What all to consider before investing on LSE?


  • Investing helps you in growing your money and generate positive returns to achieve desired goals.
  • London Stock Exchange gives plenty of options from which an investor can choose.

Investing means putting your money in a financial instrument with an expectation of generating a positive return in future, and London Stock Exchange (LSE) enhances that opportunity by allowing you to invest in multiple available options.

The UK’s primary stock exchange allows an investor to invest in a variety of shares that are listed across the two markets segment: Main Market and AIM. The main market allows large companies to raise funds for their business activities and help them list on the stock exchange. The main market of the LSE has three different segments categorised as Premium, Standard and High Growth Segment.

On the other hand, the sub-market of LSE is called Alternative Investment Market (AIM), launched in 1995 and allows small companies to raise capital and list on LSE.

Altogether, London Stock Exchange offers a variety of stocks such as Blue-chip, Mid and Small Cap, Thematic Stocks etc., listed across these two market segments. As of April 2021, a total of 1986 companies are trading on the London Stock Exchange with a combined market capitalisation of approximately £3.88 trillion.

What to consider when investing in LSE?

While choosing which type of companies one should invest in, one should keep various factors in mind as choosing the right kind of shares will help you increase the odds of success and bring you one step closer to your investment goal.

Before choosing any stock, a UK resident must own a trading account to deal in LSE shares. Any person willing to invest can register online with the stockbroker giving you an online trading platform that allows you to buy or sell shares in exchange for a fee for the services, they will deliver.

Know your Risk-taking ability: Before proceeding to invest, always assess the amount of risk you are willing to take, as the portfolio value will fluctuate from various internal and external factors such as changes in a political party, changes in the policies related to the sector in which company operates, promoters of the company etc.

Suppose you are a risk-averse investor and looking to invest in a well-established company; you should buy blue-chip stocks. These are the stocks from the top 100 companies selected based on the market capitalisation, i.e., FTSE100 index stocks.

The company listed under FTSE100 are financially stable companies that are less risky than the other publicly listed companies. These companies generally pay regular dividends to their shareholders and help in creating wealth over a long time.

However, if an investor is ready to explore and invest in a new innovative idea and generate an extraordinary income, he or she can choose the AIM-listed companies. Investment in these companies will help to unlock the hidden growth potential before any AIM-listed penny stock turns into a blue-chip stock.

One should also choose the shares as per their investment objective. If your goal is to invest for your child’s marriage or education or buy a home or save for your retirement, you should invest in companies that you can comfortably hold for at least 15-20 years.

The idea behind purchasing the company should be supported by the growth potential you see in a particular sector, depending upon the entry barrier in that sector and level of competition.

Last but not least, always diversify your investment into the companies selected across different sectors as all the industries will not see an upside at the same time.