If you want to make a return on your money, trading in shares is a good way, but it is less rewarding if dealing costs are through the roof – these alone can take a big chunk of your money. Here are some basic things you need to know about holding, buying, and selling shares while you search for the best online stock broker in the UK.
What’s a share?
In simple words, a share is just a divided-up unit of the value of a firm. For instance, if a company has a worth of £1000 million, and there are 500 million shares, then every share is worth £2. These shares do go up and down in value for a variety of reasons.
Organizations issue shares to raise money, and you (investors) purchase shares in businesses because they believe the organization will do well, and they want to ‘share’ in its success.
Basic need-to-knows about share dealing
- When buying shares, you’ve got two options: When buying shares, you can either own shares yourself or pool your money with other people in a fund (a collective investment). Since you’re not putting every egg in just a single basket as a first-time investor, pooling your money is a tad safer option, meaning you can ride out any bumps in the market.
- You should invest for five years at least: You should invest for at least five years – consider it as a rule of thumb. This offers you sufficient time to ride out any bumps in the market that may see you make a loss on your money. If, in this time, you’re going to need access to your money, then maybe investing isn’t the right path for you.
- Holding shares in just a single organization is risky: Just think about it. If that organization gets into a difficult situation, then you could lose all or some of your money. Instead, spread your risk by purchasing shares in different organizations.
- Your first port of call should always be investing in an ISA: If you’re new to investing, your initial preferred route must be ISA. The majority of the platforms will let you do this, and it is a good way to gain tax benefits while simultaneously investing your bucks.
- There are two ways to make money from investing: There are two ways you make money from investing. One is when the shares pay dividends. The other is when they increase in value, and then you reap a nice little profit when you sell them.
- Beware of scams: If someone contacts out of the blue by someone inviting you to invest in shares, always say ‘no.’ It’s almost certainly a share scam, usually referred to as a ‘boiler room scam.’ Here, fraudsters will cold-call investors providing them overpriced, worthless, and even non-existent shares. Although they usually promise high returns, those who invest typically end up losing their money. And keep in mind, if it sounds too good to be true, it usually is.
- Always keep in mind the five golden rules of investing:
- If you want a greater return, you should be willing to accept more risk
- Refrain from putting all your eggs in just a single basket
- It is wise not to take too much of a risk if you’re saving over the short-term
- Review your portfolio
- Don’t panic