Whether you’re an experienced trader or a complete novice, a share dealing account could help you to add value to your portfolio. If you want to learn more, start by reading this guide.
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What is share dealing?
If you’re interested in investing but haven’t got a clue, you’ll be pleased to hear that buying shares isn’t rocket science.
The simplest option available is to buy shares online through a ‘share dealing platform’ (or broker). This lets you purchase shares from any company listed on the stock exchange.
There’s the London Stock Exchange, which includes the big names like Barclays, Vodafone, easyJet and Sainsbury’s. The FTSE 100 Index shows the top 100 companies listed on the London Stock Exchange. Then you’ve got the Alternative Investment Market (AIM) which is a subsidiary of the London Stock Exchange. The AIM lists new, growing companies that are less well known. Only companies which have ‘floated’ on the stock exchange can sell shares publicly. If you see it listed, you can buy shares in it! It’s that simple.
Once you’ve identified the share you want to buy, you’ll have to set up a share dealing account, and link it up to your bank account or deposit money in it to buy the share.
What does 'floated' mean in investing?Companies usually get listed on the stock exchange when they’ve done an Initial Public Offering (IPO). This can also be known as floating, flotation, or just ‘going public’. There are other ways a company can become listed, for example by being taken over by an already listed company.
What costs should I look out for?
After you’ve set up an account you’ll be able to browse for shares to buy. You can select to purchase shares based on quantity, or based on value. Once you’ve purchased your shares, they will appear in your portfolio.
It goes without saying that online share dealing platforms need to make money. The main way they do this is through various fees and charges.
Here’s a list of some of the ones to look for:
- Account fee: This charge might be monthly or annually.
- Inactivity fee: Some platforms will charge you if you stop trading, but this is a decreasing trend as more providers compete for customers.
- Price per trade: This is what it sounds like. The more often you trade, the more likely you’ll get a discount on this.
- Stamp Duty Reserve Tax (SDRT): UK shares traded electronically incur 0.5% SDRT.
How do I choose the right platform?
When deciding on a share dealing broker/platform, there are several points to keep in mind, including the following:
Compare the UK’s leading share dealing platforms
Warning: The value of investments can fall as well as rise, and you may get back less than you invested. Past performance is no guarantee of future results.