Welcome to the Buy Shares Website
BuyShares.org is a guide to stock trading and other forms of financial investments. All of our content was written by licensed brokers and/or financial advisers who make their livings by helping others invest. If you’re looking to do things yourself, or just want general advice, or a better understanding of how investments work, you can find this and more using the links located on the left side of this web page. With the website introductions out of the way, let’s take a look at how to purchase shares.
How to Buy Shares
There used to be a time when buying shares was a complicated matter. Back then a face-to-face meeting and physical stock certificates were involved. Nowadays, the transaction is done electronically and in general, no actual certificate will change hands. You can still buy in person through a stockbroker, but also you can purchase on the telephone, through the post, or on the internet. Each option for buying shares has its own merits and in this article we will explore the differences – the benefits and drawbacks – of each type of transaction.
Buy Shares in Person
Buying shares through a stockbroker can be very beneficial, especially for a new investor. Unfortunately, this is the most expensive way to buy stock and it is often difficult to get much face time with a busy stockbroker. Often, they will not even accept clients who do not have a significant amount of money to invest. This amount may vary from one stockbroker to another, but it is probably unreasonable to expect a lot of time and individualized advice for much less than £20,000 invested. For less sizeable investments or when just starting an investment plan, try some of the smaller, local brokerage firms if you really want someone to talk to. It’s not all bad though. As we will discuss later, doing some research yourself can be fun and is very beneficial in a number of different ways.
Buying Shares over the Phone
One step removed from buying shares in person would be to trade over the telephone. Small brokerages and large firms alike will generally allow trades over the phone. Some firms will converse with you over the phone or offer advice, while many brokerages will only allow execution-only transactions over the phone. An execution-only transaction is one in which no advice or “sale” is made. The customer simply places an order and the broker executes the order, without discussion. Telephone orders are usually less expensive than face-to-face orders, but are still not the most cost-effective way to buy shares.
Ordering via Post
Through the post is another option for making your shares purchase. Of course, mailing an order is going to take several days. As fast as markets change and with all of the other faster, more efficient options available, buying shares through the post just does not make much sense any more. However, the option is there should the situation arise to make it necessary.
Buying Shares Online
Now we get to the new age of stock trading – buying shares on the internet. The amount of information available to today’s stock trader is simply incredible. In fact, for most people, there is much more information than would ever be needed or is even necessary. With that being the case, it is very important to find some solid, reliable resources. A site such as Yahoo Finance UK & Ireland can prove invaluable, providing news, professional research, current and historical prices, company information, financial information and analyst opinions from various sources.
Another great resource will be whichever online brokerage firm you choose to trade with. Each of them provide a number of tools and information to help you make informed decisions. You can usually find charts, research, company analysis and recommendations and even side-by-side comparisons from many of the companies.
Where to Buy Shares Online
There are many different brokerages that facilitate buying shares online. Some of the largest names in the financial services world are available including TD Waterhouse, Barclays, Saxo Bank and many more. Choosing the right broker can seem like a daunting task. However, it can be broken down to a few important criteria: speed and reliability, information available, market availability and the cost. In general, a company that excels in each area will be more expensive than say a firm that provides less market research or information. Therefore, it is best to look at it in terms of value rather than cost. In other words, what value do you get for the fee? If you only want to trade on the London Stock Exchange, then a company that has higher overall fees but allows world-wide trading might not be the best choice. On the other hand, if you want to trade on the New York Stock Exchange or trade currencies and other commodities, then you should expect to pay more for that service.
If you are doing your own research and plan to only place fairly standard orders for shares on an exchange in your own country, then one of the most important aspects when choosing your online stockbroker is the transaction cost. Many sites will offer a flat rate, such as £12 per trade while others will charge service fees instead. These fees will usually include a monthly or quarterly charge as well as a percentage of each transaction. You will have to weigh the costs depending on your own situation. However, when comparing, make sure you also compare the “standard” cost. Many sites advertise their lowest rate, which usually requires a certain number of trades per period or a minimum account balance. In other words, don’t simply fall for the marketing, do your homework and compare the sites, the tools offered, the service and the overall value that the brokerage provides.
Recommended Online Brokerage Firms
We strongly encourage you to navigate our website and read about the specific type of transaction you’re considering engaging in, prior to making any online investments. Once you’re confident, consider the following websites for your online financial trading:
Best for UK Investors
TD Waterhouse – this is perhaps the most respected website for buying and selling share investments. You can set prices to automatically execute; you can also trade equities on 18 different exchanges, and invest in bonds, trusts and EFTs. This is a solid one stop solution and their fee is just £8.95 per trade.
Share.co.uk – if you’re a small time investor looking to save money on fees, this is the place. The Share Center charges just 1% the value of the shares you’re buying and selling, with a minimum fee of £2.50 for buying and £7.50 for selling. If most of your trades are £700 or less, this will save you a lot of money.
Best for American Investors
E*Trade – Hands down the best site for Americans to buy and sell stocks online is E*Trade, who now operates at us.etrade.com. Stock and Options trades are available for as little as $7.99 with $9.99 as the maximum fee for a non-broker-assisted-trade. We’ll be adding an E-Trade review to our website in the coming days.
Which Shares to Buy?
Doing investment research on your own can be a very rewarding. However, which stocks to choose for research might seem challenging. Well… why not start in your kitchen… or your bedroom, bathroom, or any other room in your home. Think about some of your favorite foods, drinks or products that you use. Many of these will be made by large corporations that have been around since the dawn of time (well, nearly). These are generally the types of companies that you want to own via shares, especially at first. Be cautious of “hot tips” and trendy stocks. Begin a portfolio with solid, safe, even boring stocks before trying to get fancy with the next big thing. On top of the rewarding aspect of doing your own stock research, you will almost assuredly save money by doing your own research than by having a broker meet with you and provide recommendations.
Buying Shares on Your Own
Whichever brokerage firm you decide to work with, the actual process of buying shares in a stock will be similar. When you place your order, you will need to specify the quantity you wish to purchase and the price or type of order. For instance, you can specify a buy price on a certain stock. This is called a limit order. This order will fill only if the broker can find a seller at your price or better. There is no guarantee of a trade in a limit order, the transaction will only take place if your limit price is met. An example would be if you place a buy limit order at £50, the broker will only buy the shares you specify if they can get it for £50 or lower.
More commonly, a market order is placed. When you place a market order to buy stock, your broker will execute the order as soon as possible and at the best price available at that time. They do not guarantee a price so you do not know exactly what you will pay until the order is filled, but most transactions placed by individuals are market orders. When you place your order on the internet through an online brokerage, the transaction is almost immediate. The brokerage will then provide you with the price you paid plus their service fee (plus taxes in some areas).
Although buying shares can seem to be a daunting task at first, there are a number of options available to help you through the process. Try to keep it simple, feel free to do your own research and stick to large, well-known companies. In no time at all you will be building a solid portfolio that will potentially help to provide for you and your family for years to come.