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Some people only depend on their investments in banks to grow their money. However, it isn’t the only option. Investing in stocks and the share market has become very popular recently.
Shares of any company are basically a tiny part of it. When you buy shares of a company, and the company grows after that, your shares become more valuable, or if it goes into loss, your shares lose their original value. Before buying shares, you should assess all the risk factors and even study the market to know which companies to invest in, though past performance might not guarantee the future.
HOW TO BUY SHARES IN A COMPANY?
If you feel unsure regarding investments, you must consult a trusted financial adviser to help you. Buying shares in a company involves some steps. They are as follows:
Step 1: FIND A BROKER
Brokers help to buy and sell shares. Recently, online brokers or brokerage apps have become popular as online dealing platforms make the process easier. However, it’s your personal choice whether you prefer to buy and sell your shares online or through brokers who work face-to-face or over a call.
If you plan to use an online share dealing platform, make sure to compare different ones based on their pricing structure, investment ideas, and resources.
As a newbie, try to find a platform with low fees and a wide range of shares.
Step 2: OPEN AN ACCOUNT
After choosing the online platform, open an account by registering, usually free, but some may charge for additional services. The registration process requires a few details to be completed, such as personal details (Name, contact number, e-mail ID, date of birth, address and National Insurance Number), identity proof (like driving licence or a passport) and payment details (bank account details or debit/credit card details which will be used as a medium for all investments and fund your account).
Once the registration is complete, move on to activating your account with the instructions received on your registered e-mail ID. After choosing a username and a password, the activation process is complete, and now you can start trading shares.
Note: Most platforms do not have a minimum amount of a first transfer or cash required in the account, but some have such requirements.
Step 3: BUYING AND INVESTING IN SHARES
This is the most crucial step. You may decide in which company/companies to invest within a few days, weeks or maybe months.
If you plan for a short term investment, assess all the risks and do not dive in with the expectation of a higher rate of returns as it might lead you to lose everything.
If you don’t want to invest right away, choose a few companies and assess their performance for some time. This assessment must involve the following checkpoints:
- Change in the price: Has it increased or decreased?
- Go through any news headlines/ announcements of the company to review the company’s stability.
- Only invest if you can afford it.
- Compare the company’s performance with similar companies/companies in the same sector.
Now build a portfolio with your investments spread across different sectors like public and private both. Investing in smaller companies has a more significant risk while investing in established companies is expensive.
Make sure you invest after thinking thoroughly.
Step 4: PLACING ORDER TO BUY SHARES
Go to your chosen online platform and login. Many companies will be listed along with their shares and their prices. If you cannot find it, use the stock code or find it through the company name. You can either set a limit for the number of shares or price for your benefit while ordering.
Once you order and buy the shares, you will have to pay 0.5 % trade tax,i.e, Stamp Duty Reserve Tax (SDRT). If you plan to buy foreign shares, you might also have to pay additional foreign exchange charges.
Take into account all these factors before setting up your amount limit.
Step 5: HOLDING AND MONITORING THE SHARES
While holding the shares, you can earn money in two ways. The first is when the value of your shares increase, and the second is through dividends. You get to earn dividends when a company decides to share its profits with the shareholders.
Monitoring the shares depends on your investment strategy. If you plan to have a short-term investment, check your shares’ performance each night by logging onto your online share-dealing platform. If you strategize for a medium-term investment, monitor shares each week, and check every month for long-term assets will help you get going.
To limit your losses, you can put limits on your share trades. For example, if your stock loses more than 9% of its original value, the platform will automatically sell it.
For this, you need to set an automatic sell value.
Apply for ISA through your chosen online share-dealing platform. Individual Savings Account (ISA) allows you to invest up to 20,000 euros tax-free as of 2019.
TIPS AND TRICKS
- Prefer Long term Investment: It has a lower risk than a short-term investment. When you invest long term, try to forget the money invested and stop expecting returns for a long time. After 5-10 years, you can see significant changes and, a lot of times, it is very beneficial to build your wealth.
- Accept Losses: No investment has a smooth curve. Everything has ups and downs. If your invested shares’ price suddenly drops down, do not panic. Monitor it for some time and decide accordingly.
- Try to invest regularly: Investing regularly can help you cope with the stock market and help you understand the trends. It is also beneficial for the future as you take out a small chunk of your savings and grow them.
- Learn what factors are responsible for moving the share prices: Supply and Demand go hand in hand. The demand for shares can change for various reasons, including earnings reports, macroeconomic data, market sentiments, and interest rates.