now buy and sell shares more cheaply and easily than ever before.
You do, however, need to have a bit of knowledge, be willing to risk and create a plan.
Here’s our step-by-step beginner’s guide to buying shares.
First you need to decide which company you are going to buy shares from.
Yes, it depends how you look at it whether it’s a good thing or a bad thing that there are loads of companies (including collections of companies in funds called ‘investment companies’) that you could invest in, and that you can potentially invest in shares around the world, not just in the UK
I know – you’d just like to invest in Amazon and Apple now and then move on to Tesla or any other company that’s sounding cool right now, But investing involves so much risk and there are so many possibilities that it’s a good idea to take a big, deep breath, first, and do a bit of a plan.
There are some key questions you should ask yourself when choosing your shares:
Before you put some actual money into the stock market you can spend time online using a virtual portfolio to better understand the process.
It’s useful to try these virtual portfolios for a long period of time, maybe even a year to really engage with the process and understand how the markets work.
Remember that the virtual portfolio will show you how easy it is to make money and also how easy it is to lose money by trading shares. Happily, though, because it’s virtual you won’t actually lose anything (Though there is a downside to this of course, as you won’t feel any of the real-life pressure that comes with investing!)
Once you have decided which company you are going to buy shares in, the next decision is how many shares you want to buy. Here are a few suggestions to help you make up your mind:
You will need to find the EPIC code (known in the States as the Ticker Symbol) for the company you want to invest in.
You can find this number by just putting the company name into your search engine + EPIC. It should come up at the top of your search listm and on websites such as Reuters, Marketwatch, or the Telegraph shares section.
For example, if you want to buy shares in Tesco, you can search for them on one of the above websites. The symbol is TSCO.L (the L tells you that the shares are from a UK company on the London Stock Exchange).
The EPIC code for HSBC is HSBA. The one for Glaxo SmithKlein is GSK, and so on.
When you have this code, it’s time to sign up to an online broker so you can buy the shares you want.
It used to be that in order to invest in shares you had to be on the books of a posh broking house in the City that charged you lots to buy shares for you.
Today, you can do it for less than a tenner a time (sometimes free) through one of the many, cheap online brokers that now exist.
Also, share ownership doesn’t require buying share certificates anymore. It’s all recorded electronically and you will have a nominee account with your trades recorded there.
A nominee account is where you own shares without becoming involved in any of the associated administration or paperwork. Thanks to the internet, information on shares is freely available and you can check how your shares are performing at the click of a mouse.
Here are some possibilities for you to consider:
|Cost per trade
|Annual Platform Fee
|AJ Bell Dealing Account
eToro doesn’t charge fees in the usual way, which is why it looks so cheap compared to the rest! It’s a popular platform, but there will be fees involved in some trade types. You can read more on their website.
Once you have chosen an online broker you will need to register on the website. You’ll need to confirm identity information, such as your address and passport, to help prevent fraud.
Each website has a slightly different setup process, but you should expect these steps:
1. Enter your personal details
2. Register your debit card
3. Transfer cash (some will simply take payments from your bank account when you buy)
4. Buy shares
5. Profit! (or, we have to tell you, loss – but let’s hope not).
You can buy and sell shares as you wish once your account is set up.
If you find a different platform at a later date, you can transfer your shares across to the new account. Your shares aren’t linked to the broker you’ve bought them through – they’re entirely yours.
Keep an eye out for the added fees you may come across. For example, Degiro is a cheap online broker – but adds small fees such as €4 for the purchase of European stocks. Over time, these fees can add up.
Once you have shares, use your online account or the mobile app to keep an eye on their performance.
It’s a good idea to check your shares regularly to keep track of their rise and fall in value. Most websites will send you tips and information from the sector you have invested in.
Remember to do your own research too: look at the bigger picture, consider other shares in similar companies to compare the trends in your share price.
Shares react to real life events so keep an eye on the news and the general state of the economy.
Take your time to make decisions and remember that even though it is tempting to trade regularly, charges apply each time you buy or sell. If you find that you’re trading more frequently as time continues, you may choose to switch to a frequent trader rate to benefit from cheaper rates.
If you want to use your shares as a long-term investment, a ‘buy and hold’ basis, you won’t need to track them so often. However, it’s a good idea to still check them every now and then so that you can make sure the stock is still the best place for your money.
Selling shares is a risk in itself. The timing needs to be good: too early and you miss out on a better price, too late and you could lose future profit.
Look at the difference between the price you paid for the share and what it would sell for now. Have you made a profit? Or have you made a loss? If a loss, do you expect the share price to keep falling so that you should cut your losses now?
Finally, consider if you can afford to keep your money tucked away in shares. If you need money quickly, they may not be the best investment for you. You can always sell your shares at any time – but if you’re making a pressured sale to get out of a tight financial spot, you could lose on your initial investment. It’s always best to sell when you don’t need to but you think the price is right.
Investing in shares can be a profitable and exciting way to make money over a long period of time. However, the risk factor can put some people off.
If you’re unsure about whether shares are the right path for you, consider using them as part of a more diverse investment portfolio. A mix of high- and low-risk investment products can make sure you don’t put all of your eggs in one basket. Check out our investment guides to find out more about your investing options.
Are you keen to learn more about investing? Why not sign up to the fortnightly MoneyMagpie Investing Newsletter? It’s free and you can unsubscribe at any time.
*This is not financial or investment advice. Remember to do your own research and speak to a professional advisor before parting with any money.