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How to Buy Shares: A Guide to Share Dealing on the UK Stock Market

The markets are behaving oddly right now – there is no denying that the US sub prime collapse has shaken things up. But if a private investor is willing to take some calculated risks and follow the advice of the experts, there are still opportunities to make money on the stock market. Here’s how…

Step 1 – Open a Share Dealing Account

A basic share dealing account offers just that – the facility to buy shares through the Internet or over the phone. The simplest service is known as “Execution Only”, which means the broker does not provide any advice. They simply execute the trade as per the client’s instructions. For instance, buy 1,000 shares in The Hat Company Plc.

Opening a standard trading account is usually free. This needs to be credited with funds from a bank account before trading can begin. Alternatively, open a Stocks & Shares ISA to avoid paying tax on any stock market income within a certain limit. This is more sensible for long-term investing.

Typically, brokers charge £8-£12 per trade (regardless of the size of the trade). Some brokers charge an inactivity fee, so if no trade is placed over a three-month period, a trading fee may be applied anyway. Finding the most affordable broker is easy using a comparison site like Money Supermarket. To compare a list of share dealers and their fees, go here.

Step 2 – Find a Reliable Source of Stock Tips

While some private investors do their own stock research, it’s much easier to find a reputable tip sheet or research house that supplies all the ideas. Don’t pick stocks randomly (i.e. because they have a nice name) or trust investor bulletin boards (i.e. because someone says “this one’s going to be a ten-bagger!”) This is completely unreliable. Remember – the stock market is not random, it moves on fundamental attributes and investor sentiment. Understanding what causes a stock to move is the key to making money.

What is more, a professional research analyst has:

  • understanding of wider market trends
  • knowledge of individual sectors
  • experience analysing financial accounts
  • contact with the management of the stock
  • access to rumours and upcoming deals
  • no emotional bias

That last point is often overlooked. It is easy to become attached to a stock simply because it is deemed to show promise. But if the trend is down, a level-headed investor must know when to cut a loss. Tip sheets can take this procrastination out of the equation.

Free Share Tips

Ready to start trading? Great! Pick a handful of the following links and get acquainted with the market. After that, pick a few stocks and invest a modest amount to start with. Remember: the value of stocks can go down as well as up – so never invest what you can’t afford to lose.

3 Mar 2017 4:38 PM | Anonymous

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