Buying shares is one of the most popular ways to grow wealth over time, but for beginners, it can seem complex and intimidating. The good news is that investing in shares has never been easier, thanks to online platforms and accessible trading apps.
Whether you're looking to invest for the long term, build a retirement fund, or generate passive income, understanding how to buy shares in the UK is essential. This guide will walk you through everything you need to know, from choosing a broker to making your first trade.
Step 1: Understand How the Stock Market Works
Before diving in, it's important to understand how the stock market operates.
The stock market is where shares (equities) of publicly traded companies are bought and sold.
Shares represent ownership in a company, meaning you can benefit from its success through capital growth and dividends.
The UK’s main stock exchange is the London Stock Exchange (LSE), but investors can also trade on international markets.
Share prices fluctuate based on supply and demand, company performance, and economic factors.
If you’re a beginner, consider investing in well-established companies or exchange-traded funds (ETFs) to reduce risk.
Step 2: Choose a Stockbroker or Trading Platform
To buy shares, you'll need a broker or online trading platform. Brokers provide access to stock exchanges and execute trades on your behalf.
Types of Brokers
There are three main types of stockbrokers in the UK:
Full-Service Brokers – Offer investment advice, portfolio management, and research reports. These tend to be more expensive.
Online Brokers – Allow you to trade shares yourself via an online platform, usually with lower fees.
Robo-Advisors – Automated platforms that invest on your behalf based on your risk tolerance and financial goals.
Key Factors When Choosing a Broker
Trading Fees – Look for brokers with low commission fees to maximise profits.
Platform Ease of Use – A beginner-friendly interface is crucial for first-time investors.
Range of Investments – Ensure the broker offers shares from the LSE and international markets if required.
Deposit and Withdrawal Options – Check for minimum deposits, withdrawal fees, and payment methods.
Regulation – Only use brokers regulated by the Financial Conduct Authority (FCA) to ensure security.
Popular UK stockbrokers include Hargreaves Lansdown, eToro, AJ Bell, Freetrade, and Interactive Investor.
Step 3: Open and Fund Your Investment Account
Once you’ve chosen a broker, you’ll need to open an account. Most brokers require the following details:
Personal Information – Full name, address, date of birth, and National Insurance number.
Proof of Identity – A passport or driving licence for verification.
Bank Details – To fund your account and withdraw earnings.
After your account is set up, you can deposit funds using a bank transfer, debit card, or other accepted payment methods. Some platforms have minimum deposit requirements, so check before signing up.
Step 4: Decide What Shares to Buy
Choosing the right shares depends on your investment goals, risk tolerance, and market knowledge. Here are a few options:
Blue-Chip Stocks – Established, financially stable companies like BP, HSBC, and Unilever.
Growth Stocks – Companies expected to grow quickly, such as tech firms.
Dividend Stocks – Shares in companies that pay regular dividends, providing passive income.
ETFs and Index Funds – A safer way to invest, spreading risk across multiple stocks.
Tips for Picking Shares
Research a company’s financial health, revenue growth, and past performance.
Look at the price-to-earnings (P/E) ratio to assess whether a stock is over or undervalued.
Follow market news to stay informed about potential investment opportunities.
If you're unsure where to start, consider investing in ETFs that track the FTSE 100 or S&P 500, which offer broad exposure to the market.
Step 5: Place Your First Trade
Once you've selected a stock, it's time to buy shares. Here’s how:
Log into your trading account and search for the company’s ticker symbol (e.g., TSCO for Tesco).
Choose the type of order – Market orders buy at the current price, while limit orders let you set a specific price.
Enter the number of shares or the amount you want to invest.
Confirm and place the trade – Your order will be processed, and shares will be added to your account.
After purchasing, you can monitor your shares and track their performance through your broker’s platform.
Step 6: Monitor Your Investments
Investing isn’t just about buying shares; you also need to manage your portfolio over time.
Regularly check your investments to see how they’re performing.
Keep up with company news and economic trends that might affect share prices.
Consider reinvesting dividends to maximise long-term returns.
Avoid panic selling during market dips – investing is a long-term strategy.
It’s also worth reviewing your portfolio annually to ensure it aligns with your financial goals.
FAQs: Buying Shares in the UK
1. How much money do I need to start investing in shares?
You can start with as little as £10 on some platforms, but ideally, you should invest enough to diversify your portfolio.
2. Can I lose money when buying shares?
Yes, the stock market carries risk, and shares can lose value. Never invest money you can’t afford to lose.
3. What’s the best way to reduce risk?
Diversification is key. Instead of putting all your money into one company, spread your investments across different sectors and asset types.
4. Do I have to pay tax on my profits?
In the UK, profits from shares may be subject to Capital Gains Tax (CGT) if they exceed the annual allowance. Investing through an ISA or pension can help reduce tax liability.
5. Can I buy shares in US companies from the UK?
Yes, many UK brokers offer access to international stocks, including US-listed companies like Apple and Tesla. You may need to pay foreign exchange fees.
6. What happens if the company I invest in goes bankrupt?
If a company goes bust, its shares typically become worthless, meaning you lose your investment. This is why diversification is important.
Final Thoughts: Start Your Investing Journey with Confidence
Buying shares in the UK is now more accessible than ever, with online platforms making it easy for beginners to get started. By choosing the right broker, researching investments, and managing your portfolio wisely, you can set yourself up for long-term financial success.
For most new investors, a mix of shares and ETFs can provide a balance between growth and stability. No matter which approach you take, the key is to start early, stay informed, and invest for the long term.
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