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Buying shares is an exciting, but sometimes daunting, part of your investing journey. Unlike in the past, it’s now easier (and cheaper) than ever before to buy shares and own pieces of companies from around the world. In fact, Finder’s investment statistics show that around 42% of Brits are already investing. But how do you actually buy stocks, and is it worth it?
Buying shares and investing in the stock market gives you ownership of a real asset. It allows you to own pieces of companies and the reason this should be appealing is because it means you can become a business owner, without having to actually control or run the company yourself – ideal.
The true benefit of buying shares and becoming a part-owner is that you also get the opportunity to earn a share of the profits (or losses in some cases). And it’s proven to be one of the best ways to build wealth over long periods of time. The process of buying shares used to be complex and reserved for those with deep pockets or direct connections to businesses. Today, the doors have been flung wide open and now you can become a shareholder with minimal fanfare or effort.
Here’s a step-by-step guide explaining the basic process of how to buy shares:
All investing should be regarded as longer term. The value of your investments can go up and down, and you may get back less than you invest. Past performance is no guarantee of future results. If you’re not sure which investments are right for you, please seek out a financial adviser. Capital at risk.
Shares are pieces of companies. When a business is created, a certain amount of shares are also created and each one represents a portion of ownership. Buying shares and becoming a shareholder means owning pieces of that pie.
The more shares you buy, the more ownership you have in that company, which means greater exposure to any potential profits. However, the more you invest in a single company also means greater exposure to potential losses if the business performs poorly.
There are 2 basic ways that you can make money after buying shares:
Use our table below to see some of the features and fees of some popular trading apps.
This is a personal decision and the answer will depend on your goals, appetite for risk and time horizon. If you have expensive debt, don’t have an emergency fund and still need to iron out your budgeting plans, you might want to hold off.
If you have funds you’re happy to put aside for a decent amount of time (at least 5 years) with the aim of higher returns (compared to something like a savings account), you should explore the idea of investing and buying shares. There are also other ways to invest without picking individual stocks and shares as well.
When buying shares, like with everything – there’s no such thing as a free lunch. Here are the main costs involved:
When investing in stocks and shares, there are some broader downsides you need to think about:
Although there are risks to be aware of, there is also plenty of potential upside when investing in stocks:
Some share trading platforms offer several different order types which might crop up in the process — we’ve detailed some of the most common ones below with some examples of how they work.
Order type | What it does | For example |
---|---|---|
Ask | How much the seller wants for the stock | “Jack, when you sell the cow, don’t take any less than £5 for it” |
Bid | How much the buyer wants to give you for the stock | “Don’t spend any more than a few magical beans on that cow, you hear me?” |
Market order | When you buy or sell a stock to be carried out as soon as possible at the best available price | “Go out and sell the cow, quick! We’ll take £4 for it if it goes today!” |
Limit order | When you buy or sell a stock but want it to be a specific amount | “If we can’t get £5 for the cow, we won’t sell it. We’ll put up an advert for the cow and wait until someone offers £5.” |
Stop loss/ stop | An order where you set the price you want to buy or sell at, and once the price is met, it triggers an order. | “Everyone’s selling their cow. If the price drops to £4, let’s sell ours before we lose any more money.” |
Here are some questions to ask yourself and key things to think about when comparing platforms for buying shares:
If you don’t want to research and pick your own stocks, here are some alternative investing options:
The simplest way to buy shares is to get yourself set up with a cheap platform (ideally one with no platform fees). Also, look for a 0% commission option that lets you invest small amounts of money. Doing this means you can get started investing with as little as £1 or £2 and minimal other costs to worry about.
One of the best (and easiest) ways to get to grips with investing is to actually go through the process of buying shares. However, trying it out first with a small amount of money is an excellent way to get your feet wet and learn the ropes. There’s no point paying high platform fees and large commissions when you’re just starting out.
Buying shares is an exciting process and it can be straightforward to invest. However, it’s really important to make sure that the rest of your finances are looking healthy before you buy shares. Also, ensure you do plenty of research first to find the right platform and avoid buying stocks or other investments that don’t align with your individual appetite for risk.
Now that you’re completely informed on how to buy shares, check out our guide on how to sell shares to get an idea of how to sell your stocks and what the process looks like.
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All investing should be regarded as longer term. The value of your investments can go up and down, and you may get back less than you invest. Past performance is no guarantee of future results. If you’re not sure which investments are right for you, please seek out a financial adviser. Capital at risk.
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