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Summary
- If you have some money to invest, trading in shares can be simply done with a click of the mouse.
- Shares are generally issued by companies that want to raise money from the public.
- For anyone just starting out, one should look at platforms that charge the lowest amount of fees.
There was a time when investing in the share market used to be thought of elite and rich people’s affair and was thought of as risky. But now, if you have some money to invest, trading in shares can be simply done with a click of the mouse. You don’t need to go through stockbrokers and countless documents anymore.
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Here is a guide on how one can buy shares in the UK.
What is a share?
When the total capital of a company is divided into equal units, it is known as shares. Shares are generally issued by companies looking for raising money from the public. One who owns shares owns an equivalent portion of ownership in any company, a mutual fund, trust, or financial asset.
The ownership also makes you eligible to have a share in a company’s distributed profits, also known as dividends. It also lets a shareholder have a say in the decisions of the company through voting rights.
What is a bid-offer spread?
An important concept to be aware of to trade or invest in shares is a bid-offer spread. The bid price of a share is the price at which it can be sold. The price at which one can buy a share, a little higher, is known as the offer price.
The difference between the two prices is the profit made by market makers. Larger companies with higher valuation, there is small bid-offer spread, while in companies with lower valuation, the spreads is large.
How to compare shares online?
Most traders in the UK trade shares online. For anyone just starting out, one should look at platforms that charge the least amount of fees, provides a wide basket of shares to trade in, and an easy-to navigate interface. Some of the popular platforms are Hargreaves Lansdown, Interactive Investor, among others.
Online platforms allow buying and selling of shares according to the instructions given by the shareholder and would not provide any advice on their platforms. But some platforms also provide information and tutorials for investors who are beginners.
How to buy shares online in the UK?
A common way to buy shares online in the UK is to go through an online stock broker who would give a buyer an electronic dealing certificate.
An investor has to open an investment account with the broker or broking agent and put enough money in the account to initiate the purchase. The broker can also be authorised to make the purchase on behalf of the investor.
The other way to make a purchase is to buy share CFDs online. The process is the same as buying real shares except that the former is purchased from a CFD stock brokerage. However, CFD shares do not give voting rights or dividends. But the advantage of procuring CFDs is that one need not be an accredited investor to be able to open an account with a CFD broker or deposit enough capital as brokers generally permit fractional trading and can short sell any share.
