Share Shares

What the heck are they?

Shares, equities or stocks. This is when you buy a very small slice of a company. So you own a smidgeon of British Airways, Tesco or ITV.

You buy and sell them on the stock market and, just like eBay, people make bids and offers. But it all happens super fast. Prices bounce up and down and at the end of the day it all comes down to sentiment – if loads of people want a slice of the action and these things are flavour of the month (think Nintendo after Pokemon 2) then prices rise as the sellers get a bit cockier. If people get turned off and the share in question is uncool, then everyone tries to offload them and the asking price falls.

Don’t get put off by techno babble. It really is like a scale game of Dragon’s Den. Where the world tries to pick the future winners.

Tell me more...

You can either buy shares directly – through an online broker – or in a basket of investments which someone else picks for you – called a fund.

If you buy them directly there are trading costs. You will typically pay about £10 a pop and 0.5% stamp duty to the Government. So this can be an expensive way of buying small amounts – many funds in comparison don’t have trading fees. However, after the initial purchase, there are no management fees to pay as with a fund – because there’s nothing to manage! You have a single company and you have tied your fortunes to theirs. If it goes up – bonza! If it goes down – ouch.

For less experienced investors this is a risky way to get exposure to the markets. Why? Well, let’s say you have £1,000 to invest and you buy one share. If that goes badly, you’ve done badly.

If you take that same £1,000 and put it in a fund, that fund will have about 30-60 shares in it. Mitigating the risk of any one group doing badly. Spreading your bets.

If you want to trade shares directly you can look at AJ Bell Youinvest, Hargreaves Lansdown or TD Investing which are kinder to less experienced share traders who don’t need to do complex stuff.

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Important stuff!

Holly and the team have worked in the finance industry for many years but we are not regulated to give you personal financial advice, nor are we regulated by the industry watchdog (although we do talk to them a lot). For every story on this site about a good investment, or something which went up by 10% or made someone £200, we could share a story about a bad investment, something which fell by 10% or lost someone £200. Nothing’s certain when investing so if you’re really unsure, or dealing with complicated stuff like working out what to do with a pension when you retire, we’d really suggest you get some financial advice. Here are some tips on  how to pick a good financial adviser. Or check out Unbiased or VouchedFor. Just remember, commission has been banned now so advisers need to be very clear with you about what you are paying them and when.