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How to invest in shares

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Michelle Monck

Consumer Finance Expert

At a glance

  • Buying and selling shares can be made using a share dealing account through a stockbroker or investment platform
  • Investment platforms enable you to buy, sell and monitor your investments
  • Investing in the stock market can deliver good returns but trading charges need to be carefully managed
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How to buy shares

Investors can buy shares in publicly listed companies using a specialist stockbroker, financial adviser or by opening a share-dealing account with an online investment platform. Investors can then choose to own the shares directly or pool their funds with others into an investment fund. The investment fund manager then selects the shares to be bought and sold in the fund. Some investment funds also purchase shares in unlisted companies.


The first step to investing in shares is to open an online share-dealing account with an investment platform. This is the cheapest and easiest way to buy shares and invest in the stock market. You will then need to add funds to your account ready for buying shares. Your chosen online investment platform will include information about the performance of different shares and funds. You can then select the shares you want to buy and start trading. You can also sell your shares too.

How to invest in shares

Market changes and volatility is all part of investing in shares. For this reason, investors should as a rule, consider shares a minimum five-year investment. Holding all your investment in the shares of one company poses the risk of losing all or some of your money should the company performance fail. You should think about spreading your investment across a range of companies shares to help reduce this risk.

Deciding on the timing to buy and sell shares is very difficult and it can be hard to second guess the stock market. Making regular investments, also called ‘drip-feeding’, can help to smooth out any increases or decreases in the value of different shares.

When investing you should remember to:

  • Diversify your investments and spread your risk
  • Understand that greater returns usually come with a greater risk
  • Remember you should be investing for at least five years to allow for market ups and downs
  • Keep an eye on your portfolio and its performance so you can buy or sell shares if needed

How to deal in shares and make money

You can make money from investing in shares either by receiving a dividend payment or by selling them at a profit. If the company you have bought shares in makes a profit it can decide to pay its shareholders a dividend. Dividend interest is a form of income and this can be tax-free if you hold your shares in a stocks and shares ISA. Outside of an ISA, dividends can be paid up to £1,000, reducing to £500 in April 2024. Over this amount, it is 7.5% tax for basic rate taxpayers, 32.5% for higher rate taxpayers and 38.1% for additional-rate taxpayers. Some investors choose to hold their shares in a Self-invested personal pension (SIPP).

How do share dealing accounts work?

A share dealing account allows you to buy and sell shares in listed companies. A share dealing account can be opened online using an online investment platform or through a stockbroker. When you buy and sell shares you can do this on an execution only basis, advisory or discretionary basis.
Online investment platforms are usually provided on an execution only basis. This is where you receive no advice for your investment choices and will be completely responsible for these.

When you use a stockbroker to buy and sell shares, they may offer you advice on an advisory or discretionary basis. The former means they will give you guidance on your investments and you then make the final decision, while discretionary advice allows the broker to trade on your behalf. If you bought shares through an investment platform then you will need to use the same platform to sell your shares. You can sell shares either as a specific number to sell or by value.

 

Featured online share dealing providers

  • Interactive Investor
    • Impartial, market-leading intelligence daily to help you make confident investment decisions.
    • Fair, flat fees mean you get to keep more of your money and achieve your goals sooner.
    • Get one free trade every month to buy or sell any investment.
    • Award-winning support team, and full FSCS protection.
Note

Links to third parties on this page are paid for by the third party. You can find out more about the individual products by visiting their site. moneyfactscompare.co.uk will receive a small payment either if you click the links or if you use their services after you click through to their site. All information is subject is subject to change without notice. Please check all terms before making any decisions.

Disclaimer

The list of online share platform providers on this page is a selection of services available and gives you an idea of the kind of options available. You can find out more about the individual products by visiting any of the providers listed. All information is subject to change without notice. Please check all terms before making any decisions. This information is intended solely to provide guidance and is not financial advice. moneyfactscompare.co.uk will not be liable for any loss arising from your use or reliance on this information. If you are in any doubt, moneyfactscompare.co.uk recommends you obtain independent financial advice.

Share dealing charges

Share dealing accounts may charge you an account fee and a transaction cost for when you buy and sell shares. If you decide to pool your funds and put money into an investment fund instead of purchasing individual shares, then some platforms may only charge the account or management fee as a percentage of the value of funds invested. Some investment platforms will reduce the cost of each transaction on a sliding scale as you make more transactions. Some platforms may charge inactivity fees.

Invest tax-free with a Stocks and Shares ISA

Did you know you can invest up to £20,000 a year in a stocks and shares ISA? Learn more about the tax benefits of investment ISAs and find a provider today. 

 

Find a financial adviser near you

Find a qualified, independent and regulated financial adviser in your area to help you make the right decisions about your financial future. A free service, quickly connect to over 27,000 experts with the help of Unbiased.co.uk.

Investing in shares FAQ

What is a share?

A share is a unit of ownership in a company. Businesses issue shares to generate money from investors. The company may then reward investor shareholders with a dividend payment.

What is a listed company?

A listed company is one that has completed an Initial Public Offering (IPO). This is when a private company makes its shares available to public investors and is listed on a stock exchange.

What are the stock exchanges in the UK?

In the UK the primary stock exchange is the London Stock Exchange (LSE). Listed companies can be grouped into individual indexes such as the Financial Times Stock Exchange 100 Share Index (Footsie). The FTSE 100 consists of the largest 100 listed companies by value. The Alternative Investment Market (AIM) is another place for usually smaller firms to list their shares for investment. These firms have usually run out of options for private investment but are not yet of scale to conduct an IPO.

What is a share dealing ISA?

A share dealing ISA is a wrapper for investments made into the stock market. This could either be through share trading or investment into investment funds. Any income earned will not be liable for income tax or capital gains tax while held in the ISA wrapper.

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