Buying shares in the UK - company investments

Buying shares in the UK means that you are effectively buying an investment stake in a company. As a shareholder you are classed as a joint-owner of that company, no matter how small a stake you hold. Even if you do not directly hold any shares, it is likely that the company that arranges your pension plan or mortgage will link your funds with the stock exchange as a way of maximising the return on your investments.

How can I buy shares?

You have two options here. You can either purchase existing shares on the stock market, or you can buy new shares if and when a company releases them to raise money for the business. Whichever option you choose, it is advisable to do all your share dealing through a stockbroker. Stockbrokers can be employed on a execution-only basis, which means that they merely broker the deal without giving any advice. For a higher fee they can give you advice about what to buy, or can even carry out investment deals on your behalf, provided of course that you give them permission to do so.

How much will I pay?

The price of the shares depends on their current stock market value. Share values are affected by a number of factors, for instance the current state of the economy in general, both in the UK and overseas. However the main determinant of share price is the performance of the company itself. When a company is performing well, share price tends to increase, whilst poor performance tends to have a negative effect on the share value.

When is the best time to buy shares?

Ideally, you should buy shares when they are at their lowest price and sell them when they are at their highest. Of course, this is easier said than done, and anticipating market trends and fluctuations is something that even the experts can get wrong. However if you do manage to get it right, you will optimise the capital growth on your investment.

Do I have to sell shares to make any money?

Not necessarily. Most companies award shareholders a share of profits in the form of dividends, which are usually paid out every six months, so you can still profit without trading them in.

© The Pink Fridge Online Magazine 2008 - Shares