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How to Invest in Stocks UK: Quick-Start Guide for Beginners

Tobi Opeyemi Amure
Reviewed by:
How to invest in stocks in the UK for beginners

Investing in stocks means buying a share of a company in hopes of profit from its growth.

Beginners can start by using an online investment account to purchase stocks or stock mutual funds. While this offers the potential for profit if share prices rise, it also carries the risk of loss.

Key Takeaways:

  • Stock investment involves acquiring ownership shares in a public company
  • Profits can be earned from stocks if their value increases and they are sold to other investors
  • Typically, stocks are bought online via a brokerage account, with the option to invest in funds that encompass a variety of stocks in one investment

How to Invest in Stocks UK for Beginners

Here’s a quick step-by-step guide on investing in stocks:

Step 1: Open a trading account

Beginners must open a trading account to start investing in shares. This is typically an online process, taking about 10 minutes.

You need to provide details like your bank account and National Insurance information. The process includes electronic checks for identity verification. Sometimes, additional documents are required.

Check out our roundup of the best online trading platforms UK.

Step 2: Add funds to your account

After opening your account, the next step is to add money. This can be done with a debit card or a bank transfer. To buy individual shares, ensure you have enough funds for at least one share.

Some platforms offer fractional shares, allowing purchases of less than one share. This is useful for expensive US company shares.

When investing in funds, you can buy parts of a unit. Often, there is a minimum investment amount, usually between £50 and £100. This approach helps in spreading the cost over time.

Step 3: Place a trade

Trading of shares takes place on weekdays from 8 am to 4.30 pm on the London Stock Exchange. Log in to your account and search for the desired fund or company using its name or ticker. You will receive a live quote for the shares.

You can choose to buy a specific number of shares or invest a certain amount of money. Be aware of the ‘buy-sell’ spread, which is the provider’s profit margin. It varies for different shares.

When buying, you will pay share trading fees and a Stamp Duty Reserve Tax (SDRT) of 0.5% on UK shares. Buying OEIC funds is different because their price is set after the trade, known as forward pricing.

Step 4: Monitor your portfolio

After buying, the shares or funds are added to your account. You can use trading apps to check your portfolio’s performance in real time. If your investment pays dividends, these are either held as cash or reinvested in more shares.

Step 5: Sell shares

Selling shares follows the same process as buying. You will get a live quote, which you can accept or reject. You can sell a part of your holdings, like 40% of your shares. After selling, the proceeds, minus any fees, are added to your account.

Selecting Stocks for Beginners

Choosing stocks can be daunting for beginners, with thousands of options on major global exchanges.

While stock investing involves complex strategies, successful investors often focus on the basics. This typically involves investing primarily in funds, as recommended by Warren Buffett. He suggests a low-cost S&P 500 ETF as a solid investment1, advising individual stock picks only for companies with promising long-term growth potential.

The S&P 500, comprising around 500 of the largest U.S. publicly traded companies, has mirrored the market’s average annual return of about 10% over the past 50 years2.

In my recent interview with Goncalo from InvestEngine about ETFs, he said, “Put simply, ETFs are the best way for an investor to gain diversification at a low cost, whether you’re new to investing or have been investing for a while. They are also an effective way for investors to gain exposure to securities which, due to their account size, would otherwise be very difficult to do so.”

The Bottom Line on Investing in Stocks

Understanding stock investing as a beginner might seem challenging, but it essentially involves determining your preferred investment strategy, selecting the appropriate account type, and deciding the amount to invest in stocks.

This article was reviewed by Tobi Opeyemi Amure, an investing expert and writer at InvestopediaInvesting.com, and Trading.biz.

FAQs

What are the risks of investing in stocks?

Investing in stocks carries risks, including market volatility leading to potential losses. Stock values can fluctuate widely based on company performance and economic conditions. Investors also face the risk of company-specific events, such as management changes or industry disruptions, affecting stock prices. Additionally, there’s no guarantee of dividend payments or profitable returns.

Is stock investing safe for beginners?

Stock investing for beginners involves risk, as market fluctuations can lead to potential losses. Beginners need to educate themselves and perhaps start with lower-risk investments before diving into more volatile stock options.

Can I invest small amounts of money in stocks?

Yes, you can invest small amounts of money in stocks. Many online brokerage platforms offer fractional shares, allowing you to buy portions of a stock with minimal investment.

Why invest in stocks?

Investing in stocks offers the potential for significant returns, outperforming other assets like bonds or savings accounts over the long term. Stocks provide an opportunity for wealth growth and can help in hedging against inflation.

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Sources:

  1. https://www.fool.com/investing/2023/02/23/warren-buffett-swears-by-index-fund-millionaire/ ↩︎
  2. https://www.investopedia.com/terms/s/sp500.asp ↩︎

Will Fenton is the founder of Sterling Savvy. He is a personal finance expert and writes about trading, investing, budgeting, and other financial topics.

Along with his education in Economics & Finance, he has experience working in the financial services industry in London working for one of the UK’s leading financial companies, “a trustworthy and respected provider of news, education and market analysis for the everyday investor”.

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