Dealing and Buying Shares

The article is a brainchild of Atkinsons Chartered Accountants in Brighton & Hove, United Kingdom.

Because of their potential for returns, shares are still a popular choice for investment. They are also popular because an investor can put money directly into individual companies. Historically, investing in shares outweighs traditional products that offer low-return assets like a time deposit or savings account.

If you have an investment ISA or a pension, you may have been exposed to shares investment, even if it is through a fund that invests typically in a particular company’s shares. When it comes to knowing where to invest money, several new investors may be at a loss because of the many options. If you are new to investing, there are some guidelines that can help in deciding where to invest your money.

Starting Out

A share is defined as an investment in a particular company. Even if you buy one share, you own a part (although small) of that company. As a company shareholder, you can receive dividends and you can vote in organizational activities like in yearly general meetings.

However, you have to know what kind of investor you are before you start purchasing shares. You need to hire a stockbroker or use a trading platform, so you can easily transfer your shares.

When you choose investments, you can use various approaches like following analyses and charts to support a company that you are familiar with. Regardless of the system you use, you should narrow your choices down to a few companies so you will know if they meet your standards before investing. A stock filter tool is an efficient method to get a research option shortlist, depending on investment preferences.

Determining Investment Criteria

Shares can be categorized in various ways. Some of the criteria to consider are risk level, sector, geographical region, growth or income, markets and indices, and portfolio spread.

Sector – These include industries like banking, property, and pharmaceuticals. Each industry has its own risk level and negative and positive attributes.

Risk Level – Certain company shares have more risk due to the economy, sector, personal circumstances and location they are linked to. The potential risk is commensurate with the potential reward, and you need to determine the specific risk level that you can tolerate. The longer your shares are invested, the higher the risk appetite, since you have a longer period to ride out market volatilities.

Growth or Income – Certain shares will have a main focus on giving capital growth or income (dividends) through extra value as your shares appreciate in value. You could have a growth or income priority already or, over time, it may change. You can also change your portfolio to fit your particular requirements.

Geographical Region – Do you prefer to invest in foreign companies or in companies based in the United Kingdom? Do your interests lie in established or new emerging markets? Various overseas markets can carry various risk levels depending on the market’s political, economic and social factors.

Portfolio Spread – Regardless of the company you choose to invest in, you should spread out your risk across various investment criteria and investments. You want to make sure that you get a ‘balanced portfolio.’

Markets and Indices. Online trading platforms allow you to purchase funds and shares from international markets and in the United Kingdom. In the U.K., these are found in FTSE 100 stocks and AIM-listed stocks.

When and Where to Trade in Stocks?

Regular Investments – You can purchase shares within a conventional investment plan. In regular investments, you invest a particular sum on a typically monthly basis into one or several shares. This allows you to spread out your investment for a period of a few months. You can also buy shares at various prices instead of putting them in a single trade at a single price.

Live Price Trading – While the market is open, individual share prices will continuously move; thus, when you purchase, you can easily determine how much to invest. When you move money through an online trading platform, you will know the latest real-time stock price before you purchase.

Aside from stocks, you can also invest and trade in investment trusts and funds, ETFs (exchange traded funds), corporate bonds and gilts.

Buying Shares

You need to have an account where you can sell and buy shares from. Online brokers allow you to purchase shares through ‘execution only.’ You get to decide on your investments and the deal will be put under your name. Different stock brokers charge various fees. You will also pay a charge for commission every time you sell and buy shares. You can trade through phone, but online trading is becoming very popular.

Trading with Orders

You may buy shares by utilizing an order type. When you set up an order, you are depicting the circumstances of your investment. Once they happen, your trade will be established to happen automatically. Establishing order types means that you can maximize the fall and rise of share prices without having to monitor the markets constantly.

Once you have done it, the online trading platform will take care of it until the purchase order is dealt, cancelled, amended or expired.

Tax-Efficient Investments

If you are paying taxes for your investments, it is advisable to take advantage of any tax allowances, so you can maximize your profits. You can do this by investing within an ISA. If you are investing or saving for retirement, you can do it by an SIPP (Self Invested Pension Plan).

You have a yearly allowance on the ISA, which enables you to protect your investments up to a particular year’s limit. The investments and any profits will be protected as long as you keep them within the ISA.

Reviewing Investments

Once you have invested shares in a particular company, monitor your shares continuously. Be updated with market and company news. Moreover, reflect on whether what you have learned can impact your investment.

When you invest with an online trading platform, instead of a stockbroker, you may pay no inactivity or account fees. You can even trade international or British shares for a low commission and buy a lot of funds for an initial commission of 0%.

As you become familiar with the basics of investing in shares, like tax implications, risk-return ratio, commission fees, and market analysis, you can start to invest in a company with confidence.