How to Buy Shares in the UK in 2023

December 20, 2023 03:17 AM AEDT | By Team Kalkine Media

How to Buy Shares in the UK in 2023 — Image source: shutterstock.com

Seven Steps to Buying Shares:

1. Open a Share Dealing Account:

The first step towards buying shares is to open a brokerage account. With various brokers offering different services and fees, the choice depends on factors like portfolio size, investment frequency, and personal preferences. Consider account types such as Standard Trading, Stocks and Shares ISA, or a Self-Invested Personal Pension (SIPP) based on your financial goals.

2. Check the Price:

Once your account is set up, explore the market and select a company to invest in. Brokers provide bid (buying) and offer (selling) prices, with the difference known as the bid-offer spread. Larger companies tend to have smaller spreads, while smaller companies may have larger spreads. Research and choose companies aligned with your investment strategy.

3. Decide How Many Shares to Buy:

Determine the number of shares you want to purchase based on your available capital. Brokers often allow you to enter a pound value, which they then convert into shares. Diversification is a key strategy – consider owning 15-25 businesses to maximize the benefits of a diversified portfolio.

4. Select the Order Type:

Choose the type of buy order to place, considering your investment strategy and risk tolerance. Common order types include:

At Best: Immediate execution at the best available price.
Buy-Limit: Execute a buy trade if the share price falls below a specified level.
Sell-Limit: Execute a sell trade if the share price rises above a specified level.
Stop-Loss: Execute a sell order if the share price falls below a specific price to limit losses.

5. Preview Your Order:

Review a breakdown of the transaction provided by your broker. This includes details like the selected stock, investment amount, commission expenses, stamp duty, and other applicable fees. It is crucial to ensure accuracy at this stage to avoid errors in the transaction.

6. Place Your Order:

After verifying all details, proceed to place your order. Brokers often present a final quote, valid for a short time. Take your time reviewing the quote, and if satisfied, accept it. Cash is usually deducted from your account immediately, but for international trades, the process might take slightly longer.

7. Congratulations, You're an Investor!

With the completion of these steps, you have successfully bought shares in the stock market. Keep thorough records of all transactions. If you are not using tax-efficient accounts like ISAs or SIPPs, maintaining accurate records is crucial for annual tax returns or self-assessment.

By following these seven steps, you can confidently navigate the stock market, building a diversified portfolio aligned with your financial goals. Whether you are a beginner or have some investment experience, this guide provides a comprehensive overview of the process, making stock market investment accessible to everyone. Happy investing!

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