How to Buy Shares
A Guide to Buying Shares on The Stock Market
Apr 7, 2008 Rebecca Turner
This article is about how to buy shares on the UK stock market. However, the same basic rules apply for any other country, from the US to Germany to Singapore.
The markets are behaving oddly right now – there is no denying that the US sub prime collapse has shaken things up. But if a private investor is willing to take some calculated risks and follow the advice of the experts, there are still good opportunities to buy shares for profit and make money on the stock market. Here’s a step-by-step guide on how to buy shares on the stock market.
Step 1 – Open a Share Dealing Account
A basic share dealing account offers just that – the facility to buy shares through the Internet or over the phone. The simplest service is known as “Execution Only”, which means the broker does not provide any advice. They simply execute the trade as per the client’s instructions. For instance, buy 1,000 shares in ABC Plc.
Opening a standard trading account is usually free. This needs to be credited with funds from a bank account before the investor can buy shares. Alternatively, open a Stocks & Shares ISA to avoid paying tax on any stock market income within a certain limit. This is more sensible for long-term investing.
Typically, brokers charge £8-£12 per trade (regardless of the size of the trade). Some brokers charge an inactivity fee, so if no shares are traded over a three-month period, a trading fee may be applied anyway. Finding the most affordable broker is easy using a comparison site like Money Supermarket.
Step 2 – Find The Best Stock Market Tips
While some private investors do their own stock market research, it’s much easier to find a reputable stock tip sheet or equity research house that supplies all the ideas.
Don’t buy shares randomly (i.e. because they have a nice name) or trust investor bulletin boards (i.e. because someone says “this one’s going to be a ten-bagger!”) This is completely unreliable. Remember – the stock market is not random, share prices move because of fundamental attributes and investor sentiment. Understanding what causes a share price to move is the key to making money on the stock market.
What is more, a professional stock market analyst has:
- understanding of wider market trends
- knowledge of individual sectors
- experience analysing financial accounts
- contact with the management of the stock
- access to rumours and upcoming deals
- no emotional bias
That last point is often overlooked. It is easy to become attached to a stock simply because it is deemed to show promise. But if the share price is doomed, the level-headed investor must know when to cut a loss. Stock market tip sheets can take this procrastination out of the equation.
Free Share Tips
Ready to buy shares? Follow these links to get acquainted with the UK stock market. After that, pick a few company shares and invest a modest amount to start with. Remember: the value of shares can go down as well as up – so never invest what you can’t afford to lose.
Here are some popular providers offering free share tips… Generally, they are geared towards long term investing, so don't expect to make profits overnight. Log on to see what they are buying right now.
If you found How to Buy Shares interesting, you may also like:
How to Buy Stocks and Invest on the US Stock Markets
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