Many people believe that buying and selling stock in a company is risky, complicated, and reserved for the very wealthy. None of these is true, in our opinion. In this guide, we'll show you how to buy shares with the least amount of hassle and answer all of your questions about shares in the UK.
What exactly is a share?
Simply put, purchasing a share gives you a stake in a company.
You are entitled to any dividends paid out and have the right to vote on certain issues. You can keep it for as long as you like and decide when to sell it. If a company is liquidated, you are entitled to a portion of what is left after all bills have been paid.
Importantly, as a shareholder, you are not liable for a company's debts under the UK legal concept known as limited liability.
And if a company's shares are traded on a public market, such as the London Stock Exchange – such as Tesco, HSBC, and BP – you can buy and sell them very easily and cheaply, hopefully profitably!
Before you buy stocks, here are a few things you should know.
A paper share certificate was traditionally used to represent ownership of a share. It would tell you how many shares you owned and would be required to be presented to your broker when you decided to sell. If you purchased more shares, you would receive additional share certificates. To say the least, it was all a little clumsy.
Nowadays, purchasing UK shares is a little different and a lot simpler. They're most likely held electronically in nominee accounts through investment platforms like Hargreaves Lansdown or Interactive Investor.
This means that your shares are pooled with everyone else who uses the same broker and owns that specific share.
It's much faster and much less expensive.
Buying and selling shares online through a nominee account does have some drawbacks, as your name will not appear on the shareholder register and you will have to rely on your broker to send you voting notifications, copies of annual accounts, and so on.
However, for the majority of investors, the benefits far outweigh the drawbacks.
What is the cheapest way to buy shares in the United Kingdom?
There are numerous brokers to choose from when it comes to purchasing stocks these days.
They typically have different fee structures, so which one is the cheapest for you will depend on a variety of factors such as the size of your portfolio, the type of accounts you want, how frequently you trade, and any additional services you may require.
Many brokers charge a flat fee for buying and selling UK stocks, which typically range between £8 and £12. Some will give you a discount if you trade more than a certain number of times per month, while others will give you free trades on basic trading accounts, but you will have to pay more for tax-sheltered accounts like ISAs.
Where is the UK stock exchange?
The London Stock Exchange is physically located in the city. The London Stock Exchange Group was formed in 2007 when the London Stock Exchange merged with the Milan Stock Exchange, the Borsa Italiana. Its current headquarters are in Paternoster Square, near St Paul's Cathedral in the City of London. It is a subsidiary of the London Stock Exchange Group (LSEG). The London Stock Exchange Group was formed in October 2007 by the merger of the London Stock Exchange and the Milan Stock Exchange, Borsa Italiana.
How to Buy Shares Online
Now we'll get into the specifics of how to buy stock in a company. Believe it or not, once you've decided which company to buy and how much to pay, the entire process can be completed in less than a minute.
1. Sign in to your stock trading account
To find the right company, use the search function. In most cases, you can use either the company name or, if you know it, the ticker code (like TSCO for Tesco). Click the buy button to enter your complete order information.
2. Examine the current buying price
The current market share price should then be displayed to you. There will be two prices: the lower price for selling and the higher purchasing price. This is referred to as the bidding offer spread.
3. Specify the number of shares you wish to purchase
Some brokers allow you to enter an amount in pounds and they will automatically calculate the number of shares for you.
4. Determine whether you want to trade "At Best" or use a limit order
At Best means that your broker will find the best price possible, whereas a limit order allows you to specify a maximum price for your buy order. If your broker is unable to obtain the desired price, your limit order will expire.
5. Examine your purchase order
This will tell you the total amount you're likely to pay, including any fees or taxes.
6. Place your purchase order
This is the point at which you are presented with a real deal that you can accept. Because share prices fluctuate, the price may differ slightly from the order preview. You only have 15 seconds to accept a live quote, so make sure the share price is right for you. When you first start investing, this countdown can be a little nerve-racking, but you'll get used to it quickly.
Congratulations, you have purchased your shares!
That's all. You now understand the fundamentals of stock purchase. The money should be deducted from your brokerage account, and you should be given the option to download your contract note, which you should keep for tax purposes.
Nov 16, 2021