Every new investor in the financial markets wants to know one thing, and that is how to buy shares in the UK.
This can be a cumbersome process if you are a newbie and you have no one to go to but the beauty of this day and age is that you have the internet and still even with the internet you may still have a hard time deciding which information is meant to give you the best advice on the way on how to buy shares.
The good news is it is a fairly easy process once you internalize it, and the best way to get started is first to understand what are shares.
What is a Share?
A share is a unit of value of the entire company; this means the value of the company can be easily determined by the number of shares it has. If a company has 10 million shares and it offers each at $5, then the value of the company is $50 million.
There are various ways you can determine the value of the company, but this is the easiest way to make that determination. The main reason why shares are issued in the first place is to help the company raise capital for furthering their operations or pay their debts.
Before a company is listed on the exchange, there is the Initial Public Offering (IPO) that the company must go through before it is listed, this period the company is opened to the public and this is the transition from the company being a private company to being a public company.
Companies hope to have a successful IPO because this will mark a huge sign of growth; the IPOs are the moments where the company stands to make the most of their public listing. A good IPO will boost the company’s exposure too, and this is very important to the growth of their company.
How to Buy Shares?
There are many ways in which you can buy shares but there two ways that are very common; one can decide to buy shares by themselves, or they can join other investors, pool their cash together and create a fund of sorts and invest as a group.
The more amounts you have as a group, the more shares you can be able to purchase and also the easier it is for you to survive the volatile market environments rather than when you are alone, and you have to endure those tough moments alone with the amount that can easily be wiped out.
There is the phrase ‘do not put all your eggs in one basket’ this applies very well in buying shares than in any other thing you want to do.
The idea behind buying shares is about getting the best out of the money you have invested; the best way to do this is by buying different shares rather than buying one share and hoping for the best.
With a well diversified portfolio, you are able to have balanced growth, and there is no one time that all your shares will plummet and leave you in the red if you have well balanced portfolio.
In addition to this you should also be conscious about the way you buy your shares; for any share pick you have in mind you should not commit a hundred percent of the share amount at once rather you should invest in percentages and keep on adding to the number of shares until you have your 100% of the capital allocated to that particular share totally invested.
Things to Consider On: “How to Buy Shares Online”?
After the inception of the internet into the financial market everything opened up, and there was an influx of new investors into the marketplace, and these meant new innovations would be made, and also a new breed of clients would arise.
The more people got involved in the financial market, the easier it was to have scammers who would only come through to exploit the newbie investors seeking a quick buck.
To avoid this, it is important to be very critical of any offer you get through the cold calls you receive or the e-mails you get continuously offering you a stock pick that would get you insane percentage returns.
The best way to avoid these catastrophes is to trade via a registered and regulated brokerage firm. It is important to do an in-depth due diligence before you put your cash into a trading account.
There is no shame in asking questions, however, stupid the questions may sound the better for you since you will get genuine answers for all your questions asked.
Maybe you are not skilled, and you may want to improve your skills, the brokers offer virtual trading accounts which are meant to improve your skills in money management and risk management and it also gets you acquainted with the trading platform.
The more you get involved in the trading activities, the easier it will be for you to transition from the virtual trading to live trading where you use your real funds to make real money.
There is also a category of shares in the United Kingdom of how shares are demarcated; the London Stock Exchange has two categories of shares based on the companies listed.
The small cap companies are categorized in the Alternative Investment Market, and the large cap companies are listed in the main investment category.
This way the investor can be able to make a decision which shares suit their investment and risk appetite. The other most important aspect to consider if you want to buy shares is the cost involved in transacting with your brokerage firm.
There are various fees that are an investor is charged, and it is important to know them in order to consider them when you make each trade. There are account fees, inactivity fees, trading commissions, stamp duty and the Capital Gains Tax charges for profits acquired from trading activities.