How To Invest In Stocks UK – Ultimate Guide for Beginners

Are you looking to invest in shares, but not sure where to start? The process is actually more straight forward than you might think, as online stock brokers now tailor their platforms to the newbie investor.

As such, you simply need to find an FCA share dealing site that meets your needs, instantly deposit some funds with your debit/credit card – and then choose which stocks you want to invest in.

In this beginner’s guide, we walk you through the process of how to invest in shares. Not only does this includes the steps required to choose an FCA stock broker – but also choosing and investing in companies on a DIY basis.

What are the Pros and Cons of Investing in Stocks?

Pros

  • No longer a need to use a traditional telephone stock broker – you can invest from the comfort of your home
  • Choose from thousands of companies across both the UK and abroad
  • ETFs and index funds are ideal if you don’t know which shares to invest in
  • You can grow your money if the shares increase in value
  • Most companies pay regular dividends
  • You can sell your shares back to cash at any given point
  • You can easily deposit funds with a UK debit/credit card or bank account

Cons

  • Not all brokers are regulated by the FCA – be sure to check this
  • There is no guarantee that investing in shares will make you money
  • Knowing which shares to invest in can be difficult

Step 1: Choose an FCA Share Dealing Platform

The only way that you will be able to invest in stocks from the comfort of your home is to use an online share dealing platform. Otherwise referred to as an online stock broker – you will be required to open an account, deposit funds, and then select which firms you want to invest in.

With hundreds of online stock brokers now supporting UK investors – below we list some of the main metrics that you need to look out for prior to signing up.

FCA Regulation

The most important part of your research process is to ensure your chosen share dealing platform is regulated by the Financial Conduct Authority. This comes with a range of regulatory protections – such as a requirement for all investors to identify themselves with ID.

FCA stock brokers are also required to keep client funds in bank accounts separate from its own working capital.

Furthermore – and perhaps most importantly, using an FCA share broker will ensure that you are covered by the Financial Services Compensation Scheme (FSCS). This means that were the broker to collapse, your investments would be protected up to the first £85,000 (previously £50,000).

Share Dealing Charges

When you invest in shares in the UK, you will need to pay the broker a fee for each trade that you place. This usually comes in the form of a flat fee. For example, IG charges an entry-rate of £8 per trade. This means that regardless of whether you invest £50, £500, or £5,000 – you will still pay a dealing charge of £8 when you buy the shares.

You will also need to pay the share dealing charge when you sell the shares back to cash. With that said, a small number of UK brokers – such as eToro, allow you to invest in stocks without paying any share dealing charges. If keeping your costs to a minimum is important to you, this is something worth considering.

Number and Type of Shares

You also need to think about the type of companies that you wish to invest in. For example, most UK share broker sites will list shares that are listed on the London Stock Exchange. This will allow you to invest in companies such as HSBC, Royal Mail, BP, and Tesco.

Some platforms will list shares from the UK’s secondary stock exchange – the Alternative Investment Market (AIM). This hosts small-to-medium companies that are yet to reach their full potential.

If you are more interested in investing in large-cap stocks that are listed in the US – such as Apple, Disney, Microsoft, Netflix, and Facebook – you’ll need to use a broker that gives you access to the New York Stock Exchange and NASDAQ. Ultimately, you just need to ensure that you know what shares you are able to invest in prior to opening an account with the broker.

Deposit and Withdrawal Methods

You also need to check what deposit and withdrawal methods the UK share dealing site supports. Most newbie investors will opt for a traditional debit card payment – as this is both free and instant. UK stock brokers will also give you the option of depositing funds with your bank account.

This can, however, take a few days to process – so this won’t be suitable if you want to invest in shares today. Alternatively, FCA brokers like eToro and Plus500 support e-wallets like Paypal.

Where to Invest in Stocks – The Best UK Stock Broker Sites of 2020

Although we would suggest doing your own homework prior to joining a UK stock broker – this can be a time-consuming process. As such, below you will find a selection of share dealing sites that are popular with UK investors. In particular, each and every broker is licensed by the FCA, gives you access to UK and international stocks, and allows you to deposit funds with a debit/credit card or bank account.

1. eToro – Best UK Broker to Invest in Shares as a Beginner (Commission-Free)

eToro is a user-friendly UK stock broker that strives to make the share investment process a seamless one. All you need to do is enter some personal details, deposit some funds, and then choose which shares you wish to buy. All of this can be achieved in less than 10-15 minutes – which is great if you want to get started today.

Although eToro is constantly building its stock portfolio – it already lists over 800 shares. This covers the London Stock Exchange, as well as markets in the US, Canada, Hong Kong, Germany, and more. As all account balances are denominated in USD, you can access each and every stock market at the click of a button. Irrespective of whether you decide to invest in UK or international shares – eToro does not charge any dealing fees.

This makes it one of the most cost-effective options in the UK, as it’s only the ‘spread’ that you need to look out for. You can also buy ETFs at eToro, which might be suitable for you if you are struggling to pick individual shares on a DIY basis. ETFs are also commission-free. In terms of funding your account, you can choose from a UK debit/credit card, bank account, or e-wallet. The only deposit fee that you will pay is a 0.5% GBP-to-USD conversion charge.

You will need to meet a minimum deposit of $200 (£160), although you can invest in each share from just $50 (£40). eToro also offers a range of consumer protections, as it is regulated by the FCA. It also holds licenses with ASIC and CySEC – which are licensing bodies based in Australia and Cyprus, respectively.

Pros:

  • Super user-friendly online stock broker
  • Buy stocks without paying any commission or share dealing charges
  • 800+ stocks listed on multiple international markets
  • Deposit funds with a debit/credit card, e-wallet, or UK bank account
  • Ability to copy the trades of other users

Cons:

  • Not suitable for advanced traders that like to perform technical analysis

75% of retail investors lose money trading CFDs at this site.

2. Plus500 – Commission-Free CFD Trading Platform

If you are looking to invest in a more sophisticated manner, it is worth considering the merits of CFD provider Plus500. By this, we mean that you might want the option of placing both a buy/sell position on your chosen financial instrument. Alternatively, you might also want to apply leverage to a CFD stock trade – which allows you to trade with more than you have in your account.

As a retail client, you can apply leverage of up to 1:5 at Plus500 when trading stock CFDs – and more on other CFD instruments. As such, a £250 balance would permit a maximum trade size of £1,250. With that being said, as Plus500 is a specialist CFD platform you will not be investing in shares in the traditional sense. Instead, you will be trading stock CFDs – so you are merely speculating on which way you think the shares will move in the market.

This allows you to benefit from low trading fees, access dozens of international markets, short-selling firms, and apply leverage. If stock CFD trading is what you are interested in, Plus500 allows you to trade on a commission-free basis. You can get started with just £100, and deposit funds fee-free with a debit/credit card, bank account, or Paypal.

Plus500UK Ltd is authorized & regulated by the FCA (#509909).

Pros:

  • Commission-free CFD platform – only pay the spread
  • Thousands of financial instruments across heaps of markets
  • Retail clients can trade stock CFDs with leverage of up to 1:5
  • You can short-sell a stock CFD if you think its value will go down
  • Takes just minutes to open an account and deposit funds

Cons:

  • CFDs only
  • More suitable for experienced traders

80.5% of retail investors lose money trading CFDs at this site

3. IG – Invest in Shares with a Trusted UK Stock Broker

IG is an experienced UK stock broker that was first launched in the 1970s. With more than 178,000 investors under its belt – IG ticks a lot of boxes if you are looking for a trusted UK share dealing site. For example, the platform gives you access to over 10,000 companies across dozens of stock exchanges. You can buy shares in the traditional sense – meaning that you will be entitled to dividends.

Best of all, IG charges a very competitive dealing fee of £8 per trade. You can get this down to £3 if you placed three or more stock orders in the prior month. This is especially attractive if you planning to trade larger amounts, as you will always pay the same flat fee. Although IG is ideal for beginners, it is also suitable for seasoned traders. This is because the platform is jam-packed with research and analytical tools, as well as a CFD and spread betting department.

In terms of the fundamentals, IG holds a fully-fledged license with the FCA – alongside a number of international regulators. You will need to meet a £250 minimum deposit, which you can do with a UK bank account or debit/credit card. IG charges a 0..5% and 1% fee when you use MasterCard or Visa, respectively. As such, it might be worth doing a bank account transfer if you are not in a rush to get started today.

Pros:

  • Trusted broker with a long-standing reputation
  • Good value share dealing services
  • Leverage and short-selling also available
  • Spread betting and CFD products
  • Access to dozens of international markets
  • Great research department

Cons:

  • Minimum deposit of £250
  • US stocks have a $15 minimum commission

 

Step 2: Open an Account, Verify Your Identity, and Deposit Funds

Once you have determined which UK stock broker you wish to use to invest in shares, you will then need to go through an account opening process. Certain brokers – such as eToro and Plus500 make the registration process a seamless one, as it rarely takes more than 10 minutes end-to-end. At the other end of the spectrum, some brokers make you go through hoops to get started – especially when it comes to verifying your identity.

As a result, the walkthrough outlined below is based on user-friendly broker eToro – so you should have a share investment account set up in minutes.

Create an Account

You will first need to head over to the eToro website (or your chosen broker) and elect to open an account. You will now be asked to provide some personal information. Make sure you enter the information correctly, as eToro will ask you to verify this with documents in the next step.

You will need to provide your:

  • Full Name
  • Nationality
  • Home Address
  • Date of Birth
  • National Insurance Number
  • Email Address
  • Mobile Number

You will also need to choose a username and password – which you’ll need every time you wish to log in to your account.

Upload Identity Documents

After entering your personal details and confirming your email address, eToro will then ask you to upload some documents. This is to ensure it complies with the FCA’s regulations on anti-money laundering.

The two documents that eToro requires are:

Proof of Identity: This needs to be a passport or driver’s license.

Proof of Address: This needs to be a utility bill or bank account statement issued within the past three months.

The good news is that this can be done easily by taking a picture of the above documents with your mobile phone. As long as the documents are clear, eToro usually verifies them within a few minutes.

Deposit Funds

While your documents are being checked by eToro you can proceed to deposit some funds. You can deposit up to €2,000 (£1,800) before your account is verified. After that, your account restrictions will be lifted.

Supported payment methods include:

  • Debit Card
  • Credit Card
  • UK Bank Account
  • Paypal
  • Skrill
  • Neteller

Unless you are looking to add funds from your UK bank account, the deposit will be credited instantly. Take note, you will need to meet a minimum deposit amount of $200 (£160). Furthermore, your GBP deposit will be converted into USD at a fee of 0.5%. As noted earlier, this ensures that you have unfettered access to both UK and international markets on a commission-free basis.

Step 3: Choose Which Shares you Want to Invest in

At this stage of our beginner’s guide, you should now have a verified account with your chosen UK share dealing site – and have made a deposit. If this is the case, you are now ready to invest in shares. This is where things start to get a bit more complex, as you will have access to hundreds of companies at eToro from multiple stock exchanges.

Nevertheless, you typically have two options to consider when investing in shares for the first time – which we discuss in more detail below.

Option 1: Invest in Shares on a DIY Basis (Experienced UK Investors)

Investing in shares on a DIY basis simply means that you will be personally choosing which stocks to buy. Once again, this is no easy feat – as there needs to be an element of logic behind your decision. After all, it’s not a good idea to simply pick shares on a random basis – or because you like the specific product or service that the company offers. On the contrary, there are heaps of metrics that you need to consider – such as:

  • Is the company a dividends stock?
  • How is the company performing in relation to its industry counterparts?
  • What is the price-to-earnings ratio of the stock?
  • To what extent did the company generate profits in relation to the same period last year?
  • How much debt does the company have in relation to shareholder equity?

Here’s what you need to do to invest in shares yourself at eToro:

Search for Company

Enter the name of the stock that you wish to buy into the search box at the top of the screen, and then click on the corresponding result. In our example, we are looking to invest in Morrisons shares.

Click on ‘Trade’

If you want to invest in the shares right now, click on the ‘Trade’ button.

Invest in Shares

Enter the amount that you wish to invest in USD. In our example, we are buying $50 worth of shares. Finally, click on ‘Open Trade’ to buy shares in your chosen company.

If investing on a DIY basis is what you want to do – we would suggest reading our guide on how to pick stocks and shares. Within it, we explain the ins and outs of selecting which stocks to buy.

Option 2: Invest in Shares via an ETF (Novice UK Investors)

If you’re not quite at the stage where you feel comfortable picking and choosing shares on a DIY basis, it might be worth going the ETF route. In a nutshell, Exchange-Traded Funds – or simply ETFs, allow you to invest in dozens of shares through a single trade. The ETF will be managed by a financial institution, who will personally buy and sell shares on behalf of its investors. You will stake a claim in these shares at an amount proportionate to what you invest.

In order to clear the mist, let’s take the iShares Core FTSE 100 UCITS ETF as a prime example.

  • This particular ETF is managed by iShares – which is one of the largest ETF providers in the space
  • The ETF is tasked with investing in the 100 companies that make up the FTSE 100
  • For those unaware, the FTSE consists of the 100 largest UK companies that are listed on the London Stock Exchange
  • If you were to invest £500 into the ETF, you would be buying 100 shares through a single trade
  • The amount of shares you hold in each company is based on the percentage split undertaken by iShares
  • For example, AstraZeneca, GlaxoSmithKline, and HSBC each make up 7.05%, 5.09%, and 4.94% of the portfolio, respectively

Ultimately, going with an ETF over traditional DIY investing is ideal if you are a complete novice. Furthermore, not only will you benefit from a passive income stream, but you will still be entitled to dividends. Best of all, eToro allows you to invest in ETFs on a commission-free basis.

Here’s what you need to do to invest in an ETF at eToro:

Search for ETF

Enter the name of the ETF into the search box at the top of the screen, and click on the result that pops up. If you don’t know which ETF you want to invest in, head over to the ‘Trade Markets’ section of eToro and click on ‘ETFs’. The platform offers more than 145 ETFs for you to choose from.

In our example, we are looking to invest in the iShares Core FTSE 100 UCITS ETF.

Click on ‘Trade’

If you want to invest in the ETF right now, click on the ‘Trade’ button.

Invest in the ETF

Enter the amount that you wish to invest in the ETF. In our example, we are investing $50 – which is the minimum. Finally, click on ‘Open Trade’ to complete your ETF investment.

How to Invest in Stocks – The Verdict

In summary, if you’re based in the UK and you wish to invest in shares – the end-to-end process can be achieved in less than 10-15 minutes. Not only does this include the actual share investment process itself – but also registering with an online broker, uploading your ID, and instantly depositing funds with your debit/credit card.

The most important thing for you to consider is the type of share investment strategy that you wish to take. For example, while some UK investors are happy to pick and choose their own stocks, others feel somewhat intimidated by this. If you fall into the second category, the good news is that stock ETFs do all of the hard work for you.

Either way, if you want to get your stocks and shares investments journey started today  – we would suggest exploring the merits of FCA broker eToro – especially if you are a complete novice.

Disclaimer: Investing in shares involves significant risk of loss and is not suitable for all investors. You should carefully consider your investment objectives, level of experience, and risk appetite before making a decision to buy shares. Most importantly, do not invest money you cannot afford to lose.

FAQs

How do I sell my shares?

The process of selling your share investments is the same as when you originally bought them - but in reverse. That is to say, you simply need to exit your position at the respective share dealing site, and the cash will then be added to your brokerage account balance. You then use the funds to invest in other shares, or simply withdraw them back to your debit/credit card or bank account.

Is it safe to invest in shares online in the UK?

Yes - but this is on the proviso that you only use a UK share dealing platform that is regulated by the Financial Conduct Authority. Among many other consume protection, who will have the safety net of the Financial Services Compensation Scheme - which covers brokerage collapses of up to £85,000 per person.

Can I buy Amazon shares in the UK?

You certainly can. However, you need to ensure that your chosen broker gives you access to the NASDAQ stock exchange.

How do I receive my dividends when I invest in shares?

The dividends will be distributed to your chosen UK stock broker, who in turn, will then credit your account balance.

What is the minimum amount I can invest in shares?

Firstly, there is no longer a requirement to buy 'whole' shares, as several UK brokers now support fractional ownership. For example, let's suppose that you want to buy shares in Amazon - which are priced at $2,600. When using a new-age broker like eToro, you can invest just $50 (£40). In theory, this means that you own 1.9% of a single Amazon share!

 

 

 

 

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Kane Pepi

About Kane Pepi

Kane Pepi is a British researcher and writer that specializes in finance, financial crime, and blockchain technology. Now based in Malta, Kane writes for a number of platforms in the online domain. In particular, Kane is skilled at explaining complex financial subjects in a user-friendly manner. Academically, Kane holds a Bachelor’s Degree in Finance, a Master’s Degree in Financial Crime, and he is currently engaged in a Doctorate Degree researching the money laundering threats of the blockchain economy. Kane is also behind peer-reviewed publications - which includes an in-depth study into the relationship between money laundering and UK bookmakers. You will also find Kane’s material at websites such as MoneyCheck, the Motley Fool, InsideBitcoins, Blockonomi, Learnbonds, Finder, the Malta Association of Compliance Officers, and the International Compliance Association.

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