Do you remember when Musk hit the news — after buying 9.1% of TWTR shares, worth billions of dollars?
The unexpected move flamed Twitter into a “hot” stock overnight. Many people rushed to buy their own shares in Twitter — right after, pumping up prices even more.
Many of these shares were bought online using smartphones. These traders didn’t need to be rolling in cash. They were able to get a piece of the top firm for less.
And it didn’t cost thousands of pounds either. Today, you can instantly put small amounts of money into a red-hot stock like Amazon or Tesla, from your phone. They’ll give you a slice of their earnings.
This guide covers how to buy shares online.
Table of Contents:
How to Buy Shares Online UK - Overview
Considering trading stocks? When assessing your Trading Data, be patient with your strategy. Take a breather and work from principles rather than emotions.
The powers-that-be are very good at using your emotions against you, in order to manipulate you. So stay cool, Cucumber.
This guide will run through a speedy overview of the topic. This won’t be a substitute for a world-class stock trading course. But a couple of things keep in mind about how to buy shares online:
- Selecting stocks involves first knowing the amount of risk you’re willing to take, compared to the potential upside. Any returns are made mostly in these two ways:
- If share prices grow during your ownership, such as Tesla stock, you can sell for greater value than you paid (day trading works this way too).
- If shares that you bought online give dividends on a steady basis to shareholders (typically each quarter), a portion of earnings are given to you.
How Stocks Work…
Shares are pieces of stock. Investing in this is normally used for long-term investments, such as for retirement planning, but sometimes activities happen inside of a day.
Investing in shares online is only possible for companies who have “gone public” and this means stocks are openly tradable.
Firms go public in order to increase the amount of funds they have for day-to-day activities, or to expand. These ‘shares’ become tradable.
The total number of stocks reflect its market capitalisation. If the company is large enough, this could be in the billions or trillions of dollars.
Unless they are Elon Musk, investors purchase small slices of that full value, called ‘shares,’ therefore becoming stockholders. This grants them a portion of investment in the firm’s future market value — with the possibility that this could increase across time, according to performance. When this occurs, a buyer can sell those shares for more than they originally purchased them for, making a profit.
With very few exceptions, investing in the stock market is a long term strategy. Even the traders who make small earnings from minute-to-minute and hour-to-hour changes in market prices will only make substantial earnings across longer time horizons.
It’s also problematic without the right training in stock markets to bet too heavily on one company stock or even industry sectors, unless most of these are blue-chip firms—this form of organisation has such a great monetary capitalization that they tend to be robust against market downswings.
However, this isn’t always the case. For instance, a single significant move, such as Elon Musk buying up 9.1% of Twitter, and resolving to eliminate payment for its board members, or consequences from the increasing amount of inflation in Britain, or the Russian-Ukrainian conflict, can all lead to sudden unforeseen shifts.
But during such tortuous times, most financial masters would tell you to focus on principles rather than the moment—Ray Dalio for instance doubled-down when his Chinese investments for important retailers there; Dalio was operating in reaction to events but according to market principles.
Let’s compare this to an investor like Warren Buffett, who is known for reading for hours today, in order to understand historic and current financial data, and combining this with his talents for business. So overall, the most dependable way to buy shares online is to go through an online investment fund, particularly a high-performance index fund or stock mutual funds.
Many brokers also let you simulate real investing using demo accounts, which are connected to the real stock-market but do not invest your actual cash.
Who Are You as an Investor?
The primary kind of investor plays the long game. Warren Buffett is a premier example.
These mines look to harness financial principles that govern economics.
They therefore focus on high level activities influencing the decisions of corporations, nations, and even unforeseen events such as the pandemic or recessions.
Elon Musk is a different type of investor. He’s trying to make a change and this in itself is the profit. The exact opposite of this is a day trader—who makes tons of decisions in one day—although they are just as active, they obsess about technical indicators, market rhythms, and trends inherent to the exchange itself. This form of trading involves high stress and intensity—eg. “Wolf of Wall Street” stuff.
A final type of investor dimension is the everyday retail consumer who wants a retirement pathway; People like this will often seek out an active fund manager to allocate a portion of their monthly income into investment pools, or they will work with a financial adviser, or use a stocks & shares ISA.
Three ways: How to Buy Shares Online
A. "I want to select my shares."
Once again, the most hands-on type of investors are day traders, but this list also includes long-term stock traders such as Warren Buffett. Both kinds are professional investors. Indeed, the stock market has such a poor success rate due to the fact that most are traders in fact not professional but amateurs—depending on luck.
In truth, unless you are completely risk tolerant, only professionals should be making substantial investments in the stock market due to its risky nature. These people have spent years studying how these markets work, and often will have the relevant qualifications. As with any skill set, after a certain number of thousands of hours, they become able to see key patterns in order to make accurate decisions and do things such as overviewing technical indicators or a company’s financials.
To a n00b however, this information is completely hidden.
B. "I need a financial adviser to manage my funds!"
Most brokerages offer this. While some trading apps use robo-advisors, this approach to managing allocations of funds typically has a low level of dependability for beginners. These tools try to forecast the performance of stocks based on their market capitalization, past performance, and other financials.
For example, the likelihood of Amazon stock slicing in half in the next 12 months is small compared to smaller companies like Vimeo. Added to that, Amazon also has good potential for long growth.
C. “I want to diversify as much as possible, to maximise retirement and savings!”
For this approach, mutual funds are the safest bet, however there is no trading pathway that is completely risk free. Of all options, it’s the most proven way to allocate extra cash sensibly.
I frequently mention Vanguard, which is operated by Bridgewater associates, only because it has proven returns on its holdings year after year since its inception in the 1920’s—it’s hard to find a better competitor and investments go beyond individual stocks, offering a basket of shares inside across indices.
Best Investment Way to Buy Shares Online? (Best App)
Brokers will either give you full or discount stocks.
Full service brokers offer a detailed package of brokerage services, including pension plans, health care, and much more.
However, these are normally only affordable by wealthier clients with bigger networks, as there are substantial fees and more transaction rates, as well as manager fees, and sometimes with annual subscription fees. Minimum deposits normally start at over £15,000.
By comparison, discount brokers are the most popularly used brokerages. Discount online brokers also let the retailer execute their own transactions. Due to lots of competition in this space, this industry has grown in the number of features available using discount brokers, including mobile app capabilities and learning resources.
⭐ The most helpful way to buy shares online for beginners?
eToro – How to Buy Shares Online as a Beginner
eToro has amassed an incredible amount of brand recognition owing to its advertisement and advertising deals globally in the celeb and sports world.
But its key offerings are practical…
Primarily, it harnesses crowd wisdom using social trading. This ranges from community forums, social feeds where trading activities are shared, as well as a renowned copy-trading platform that automatically copies the market moves of the most successful investors on the platform.
No-Commission Trading 🔥
Other than this passive form of trading, eToro (review) is also known for being a secure platform that filters out suspicious accounts by requiring user verification, Know Your Customer (KYC)— it’s impossible for users to start trading or to influence the platform before being verified.
While some trading apps do not employ two factor authentication: eToro isn’t included. Not only do you have to have a minimum account deposit, eToro also gives users a slightly more credible way to access the stock market creatively than using robo-advisors, because you're copying an actual human investor who has years of experience.
MIT believes this gives a 6 to 10% increased chance of success. An exposure is into worldwide markets, accessing more than 2,700 stocks without commission per trade, across industries that range from social media platforms apps like Twitter to technology firms like NVIDIAvidia, from Beijing to London— and due to fractional shares, it’s incredibly viable to hold many blue-chip stocks.
Vanguard Review – How to Buy Shares Online in Long-Term
How about investing serious money that you will need later down the line?
While we don’t give specific financial advice, Vanguard has a proven track record for eliminating many risks that beginner investors in stock markets face.
To begin with, Vanguard is recommended by masters of economy including Ray Dalio (who in fact founded Bridgewater Associates, who operate Vanguard) and Warren Buffet who calls the company his dying wish advice (specifically, it’s S&P Admiral fund) he would give to his wife before departing.
Other people that recommend the company include Tony Robbins—who understands the devastating cycle of poverty and sort out this company as a way for the everyday person with low savings to slowly build up a pool of wealth long-term for retirement and more.
This is How to Buy Shares Online Without Guessing
To repeat, Warren Buffett says that he would personally advise investing in the Vanguard 500 Index Fund Admiral shares, which has recently seen annualised compounded returns of 7.1% on funds. It’s also worth repeating that Buffett even said this would be the single piece of investment advice he would give to his wife if he ever were to depart from this world!
I say this in order to emphasise the credence of using a mutual fund versus trying to select your own stocks. The former is not as razzle-dazzle, but holds up more long-term. According to Buffett, the key behind funds like this is in avoiding the temptation to select the perfect stock; but rather to batch by a selection of large companies and to constantly trim for as cheap as possible.
During Recessions, Panic is the Worst Idea
With a lot of volatility on the horizon, even down to number 10 Downing Street being hacked by foreign spyware - the UK seems to be well underway in a recession. Ray Dalio himself felt the need to release a YouTube animated video called ‘Principles Are Dealing with the Changing World Order’ in order to make people more aware of the changing landscape.
To sum things up, Vanguard is a top tier fund manager, with a century of good annual returns across volatile market conditions including the Second World War. Vanguard is therefore entitled to its brand name, and is a handy step to beginner learning how to buy shares online.
You do not need pre-existing knowledge of economics. Vanguard handles shares for you.
Low Starting Cost and Capital
Vanguard charges one of the lowest management fees, at only 0.15% yearly. Once again, each individual trade made by Vanguard for you does not have any associated commissions. And to get started, you can pay £500 or opt for a membership plan per month of £100.
Many companies allow their staff members to invest 1% of their incomes into a pension and retirement package that automatically comes out of your paycheck.
Most people hardly even notice this. And this approach to retirement leans on the principle that Einstein referred to as the eighth wonder of the world, the compound effect. The money invested into this pool is outsourced to investment managers like Vanguard who then make financial decisions on your behalf.
Any economist knows that there isn’t any such thing as a free lunch. So the first thing to know about how to buy shares online is that there aren’t any “free stocks and shares.” Even if commissions are free, at some point in the process there will be charges.
On top of this, most brokerages employ a minimum deposit. Which means you cannot open an account without meeting an account balance threshold. This can be over £1,000 depending on the broker.
Because of associated costs, significant returns cannot be made unless the market moves significantly in your favour. Which is why Warren Buffett says keeping costs as low as possible is essential. Investors need to balance choosing a credible service with proven annual returns with minimising associated costs.
Most often, the broker will charge you a commission per transaction. And if this isn’t the case, another cost will come into play.
Nevertheless, some charges better fit some investors than others. For example, because day traders are relatively high-frequency traders, they will typically want a platform with no or the lowest commissions for entering and exiting positions. Associated costs quickly add up if you are constantly moving in and out of the market, and this is especially true for smaller sums of money.
The platform will determine how many trades you are making according to the type of assets or trade. For instance, opening a position is one trade, closing it is another. So before returns can be made on any stock, you have to make two trades: buying and selling or vice versa.
To illustrate this, suppose you bought £1,000 worth of company stock. Before you complete the move, you’d need to pay £40 in commissions—in the case that opening and closing a position cost £10 each—which amounts to 4% of your total portfolio. This also means you have to make up for a 8% loss right from the outset of your investment, in order to make any gain.
Costs for Mutual Funds
I have already mentioned that Vanguard mutual fund charges 0.15% annual management fees. This is among one of the lowest available. But why the cost?
Mutual funds are pools of fines that are curated by investment professionals. The money is gathered across numerous investors and it is then invested into very tried and tested and exact investment vehicles and assets, such as investing in the LSE index.
For this management, participants are charged a management fee. Indeed, one of the most important costs to consider is the management expense ratio (MER), which happens if your mutual fund has lots of management activity, and it is calculated based on the amount of activity across the year. Typical these typically range between 0.05 and 0.7%, depending on the actual fund.
The higher the MER, the greater the impact it has on potential returns. But you also have to consider sales charges which are also chord loads. Loads vary in type: you have front end loads, some mutual funds do not include loads, while others are known as back-end-loaded funds. You should take some time to consider the type, before you opt to go with a specific mutual fund.
The primary benefit of mutual funds, relative to fees in direct share investments, is that mutual fund costs are set, and do not shift according to the amount of investment. As long as you can handle the account minimum, you can begin adding to the mutual fund pool with as little as £100 (Vanguard), per month. This capability came about through a regulatory allowance called the dollar-cost averaging (DCA), which can be of high service to new traders.
How to Hedge for Threats
Diversification is designed to reduce chances that one underperforming stock can significantly impact your portfolio.
In short, this is a practice of “Never put all your eggs into one basket” when deciding how to buy shares online. It’s particularly important with higher risk assets such as stocks but also harder.
The reason for this is simple: stock costs fees quickly add up according to how many different stocks you’ve selected—and platforms consider each different stock to be a different trade. Which also means that there can be more fees: in order to open then to exit the trade.
So directly buying stocks with varied entities can be trickier. Whereas mutual funds and ETFs pool together many different streams, and employ the BCA loophole, in order to cover a wider breadth of instruments without added costs.
How Safe is Stock Investing for Beginners?
There is no such thing as a free lunch investment, and there is no such thing as a risk-free investment either. So while the range of catering to retail investors has expanded over the years, it’s easy to quickly lose a lot of money. By comparison, the ‘70s for instance saw most people investing for retirement using workplace schemes or personal savings.
However, today, particularly with the extreme developments in the crypto space, it’s become simpler for retail investors to directly dip in and out of professional mutual funds with Goliath fund managers like Vanguard. These management services are incredibly robust and a good bet for portioning off a good amount of savings for long-term returns.
A useful rule of fun is that the shorter the time horizon for the targeted gains, the sharper the trader needs to be and the more aggressive the potential upsides and downsides. Robo-advisors are still an uncertain gambit.
What is the Best Way to Select Stocks?
The best way is to begin with financial common sense. For instance, savings and budgeting. Once you understand this, it’s important to know what your risk-tolerance is. Do you want to gamble on everything like going to Las Vegas? Are you okay with losing it all?
The most aggressive traders will lean towards straight up gambling, as with CFDs. While moderate risk millennials who can still tolerate a lot of loss, like students living at home, may opt for something like eToro.
While the most risk-averse traders will want a proven system for investing their money, such as Vanguard. You won’t want to risk your pension on one shot on the table. The objective of mutual funds is to work your money so that it outperforms the markets, regardless of depressions. So your risk tolerance really decides what you do. You should talk to an investment professional but never trust one who isn’t rich themselves. Remember, you want someone who has proven themselves, not someone who can talk a good talk.