Shares

Shares simply let us own a small slice of a company. If they do well, so do we. If they flop, we lose money. 

 

3 quick facts

  • The FTSE 100 is simply the biggest 100 companies in the UK you can buy shares in
  • Buying single shares is riskier than pooling your investments and buying a fund
  • Online brokers charge about £10-£12 a pop to buy or sell shares

 


 

What you need to know 

Also known as stocks, or equities, shares exist to enable companies to raise money to fund their activity and growth. Individuals or companies buy shares, and give that company some money in return for ownership of a small piece of that business.

The thought process behind buying a share is no more complicated than what you see on Dragon's Den. You're the dragon trying to work out if you should invest in the company or not. 

Buying a single share can actually be a risky way to access the stock market. Why? Well you're putting all your eggs in one basket.

We spoke to a lady who was horrified that she bought M&S shares and they went down. "I mean, it was M&S! They're really busy!" Just because it's a big brand which looks safe and solid, doesn't mean they are making decent profits that year or tracking to plan. 

Unless you really know what you're doing and can track analyst updates, we wouldn't advise your average Josephine to buy individual shares. 

 


 

Ok. What's the Shares For Dummies approach?

Have a look at funds. A fund is simply a collection of shares which is put together for you by a fund manager. It's a bit like getting a playlist on Spotify when you want someone better informed than you to put together a collection for you. 

If you own a fund and one share in it has a shocker of a year, it doesn't matter so much because you typically will have about 30-50 other shares in your one fund. So this dilutes the impact. 

Alternatively try a robo adviser. This is the easiest way possible to get a bundle of shares. You'll answer a few simple questions and they will match you to a ready-made collection of shares. 

  • Have a look at Vanguard's low-cost LifeStrategy funds – cheap and easy way to access stock markets
  • Look at our Stocks & Shares ISAs Best Buys for beginners
  • Read up on robo advisers and see what other investors have to say
Our ISA Best Buys

What can I expect?

Just like the weather, it's impossible to know what the future holds. All we can do is show what has happened in the past. Shares are a bumpier ride than cash – and not a short-term thing. Anyone who says they can guarantee you'll make money is probably a spiv. There are risks. But research tells us that shares have done better than cash 9 times out of 10 over any 10 year period since the stock markets began. 

 


 

How does it work?

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 Go) 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.

 


 

Our short factsheet

More info and ideas on shares – how to buy, where to buy and who has decent research.

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