If you’ve been watching the markets and think you know how to spot a winner but are unsure about how to invest, then you’re not the only one. To the uninitiated, the stock markets can seem a confusing kaleidoscope of figures, numbers and graphs. It’s almost impossible to figure it all out on your own, which is why everyone can do with a little help to understand how it works.
Where to start?
The best way to get into stock trading is with an online account. These can be relatively cheap and with just a few hundred pounds you could be off and running. Going online is the cheapest way of doing it, as phone dealers will require an extra charge.
Make sure you are going with a reputable online broker, as there are plenty of scams out there. Do a bit of research and ask about to see who is good. In some instances, you may need to wait for a password to arrive via the post so if you want to get started immediately you’ll need to ask about this.
The reason you need an account through a broker is that only qualified and certified brokers are allowed to trade stocks.
Getting the right account
If you’re just dealing in small amounts, the fees and charges will be small to begin with. They go up with the amounts you are investing, as risk is then greater. You should be looking to pay between £10 and £20 for most small trades, so factor this into your budget.
What are you trading?
This is where your eye for a winner can come in. You may want to study the markets yourself, looking into how companies are doing and figuring out where share prices will go in the future. It is a real skill to be able to do this well (which is why so much money is made and lost on the markets).
It is often a good idea to ask for advice from your broker or from other people who know the markets before rushing in. You might think you know it all but it can take years to fully understand the intricacies of the markets. More experienced people than you have lost fortunes by getting it wrong.
Once you have chosen your shares, you need to choose the amount and select to buy at a certain price. You usually have about fifteen seconds to execute the deal with the money clearing your account immediately.
Are there other costs involved?
There is a standard tax or stamp duty on all share purchases, big or small but this is fairly small. However, you are usually allowed to make up to a certain amount of money before larger capital gains taxes kick in at a much higher rate. All the amounts involved will vary depending on that year’s budgetary statement from the government.
As we mentioned above, there are plenty of shady people out there looking to make some ill-gotten money out of beginners. Beware of people that contact you out of the blue and if it sounds too good to be true, then it probably is.
Also, be wary of believing everything you are told. Yes, it is true that some people make a lot of money from shares and stocks. However, the money that they make has to come from somewhere, meaning that plenty of other people are losing out. Start small, be sensible and try to accrue profit gradually. Bigger risks come with bigger rewards for sure, but the consequences of losing out are that much greater too.
Paul McMann who began trading from home until his success meant he could grow his trading business. Paul now rents office space with Easy Offices