Always remember that investments can go down as well as up in value, so you could get back less than you put in. We recommend hanging on to your investments for at least five years to give them the best chance of providing the returns you are hoping for.
Share dealing or stock trading is a way to buy and sell shares in publicly listed companies.
Publicly listed companies are companies that are listed on a stock exchange, such as the London Stock Exchange or the New York Stock Exchange.
To trade shares, you need to open a share dealing account with an investment platform. A share dealing account can be an individual savings account (ISA), general investment account (GIA) or pension account.
There are two ways to buy shares. You can either buy individual company shares directly (through a stockbroker) or invest in a fund (which pools money from you and other investors to buy lots of shares).
Depending on the amount you have to invest and your investing savviness, funds tend to be a cheaper and less risky way to invest in shares as you'll be spreading the costs and risks with other investors in the fund.
The first opportunity you'll have to invest in shares is when the shares are created and offered to the public for the first time. This is called an Initial Public Offering (IPO) or 'Going Public.' Companies go public to raise money to fund their activities.
Once shares are created, they can be bought or sold on the stock exchange. This is called the secondary market because it comes after the IPO.
Most investment platforms are online and will allow you to invest regularly (e.g. £25 per month) or occasionally (e.g. a lump sum of £1,000).
Whether online or offline, you need the services of a stockbroker or share dealing platform to buy shares. Stockbrokers offer three types of services - execution-only, advisory or discretionary.
You can open a share dealing account (ISA, SIPP or general investment account) with the platform you choose.
Deciding what shares to buy can be intimidating, but it doesn't have to be. We've summarised our top five methods below:
Share dealing platforms charge several fees for using their services. The main fees are the annual platform charge, dealing charge, transfer out charge and inactivity charge.
Compare our best share dealing accounts below. To make sense of the charges, use our share dealing charges comparison table.
Capital at risk.
AJ Bell Youinvest offers a wide range of investments, including stocks and shares, over 2,000 funds (unit trusts and OEICs), ITs and ETFs. Its products include Stock & Shares ISA, Lifetime ISA, Junior ISA, SIPPs, etc.
Interactive Investor has more than 40,000 investments to choose from, including UK and overseas shares, funds, investment trusts, and ETFs. You get a free trade every month, which you can use to buy or sell any investment. The site has lots of expert ideas, research and insights, which can be helpful when choosing investments. Interactive Investor offers Stocks and Shares ISA, pension and Junior ISA.
Hargreaves Lansdown is the biggest player in the market. It does not charge a platform fee on its Fund and Share Account but charges 0.45% (capped at £45 a year) on its ISA and 0.45% (capped at £200 a year) on its SIPP. It offers most products, including Stock & Shares ISA, Lifetime ISA, Junior ISA, SIPPs, etc.
IWeb is part of Lloyds Banking Group and operated by Halifax Share Dealing. It has a wide range of shares, funds, ETFs and investment trusts. Share dealing is cheap, and you pay no platform fee. Services include Stock & Shares ISA, Junior ISA, SIPPs, etc.
X-O is an affordable execution-only online share-dealing platform. Its services include Stock & Shares ISA, Junior ISA, SIPPs, etc.
To make sense of the charges, use our share dealing charges comparison table.
When you sell shares or other investments, you may have to pay Capital Gains Tax if you make a profit (gain). You may need to pay tax on:
You only have to pay Capital Gains Tax on your overall gains above your tax-free allowance.
This tax year, the Capital Gains tax-free allowance is £12,300. Additionally, the first £2,000 you receive in dividend is tax-free.
Here a few common stock market terms you should know:
A share is a unit of equity ownership of a public company. When you buy a share, you own a small unit of a public company.
If you bought a share in Apple, for example, you would become a part-owner of Apple. If it performs well, you will benefit from its success. If it doesn't, you may lose some money.
Companies issue shares to raise money to fund their activities. People invest in shares to benefit from the successes of companies they believe in.
You may also come across the word stock or equity. In most situations, stocks, equities and shares refer to the same thing. Stocks could also mean all your shares in one or more companies.
Investing in stocks and shares can be a great way to grow your money and can offer you higher long-term returns than leaving your money in a savings or current account. There are two ways you could benefit from investing in shares:
The stock market is a marketplace where shares and other assets are bought and sold.
There are several stock markets around the world, and in the UK, the main exchange is the London Stock Exchange (LSE). The LSE offers trading in shares from big names you'd have heard of, such as Vodafone on its main market to smaller companies such as ASOS listed on the Alternative Investment Market (AIM), its junior market.
Anyone can buy shares on the London Stock Exchange, but you need to go through a stockbroker.
An index is a group of shares of companies representing a particular market segment. These companies are usually grouped by size and value.
In the UK, the main indices are the FTSE 100 (an index of the 100 largest companies on the LSE), the FTSE 250 (an index of the next 250 largest companies) and the FTSE All-Share (an index of all shares listed on the LSE's main market).
Indices are used as benchmarks to gauge the movement and performance of market segments. For example, the FTSE 250 can be used to gauge the fortunes of the UK economy.
Share prices are initially set by the company issuing the shares and subsequently determined by demand and supply.
Demand means the number of people who want to buy the shares, and supply means the number of people who want to sell. While there is no perfect equation that tells us exactly how share prices will behave, several factors can affect demand and supply, such as:
The best online stock brokers for beginners in the UK:
The best share dealing accounts in the UK:
Use our share dealing charges comparison table to get a sense of how each platform charges for regular investing and ad hoc share trading.