Always remember that investments can go down as well as up in value, so you could get back less than you put in. A rule of thumb is to hang 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 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 or stock broker. You can also use an Individual Savings Account (ISA), General Investment Account (GIA) or Self-Invested Personal Pension (SIPP) to trade shares
There are two ways to buy stocks and shares. You can either buy individual company shares directly (through a stock broker) or invest in a fund (which pools money from you and other investors to buy lots of shares).
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 within 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 in stocks and shares regularly (e.g. £25 per month) or occasionally (e.g. a lump sum of £1,000).
Whether you choose to go online or offline, you need the services of a stock broker or share dealing platform to buy shares. Stock brokers offer three types of services - execution-only, advisory or discretionary.
Deciding what shares to buy can be intimidating for the first-time investor, 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 ones are the annual platform charge, dealing charge, transfer out charge and inactivity charge.
Compare some of the best share dealing accounts below. To make sense of the charges, use our share dealing charges comparison table.
Capital at risk. Other charges apply.
Hargreaves Lansdown has thousands of investments to choose from, including UK and overseas shares, funds, investment trusts, and ETFs. 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 Fund and Share Account, Stocks and Shares ISA, Lifetime ISA, Junior ISA, and SIPP. These services are intended for investors happy at making their own decisions. Capital at risk. Other charges apply.
AJ Bell Youinvest has thousands of investments to choose from, including individual stocks and shares, funds, investment trusts, and ETFs. Share dealing is cheap if you make 10+ trades a month. AJ Bell Youinvest's services include Share Dealing Account, Stocks and Shares ISA, Lifetime ISA, Junior ISA, and SIPP.
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's services include Trading Account, Stocks and Shares ISA, SIPP and Junior ISA.
Fineco Bank is one of Europe’s largest banks, with 20 years of leadership history in brokerage and over 30 million orders processed every year. Access 26 global markets and trade over 20,000 financial instruments worldwide on a single account. Invest and trade directly in GBP, EUR, USD, Swiss Franc and 20+ currencies. Fineco Bank offers Trading Account and Stocks and Shares ISA.
Promo: Apply with the link below before the 31st of July 2021, and get 100 commission-free trades!
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 Share Dealing Account, Stocks and Shares ISA, Junior ISA, and SIPP.
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 stock broker.
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:
Here are some of the best online stock trading sites for beginners in the UK:
Here are some of 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.
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