Shares

By Mike Narouei, Content Producer at Boring Money

9 May, 2017

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.

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

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 (https://www.youinvest.co.uk/), Hargreaves Lansdown (http://www.hl.co.uk/) or TD Direct Investing (https://www.tddirectinvesting.co.uk/investment-funds/quick-start-funds#quick-start-funds#) which are kinder to less experienced share traders who don’t need to do complex stuff.