New to share dealing?
If you’re new to buying shares, we can help you, from providing you with a low-cost trading account to offering extensive research data, trading tools and financial intelligence.
Below you can read our introduction to share dealing. When you're ready you can find out more about our low-cost account.
Introduction to share dealing
Shares remain a popular investment choice thanks to their potential for return, and their opportunity to invest directly in individual companies.
Over the longer term, history shows the benefits of investing in shares typically far outweigh those of holding your money in lower-return assets such as cash savings.
If you have a pension or an investment ISA you’ll almost certainly already have exposure to shares, even if it’s via a fund which typically invests in individual company's shares.
However, when it comes to deciding where to invest, some new investors can be overwhelmed by the seemingly endless options. A few simple guidelines can help you understand your own priorities and how to narrow the field to a handful of shares.
A share is an investment in an individual company. Buying even one share gives you part ownership (albeit a very small part) of that company. This entitles you to benefits such as receiving dividends and registering your votes in company activities.
Before you start buying shares, you need to establish what kind of investor you are. You can work out your personal financial objectives in the first section of this guide.
Once you understand your priorities, you can determine how much and where you want to invest. You’ll then need a trading platform or provider (stockbroker) through which to buy and sell your shares.
When it comes to choosing your investments, you can take a number of different approaches: from analysing charts to backing a company you have personal knowledge of. Whichever system you use, you’ll want to narrow your choice to a handful so you can check they meet your criteria before buying.
Using a stock filter tool is an efficient way to get a shortlist of options to research, based on your investment preferences.
Setting your investment criteria
Shares can be categorised in a number of different ways. To help determine which suit you best, here’s a quick rundown of what to consider:
risk level – Some shares carry more risk due to the sector, economy, location and personal circumstances they’re related to.
With potential risk comes potential reward, so you’ll need to decide the level of risk you’re comfortable with. Generally speaking, the longer term the investment, the higher the appetite for risk, as you have a longer period over which to smooth out any market fluctuations.
sector – Sectors include areas such as pharmaceuticals, property and banking. Each carries its own risk levels, as well as positive and negative attributes. Having personal knowledge of and interest in a sector can be an advantage as you’re likely to keep more informed about it.
geographical region – Do you want to invest in UK or overseas companies? Are you interested in new or established emerging markets? Different overseas markets will carry different levels of risk depending on their particular social, economic and political factors.
income or growth – Some shares will have a primary focus on providing income (paid out as dividends to investors) or capital growth through additional value as the price of your shares rise. You may have an income or growth priority already or this might change over time. You can alter your portfolio to suit your individual requirements at any time.
indices and markets – ii lets you buy shares and funds from UK and international markets. In the UK these include those listed on the main market such as FTSE 100 stocks and markets such as AIM listed stocks, which typically cater for smaller comapnies.
portfolio spread – Wherever you decide to invest, it’s important to spread your risk across a variety of investments and investment criteria. This results in what’s often referred to as a ‘balanced portfolio’.
Where to buy – researching shares
Once you’re ready to consider individual shares, here are some ways to gain more insight into their suitability for you:
independent news and features – the more you keep up-to-date with business and financial news the better informed you’ll be when it comes to selecting investments. Our experts profile individual shares and keep you up to date with what’s happening in the markets.
fact Sheets – search for shares on ii and you’ll be able to access performance charts, technical insights, fundamental information and more. You can also see how often the stock is being traded by other investors and what they’re saying about it.
company information – use our free Annual Report service to get further company information and check balance sheets.
market movers – on ii you can see which shares are being traded most actively, and which are at both ends of the performance tables.
level 2 – for a monthly fee you can access live price information and even more sophisticated data and charting tools with our level 2 service.
When to buy and sell
trading on live prices
Individual share prices can move continuously whilst the market is open, so when you buy determines how much you pay. When you buy through ii you’ll be given the latest live price before you commit to a purchase.
Some investors become overly concerned with ‘timing the market’ and buying and selling at the best possible price and there are significant benefits if you can get this right. However, even the most expert of investors don’t expect to achieve this all the time, and as long as you’re investing for the long term, you’ll be giving your investments a chance to smooth out the ups and downs of the market.
You can also buy shares within a regular investment plan. Here you invest a specified sum on a regular (usually monthly) basis into one or more shares, allowing you to spread your investment expenditure. It also means you will buy the shares at a variety of prices rather than placing it all on one trade at one price.
Investing monthly using ii’s automated regular investing service costs just £0.99 per trade.
What else you can invest in
Among the investments available for share dealing are shares, investment funds and trusts, exchange traded funds (ETFs), gilts, and corporate bonds.
How to buy
First, you will need to open an account which you can buy and sell shares from. Online brokers let you buy shares on an ‘execution only’ basis, meaning you are making your own investment decisions and the deal will be placed on your behalf.
Different brokers charge different types of fees. Some charge an annual fee, as well as inactivity fees if you do not make a minimum number of trades in a given period.
You will also be charged a commission fee each time you buy and sell shares. Most brokers allow you to trade on the phone, but many charge much higher fees for this, to encourage you to trade online.
At ii we believe in simple and fair fees. This is why we have a range of Service Plans to choose from, with flat monthly fees, and trading credits for you to use when you need them. Our online trading costs are normally £7.99, but this is reduced to £3.99 if you choose our Super Investor plan.
There is a 0.5% stamp duty reserve tax on all share purchases and profits from the shares are also taxable. You are allowed to make profits of up to £11,700 before you are charged capital gains tax at 18% (or 28% for those on higher rates of income tax). Though tax rates and exemption limits may change.
Trading with order types
You can choose to buy shares using an order type. When you set up an order type you are stating the exact circumstances under which you want to trade. Once these occur (for example, the stock you’re interested in reaches the price you want to buy it at) your trade will be set up to happen automatically.
Setting up order types means you can make the most of the rise and fall of share prices without having to monitor the markets day and night. Once you have, we'll take care of the rest until your order is dealt, it expires or you amend or cancel it.
With ii it’s free to set up order types.
Making your investments tax efficient
If you’re paying tax on your investments, it makes sense to use all of your available tax allowances, so you can keep more of your profits for yourself.
The easiest way to do this is to invest within an ISA, or, if you’re investing for retirement, a Self Invested Pension Plan (SIPP).
You have an annual ISA allowance, allowing you to protect investments up to that year’s limit. These investments, plus any profits from them, will stay protected as long as you keep them within your account.
If you already have holdings in an investment account, and don’t want to make new investments, you can consider selling and reinvesting the proceeds in an ISA. That way you’ll hold the same investments – but tax efficiently. This process is called Bed & ISA.
If you want to invest for the long term, SIPPs offer all the tax advantages of a pension, with the ability to manage your own investments.
Reviewing your investments
Finally, once you’ve invested in shares, it’s important to continue monitoring them. Keep up-to-date with company and market news, and ask yourself whether what you learn is likely to have an effect on your investment.
When you’re deciding where to invest, you can see which shares have performed well (remember, past performance doesn't guarantee future performance), what other traders are investing in and what the experts say. Choose from the ideas listed below to help you find which investments suit your trading style.
Share tips and ideas
Our articles and videos will give you a wealth of market and company news, analysis and tips. All to help you decide where to trade right now.
Share trading ideas with other investors
We have one of the longest standing, most vibrant trading communities. Join the debate with our experienced traders, see what other people are talking about and investing in, and follow the traders you most like.