How to buy shares

3 minute read

Once you’ve decided you’re comfortable with the risks involved in investing in shares, your next step is to start building your portfolio. Read on to find out about the different ways you can buy shares.

Who's it for? All investors

The value of investments can fall as well as rise and you could get back less than you invest. If you’re not sure about investing, seek independent advice. Tax rules can change and their effects on you will depend on your individual circumstances.

What you’ll learn:

  • How to buy and sell shares online.
  • How to invest in funds.
  • Why holding your investments in an ISA is tax-efficient.

If you want to buy and sell shares, you‘ll need to open an investment account or stocks and shares ISA with an online investment platform such as Smart Investor, or a more traditional stockbroker.

Here, we consider what you need to know.

Opening an account

Gone are the days where you receive a paper share certificate to prove you own shares in a specific company. Instead most shares are now held on a ‘nominee’ basis which means the investment service you have an account with will hold them digitally on your behalf, although you still own them. This makes the process of investing in shares much simpler and you can trade almost instantly.

To open an investment account, you need to provide details such as your name, address and National Insurance number and pass an identity check.

Paper share certificates

If you have some paper share certificates you may want to consider converting these to nominee held shares because it is so much more convenient.

Making your own investment decisions

Some services, such as ours, don’t provide advice, so you make your own investment decisions. These are often called self-directed or execution-only services and they tend to offer the simplest and cheapest way to buy shares and other investments.

If you’re not comfortable going it alone, you may want choose an advisory service, so that an adviser can recommend which investments to make. You’ll pay extra for this advice.

Placing a deal

When you place a deal online or over the phone, you’ll give us an ‘Order’ – it’s an instruction to buy or sell the investment you’ve chosen. There are different types of orders, depending on the asset you are buying.

If you’re planning on choosing investments yourself, always do plenty of research before buying.

Investing in funds

You may decide that you want to invest in a combination of shares and funds. This is simple with an online investment service, and you’ll be able to see all your investments in the same place, which makes it easy to see the value of your overall portfolio and how your investments are performing.

Funds, such as unit trusts and open-ended investment companies (OEICs), along with investment trusts and exchange-traded funds (ETFs), enable you to invest in a wide range of shares, bonds and other assets, which are carefully picked and monitored by professional fund managers.

Find out more about funds, ETFs and investment trusts

Hold funds or shares in an ISA

One of the most tax-efficient ways to invest in funds or shares is through an individual savings account (ISA), which can hold a wide range of investments, including cash, funds, gilts and bonds.

There’s no income tax, tax on dividends or capital gains tax to pay on any investments you hold in an ISA. Bear in mind that tax rules can and do change and their effect on you will depend on your individual circumstances.

Find out more about investment ISAs

Remember that past performance isn’t a guide to the future. Just because a fund or share might have performed well historically, there are no guarantees it’ll continue to do so in future, so you could get back less than you put in.

If you’re in any doubt about where you want to invest, you may want to seek financial advice to help you choose. Remember that the value of investments can fall as well as rise and you may get back less than you invested.

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An alternative way to get invested

If you have at least £5,000 to invest but want us to manage the investments for you, you might want to consider using our Plan & Invest service. Designed to take the time and hassle out of investing, if we think that investing is right for you, our experts create and manage a personalised Investment Plan, leaving you free to do what matters to you.

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