How to Buy and Sell Shares on the Internet
Buying or Selling Shares – Top Tips
- Use an online stockbroker who has research tools so you can learn all about your proposed investment. One such broker is Hargreaves Lansdown who offer a range of research tools designed to help you make the most of your shares visit Hargreaves Lansdown.
- Ask yourself- are there any Stock Broker views? buy? sell? hold?
- Make sure you've researched the company. Visit the company web site.
- Find out if the shares come with a dividend. If yes, what is the current share price yield i.e. the effective rate of interest you will be paid for owning the shares.
- Decide before hand what price you are happy to buy at, what price are you happy to sell at and what would be a good profit.
- Consider setting a Stop Loss. If your share price falls 30% from your purchase price, your decision to buy may not have been a good one.
- Never invest more than you can afford to lose in shares.
- Decide if you want to buy a number of shares or invest an amount. There are dealing costs and stamp duty to consider.
- Open your first dealing account with Hargreaves Lansdown and you can start dealing shares online at just £11.95 per deal and as low as £5.95 per deal if you are an active trader. Visit Hargreaves Lansdown.
- Find a Stock Broker online that has been around for years. One such broker is Alliance Trust, who offer Low Cost Share Dealing Accounts. You will be able to buy and sell shares safely. They also offer access to a range of share based investments too.
Buying shares is expensive and risky, stamp duty is 0.5% of any buy trade and with dealing costs on top investing small amounts may not be worth it. If you are not prepared to potentially lose a large percentage of your investment you may want to consider a Cash ISA as a safe home for your money. See Latest Cash ISA Rates here .
About buying shares online - what are your options.
Shares can be bought and sold by post, telephone or online. Most people, however, now trade shares on the internet because it is the cheapest way of dealing. It is also quick and convenient.
Internet share dealing is ‘execution only’, which means that the broker carries out your instructions on what to buy and sell. No advice is given. When you buy shares, you pay 0.5pc stamp duty on top of the cost of dealing.
Some internet share dealing services buy and sell shares in real time so you know exactly the price you are paying for your chosen shares. However, not all services do this. Some bundle up deals throughout the day and only buy at certain times - usually at the end of the day - to keep costs down. With this, the danger is you may not buy or sell the shares at the price you thought.
It is likely your shares will be held in a ‘nominee account’ - basically the stockbroker holds them on your behalf, so your name doesn't appear on the company's register. This means you may not receive the company's report and accounts or any perks which holding the shares may attract. Dividends will be paid into your account.
As you don't hold the share certificates, you have to sell the shares through the broker you bought them from. Most brokers charge you a fee per stock if you swap to another firm.
Always compare prices across the board. Ask how much it is for a basic trade, for a frequent-trader service (if you expect to trade every day) and for other extras, such as the cost of a tax-free self-select ISA wrapper (where you choose the shares which sit in an Individual Savings Account). Basic trading begins at less than £10 per trade, although investors should be wary of offers that are suspiciously low - the price may rise in the future or the costs may be hidden elsewhere.
The first thing you need to get before you can buy or sell any shares is you need a Stockbroker.
Low Cost Share Dealing Accounts
1. Hargreaves Lansdown Vantage Fund & Share Account
- Deal shares online from £11.95 per deal or as low as £5.95 per deal if you deal regularly
- No charge to hold shares in the Vantage Fund & Share Account
- Deal UK, US and European Shares plus Funds, Investment Trusts, Bonds and Gilts
- Free share tips and research from Investors Chronicle and Shares magazine
- Use stop loss and limit orders to manage your deals
With Alliance Trust you can:
- Open and trade online or by phone today
Some of the lowest Annual Management Charges (AMC) on the market
- Online monthly dealing from only £1.50
- Choose from a wide range of investments of UK equities, gilts, bonds and ETFs
- Over 1,900 investment funds from over 45 UK Fund Managers
- Low quarterly administration charge of £10+VAT
- Trade from only £12.50 per deal
- Get a FREE 20 page guide from Hargreaves Lansdown on "How to Select Shares" - download it today to your PC or tablet.
Investments can go down as well as up. You may get back less than you originally invested. A full list of applicable charges is available via the Alliance Trust website. Alliance Trust Savings doesn't give advice.
Full details on Low Cost Share Dealing Accounts
What Online Stock brokers offer
J.P. Morgan are a well respected multinational business who offer an online and offline share and investment service. You can set prices to automatically buy or sell shares at so for busy people who haven’t got the time to keep a daily eye on the markets or individual shares J.P. Morgan is a good choice.
J.P. Morgan lets you trade in UK equities, bonds and gilts, investment trusts, unit trusts & OEICs and Exchange Traded Funds (ETFs) as well as international equities on international exchanges.
The Share Centre (http://www.share.com) is one of the cheapest players around for both one-off share buying and regular trading. It has a basic share-dealing service that charges 1% of the value of the shares you're buying or selling. There is a minimum charge of £2.50 for buying and £7.50 for selling.
You pay a £2.50 fee every quarter plus VAT on stock held in your account. Shares are bought and sold on a batch basis three times a day, so you won't know what price you're getting. The service is available online, by phone, post or fax.
For regular traders buying shares or selling shares, the Share Centre's Fastrack service costs £7.50 per trade in real time. You pay £80 plus VAT a year for administration charges on stocks.
The Norwich & Peterborough building society runs BrokerlineDirect.com which costs £11.95 per trade in addition to an annual fee of £10 and a one-off £10 signing-up fee. Shares are bought in real time.
Stockbroker Hargreaves Lansdown has a choice of services, including online-only, which has a flat rate of £11.95 per trade plus this drops to £5.95 per trade for frequent traders. Shares are bought in real time, you see the price before you deal.
Do Research, before You Buy Shares
Every investor should want to know as much about a company that they can before you invest your hard earned cash.
There are various share magazines, like Investors Chronicle or Moneyweek or there are free share tips that you can ask for online and straight into your inbox via email; Or you can read daily newspapers they all have a financial section and from time to time offer tips on shares to buy and sell. Do as much research as possible.
Hargreaves Lansdown can help with your research it has tools and information including weekly share tips from Investors Chronicle and sector reports from shares magazine. This is all provided free to help you make your own investment decisions.
When to buy shares
Market timing is everything, you can buy shares in a good blue chip company in 2012, and the day you buy can make a huge difference to your overall return.
Timing is everything with shares, even if you want to hold for the longer term, take Aviva for example in 2011 they were as high as 470 pence and as low as 280 pence a share with no company statements to suggest that any fundamentals of the business had changed, of course all shares in 2011 had a volatile time due to the Euro.
Hence remember that buying shares is risky and they can go down as well as up, even in good solid business’s.
What about Investment Trusts?
For those of you who think investing in a single company on the stock market is too much risk, you could consider investment trusts. An Investment Trust invests in shares of Plc. companies normally with a set focus.
For example Merchants Trust states that “The Trust’s objective is to provide an above average level of income, income growth and long-term growth of capital through a policy of investing mainly in higher yielding UK FTSE 100 companies.” And if you investigate its current holdings then you will find household blue chip shares like, Royal Dutch Shell, HSBC, Vodafone to name a few. The Association of Investment Companies (AIC – visit website) has all the information on hundreds of Investment Trusts.
Investment trusts can be bought and sold just like shares via one of the brokers we have mentioned earlier. Investment trusts help you spread your risk as they invest in lots of shares and you buy shares in the trust.
If buying shares are risky what’s a safe alternative?
The simple answer is holding cash. Whist interest rates in 2012 are still at all time lows - you can get some good ISA’s rates, UK Net compares ISA rates for you .
The golden rule to investing is do not put in what you are not prepared to lose. Please always seek independent financial advice.