The Basics on Buying Shares
Dealing shares no longer is exclusively for those City men wearing pinstripe suits. Nowadays almost everyone is dealing shares, from your average day trader typing away all day to the woman in the mall who fancies Royal Mail shares.
The increase in popularity that share trading has seen is partially due to the fact that it is now more accessible. You are now able to buy shares in just about anyway, via posy, online, over the phone and even from a mobile app. The question is, how do you begin?
Understanding the risks is one of the most important things. It is true that share prices can rocket, they can however also plummet and there is no guarantee which one will occur. Let’s say that for example, you purchase fifty shares from company X at 500 p a share, the shares could possibly climb to 600 p on the first couple of months, however due to some poor trading results, and they could then drop to 400 p.
Your original stake of £250 would only now be worth £200 which equals a loss of £50. There is a chance that it could recover again, but it could also drop even further. The element of risk means that you should only ever invest your money in shares that you are able to afford loosing. What I means is that before you begin dabbling in the stock market, make sure that you can pay your mortgage and other important bills.
There are large amounts of information available on the companies which are listed on the stock market — researching can really pay off. Look into the recent performance of a company, take their chances of success not only in their own sector, but also in the wider economy, into consideration.
Keep in mind that there are firms which tend to be inherently more of a risk than others. For example, a large company like this is most likely a safer bet than a smaller start-up company, if you can however deal with a greater risk, you could set yourself up with a greater reward.
There are people who do not hold onto their shares for very long, they regularly cash in on small price fluctuations. But these kinds of tradings, which are sometimes called `day trading´are only for investors that are greatly experienced. It is generally best to hold onto your shares for at least five years, if not even more, this way you ride out the ups and downs if the market which are inevitable.
If you are looking to buy shares, it is important to trade through a stockbroker — the choices here are many. You could with a City name that is already established, or you could go with one of the building societies or big banks that have a stockbroking division. There are also larger firms or financial advisers who provide stockbroking services, there are also various growing online companies who do as well.
Stockbroking services are offered in three different varieties. If making your own decisions is something you are comfortable with and is you want to control your own share trades, then a DIY stockbroker may be a good choice for you. These stockbrokers are often called `execution only ‘and with this you decide what shares a bought and when they are bought.
Those who do not feel as confident may prefer the advice of a stockbroker. If the service you choose is advisory, you will be offered investment guidance by the firm, this will coincide with the goals and your attitude towards risk which has been expressed. In the end however, the final decision is yours.
As soon as you place money in your account, you can start trading. A discretionary service is another option, with this you will hand over all control to an experienced stockbroker. This means that all the investment decisions will be made by the firm, they should however take your aims and risk profile into consideration.
Execution only services are sometimes all that some brokers will offer, it is usually the least expensive and simplest choice. That being said, the most inexpensive may not always be the best, the right service for your personal circumstances is what you should pick.