How to Buy Shares online
Stocks can be bought and sold by mail, telephone or on the internet. Nearly everybody, however, now buys shares on the internet because it’s the cheaper means of dealing. It’s also quick and convenient.
Internet share dealing is ‘execution only’, which means the stock broker performs your instructions on what to buy and sell. No guidance is given. When you buy shares, you have to pay 0.5pc stamp duty in addition to the cost of dealing.
Some internet share dealing companies buy shares in real time so you know precisely the cost you are paying for your chosen shares. Even so, not all services do this. Some bundle up deals during the day and only buy at certain times – typically at the end of the day – to keep expenses lower. Using this, the risk is you may not buy shares for the price you thought.
It is likely your stocks will be kept in a ‘nominee account’ – essentially the stockbroker keeps them on your behalf, so your name will not be visible on their register. What this means is you may not receive the company’s report and accounts or any added benefits which holding the shares might attract. Dividends will be paid out into your account.
How to buy shares Tip: Because you don’t keep the share certificates, you will need to sell the stocks through the brokerage service you purchased them from. The majority of brokers charge you a fee per stock should you swap to a new firm.
Always compare costs across the board before buying shares. Ask how much it is for a basic trade, for the frequent-trader services (should you expect to trade everyday) as well as other extras, for example the cost of a tax-free self-select ISA wrapper (where you choose the stocks which sit inside an Individual Savings Account). Basic costs of buying shares begins at less than £10 per transaction, although individuals ought to be wary of offers that are suspiciously low – the cost might increase in the future or the costs could possibly be hidden elsewhere.
Buying Shares – what to take into consideration
Think about these questions before buying shares:
* Use an online stockbroker that has research tools so can learn all about your proposed investment.
* Exactly what do you know of the firm? Check out the company website.
* Do the shares come with a dividend? If yes exactly what is the current share price yield, i.e. the effective interest rate you’re paid for owning the shares.
* Precisely what price will you be happy to buy at? What price will you be pleased to sell at, what would be considered a good profit?
* Consider setting a Stop Loss, if your share price falls 30% from your purchase price, your choice to purchase might not have been a beneficial one.
* Never invest greater than you really can afford to forfeit in shares.
* Assess if you intend to buy a number of shares or invest an amount, there are dealing charges and stamp duty to bear in mind.
Keep in mind that buying shares can be risky and they will go down as well as up.