Known from:
ntv-logo sky-logo comedy-central-logo

Stocks and shares for beginners – how to start trading stocks and shares in 2019

If you have decided to take the plunge into investing and need stocks and shares explained, you are probably feeling a mixture of excitement and nerves. The potential for high returns on your investment is certainly there, but shares can also fall, resulting in losses. This guide to stocks and shares for beginners can help you learn some tricks of the trade as well as giving tips for avoiding the pitfalls.

  • The basics of stocks and the stock market
  • Choosing a broker
  • The advantages and disadvantages of a demo account
  • The mechanics of buying and selling
Stocks Highlights

Back to basics – what is the stock market?

There are a number of stock markets all over the world, and they have been around for longer than you might expect. The first stock exchange was the Amsterdam Stock Exchange founded in 1602. A stock market is simply the place where stocks and shares are traded every day, either by people or, more commonly today, electronically. In the UK, the main stock exchange is the London Stock Exchange. Here, financial instruments including limited companies, government bonds and derivatives can be bought and sold. Current prices are displayed on screens and can change quickly. The stock market is divided into different indices, which refers to the price of a selection of stocks. In the UK, the most famous index – and one you will almost certainly have heard of – is the FTSE100, but it is not the only one. Others include the FTSE250, FTSE Fledgling and the AIM (alternative investment market). By describing how these indices go up and down, a broker or market commentator is describing the performance of these shares. It is also often used as an indicator for how the economy is performing as a whole. Making money short-term on the stock market is tricky and may well only be gained through luck. However, with some good trading strategies and the ability to invest long-term, healthy profits can be made over time.

Top 3 Stock Broker Comparison

1
of 9 Stock Broker IG Stock
National fees £ 8,00
Custody fee £ 8,00
Intl. fees 10 EUR
Dep. Protection 50,000 GBP
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
2
of 9 Stock Broker Interactive Investor
National fees £7.99
Custody fee £9.99 monthly
Intl. fees £7.99
Dep. Protection 50.000 GBP
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
3
of 9 Stock Broker Calamatta Cuschieri
National fees £ 7.50
Custody fee £ 0.00
Intl. fees £ 7.50
Dep. Protection 100.000€
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.

How are stocks and shares explained and are they the same thing?

There is a subtle difference between stocks and shares. Stock is a more general term used to describe the ownership certificates of any company, while shares should be used to describe ownership certificates of a particular company. In practice, the two terms are used interchangeably. Stocks and shares enable a company to raise capital, and a company can release further shares at any time. Doing this does not mean a company is in trouble but is a way for a company to raise funds for investment. Owning shares in a company does not mean you own a part of the company. Instead, you own a share issued by that corporation. This means that if the corporation gets into difficulty, your own shares may tumble in value, but your personal assets are not liable. However, while you do not actually own any part of the corporation’s assets, you may have voting rights at shareholder meetings and will be paid dividends if the company issues these rather than reinvesting. Issues that can affect the value of your shares include:

  • Political stability and changes
  • Government decisions on their own investments
  • How much trust people have in the economy, also known as market sentiment
  • Even a change in season and inclement weather can have an effect

spread betting 1

It is important to remember that stocks and shares are a long-term investment, and hopefully you will be able to see out the short-term fluctuations.

How to buy stocks and shares

If a company requires funds for investment or any other reason, the ownership of the company is split into shares, and these are listed or floated on the stock market for anyone to buy. This is known as the initial public offering (IPO). After this, they can be sold on via the stock market. This is known as the secondary market. When buying shares on the secondary market, you will use the services of a stockbroker. When looking at stocks and shares for beginners, one of the first things that will strike you is the vast number of online brokers available. Choosing one can be a tricky decision, and it is well worth taking your time when making your selection. It is also worth noting that not all the brokers your search throws up will be reputable ones. As well as some skilled and highly respected brokers, there are also plenty of scams. A good start to making a broker comparison is to read as many reviews as possible, noting the positives and negatives of each one you consider. Stockbrokers offer a number of different ways to buy shares. You may wish for an execution-only service, where you make all decisions alone, or you may prefer an advisory service, where a financial expert will advise you on investments. The third way is discretionary management, where the expert will make all decisions on your investments.

How to choose a stockbroker

Certainly, you want to avoid scams, but even with legitimate stockbrokers, there are differences between them. One of the first points to look out for is if and where a stockbroker is regulated. Regulation proves the company adheres to certain standards. Additionally, stockbrokers regulated by the UK’s Financial Conduct Authority (FCA) not only face stringent regulations but it also means UK investors will be protected by the Financial Services Compensation Scheme (FSCS) up to £50,000. Other points to look out for include:

  • The fee structure: How transparent is it? Are there any hidden extras?
  • Customer services: As a new investor, you will likely need some support, so consider the availability of customer support and how you can contact these services when choosing a broker.
  • Training opportunities: Good brokers care about their client’s development and will offer training videos, webinars and articles for you to hone your skills.
  • An easy-to-use platform: When investing, decisions may need to be made fast, so an easy-to-use platform with effective features is something to look out for.

stocks 1

If you have any special requirements, look out for these specifics when reading reviews. For example, if English is not your first language, it can be highly beneficial if the broker’s website is available in your first language and to have customer support available in the language easiest for you.

The demo account – a risk-free start

Many brokers offer a demo account to allow you to ‘try before you buy.’ This means you can experience trading stocks and shares without risking any real capital, and there is no obligation to open a real account if the demo account suggests the broker is not for you. When you open a demo account, you are given a sum of virtual capital. A good demo account will mimic real market conditions as accurately as possible, allowing you to use a platform with the same features as the real account. This allows you to familiarise yourself with the tools, experience the market fluctuations and see the profits and losses just as with a real account. The difference is that any profit or loss is virtual, with no loss or gain of real capital. Some brokers offer a time-limited demo account – 30 days is a common length, while others provide an unlimited account. An unlimited account allows you to take as long as you need to practise using the platform, while a fixed-term account may mean you have to start trading for real before you are completely comfortable. With an unlimited account, you can also keep your demo account even after opening a real one, allowing you to trial new strategies before using them for real. Even experienced traders can find this feature useful.

Contentgrafiken Vergleich Social Trading

Limitations of a demo account

While using a demo account is recommended before using a new broker, and particularly when you are considering stocks and shares for beginners, it is important to be aware of the limitations of these accounts. Successful trading in the demo account may not always translate to successful trading of real stocks and shares. One key difference is the amount of capital you have to invest. The amounts of virtual capital given in a demo account can be very large, such as £50,000’s worth. This is considerably more than the average novice trader is likely to have or invest. The other limitation is the accuracy in which the trading experience can be replicated. A demo account can faithfully replicate the platform and the market conditions, portraying the market fluctuations in real time, but what it cannot replicate is the emotions involved. In the real market, when stocks and shares explained, decisions need to be made quickly. The frustration of missing out on a profit and the agony of a significant loss are all very real, and this is likely to have a significant impact on your decision making. This is not the case with a demo account, where the profits and losses are virtual and will raise no significant feelings in you. In fact, it may lead to making decisions that you would not actually make if dealing with real sums.

1
of 22 Forex Broker Plus500
Currency pairs 61 Currencies
Max. Lever 1:30
Trading size Depends on underlying
Minimum deposit £ 100
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
2
of 22 Forex Broker AvaTrade
Currency pairs 47 Currencies
Max. Lever 1:30
Trading size Micro-Lot
Minimum deposit £ 100
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
3
of 22 Forex Broker FxPro
Currency pairs 68 Currencies
Max. Lever 1:30
Trading size Micro-Lot
Minimum deposit £ 100
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
4
of 22 Forex Broker eToro
Currency pairs 47 Currencies
Max. Lever 1:30
Trading size Micro-Lot
Minimum deposit £ 200
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
5
of 22 Forex Broker FXTM
Currency pairs 51 Currencies
Max. Lever 1:30
Trading size Micro-Lot
Minimum deposit £ 10
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
1
of 6 ETF Broker IG
ETFs w/ discount 1200
Custody fee 0 GBP
Min. deposit £ 0
Trading from 5 GBP
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
2
of 6 ETF Broker Fidelity
ETFs w/ discount 93
Custody fee 0 GBP
Min. deposit £ 2.500
Trading from 25 GBP
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
3
of 6 ETF Broker AJ Bell Youinvest
ETFs w/ discount
Custody fee 0 GBP
Min. deposit £ 0.00
Trading from 1,50 GBP
Go to IG
Risk warning: Capital can be lost. Terms and conditions apply.
4
of 6 ETF Broker Bestinvest
ETFs w/ discount 216
Custody fee 0.4% annually
Min. deposit £ 500
Trading from 0 GBP
Go to IG
Risk warning: Capital can be lost. Terms and conditions apply.
5
of 6 ETF Broker DEGIRO
ETFs w/ discount 740
Custody fee 0 GBP
Min. deposit £ 0
Trading from 1,75 GBP + 0,004%
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
1
of 9 Stock Broker IG Stock
National fees £ 8,00
Custody fee £ 8,00
Intl. fees 10 EUR
Dep. Protection 50,000 GBP
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
2
of 9 Stock Broker Interactive Investor
National fees £7.99
Custody fee £9.99 monthly
Intl. fees £7.99
Dep. Protection 50.000 GBP
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
3
of 9 Stock Broker Calamatta Cuschieri
National fees £ 7.50
Custody fee £ 0.00
Intl. fees £ 7.50
Dep. Protection 100.000€
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
4
of 9 Stock Broker Hargreaves Lansdown
National fees 11,95 £
Custody fee 0,00 £
Intl. fees 11,95 £
Dep. Protection 50.000 £
Go to IG
Risk warning: Capital can be lost. Terms and conditions apply.
5
of 9 Stock Broker Fidelity
National fees £ 10,00
Custody fee 0,35%
Intl. fees £ 10,00
Dep. Protection 50,000 GBP
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
1
of 23 CFD Broker Plus500
FTSE spread Variable
Dep. Protection £ 50.000
Max. Lever 1:30
Min. deposit $/€/£ 100
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
2
of 23 CFD Broker AvaTrade
FTSE spread 1.5 Points
Dep. Protection € 50.000
Max. Lever 1:30
Min. deposit £ 250
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
3
of 23 CFD Broker eToro
FTSE spread 1.50 Points
Dep. Protection £ 50000
Max. Lever 1:30
Min. deposit £ 200
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
4
of 23 CFD Broker FxPro
FTSE spread 1.5 Points
Dep. Protection £ 50000
Max. Lever 1:30
Min. deposit £ 100
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
5
of 23 CFD Broker FXTM
FTSE spread 1.0 Point
Dep. Protection € 20.000
Max. Lever 1:30
Min. deposit £ 10
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
1
of 14 Crypto Broker IQ Option
Crypto currencies 13
Max. Lever 1:1
Min. deposit $ 100
BTC spread 6 percent
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
2
of 14 Crypto Broker 24Option
Crypto currencies 5
Max. Lever 1:2
Min. deposit £ 500
BTC spread N/A
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
3
of 14 Crypto Broker Plus500
Crypto currencies 10
Max. Lever 1:2
Min. deposit £ 100
BTC spread variable
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
4
of 14 Crypto Broker Pepperstone
Crypto currencies 5
Max. Lever 1:2
Min. deposit £ 200
BTC spread N/A
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
5
of 14 Crypto Broker City Index
Crypto currencies 5
Max. Lever 1:2
Min. deposit £ 0
BTC spread 40
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
1
of 6 Social Trading Broker eToro
Underlying assets 866
Dep. Protection 50000
Min. deposit £ 200
Max. Lever 1:30
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
2
of 6 Social Trading Broker ZuluTrade
Underlying assets 200
Dep. Protection
Min. deposit £ 0
Max. Lever 1:30
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
3
of 6 Social Trading Broker Ayondo
Underlying assets 90
Dep. Protection 1000000
Min. deposit £ 2000
Max. Lever 1:30
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
4
of 6 Social Trading Broker Tradeo
Underlying assets 122
Dep. Protection 20000
Min. deposit £ 250
Max. Lever 1:30
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
5
of 6 Social Trading Broker FXTM
Underlying assets 247
Dep. Protection 20000
Min. deposit £ 10
Max. Lever 1:30
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
1
of 9 Spread Betting Broker IG
FTSE spread 1 Point
Dep. Protection 50000
Max. Lever 1:30
Min. deposit £ 0
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
2
of 9 Spread Betting Broker City Index
FTSE spread 1 Point
Dep. Protection 50000
Max. Lever 1:20
Min. deposit £ 100
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
3
of 9 Spread Betting Broker ETX Capital
FTSE spread 0.1 Points
Dep. Protection 50000
Max. Lever 1:30
Min. deposit $ 100
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
4
of 9 Spread Betting Broker Core Spreads
FTSE spread 0.8 Points
Dep. Protection 50000
Max. Lever 1:30
Min. deposit £ 10
Go to IG
Risk warning: Capital can be lost. Terms and conditions apply.
5
of 9 Spread Betting Broker OANDA
FTSE spread 1 Point
Dep. Protection 50000
Max. Lever 1:30
Min. deposit £ 0
Go to IG
Risk warning: Capital can be lost. Terms and conditions apply.

Buying, selling and holding shares

Once you have opened your account and deposited funds, the actual mechanics of buying and selling are fairly simple. To buy, choose a stock and set a quantity or value. The price will be quoted, and if you accept, the shares will be in your portfolio. Selling shares is done in a similar way. The days of share certificates are in the past – you’ll need to sell on the same platform from which you bought. When selling, state the quantity or value of the shares you wish to sell, and when a price is quoted, you will have a brief interval to make your decision. Once you have accepted, the money will appear in your account. If you trade shares online, you are unlikely to be involved in any of the paperwork, and your name will not be on the company share register. Remember:

  • Investment does not need to be carried out as a huge sum. Slow investment over months may be more effective.
  • The greater profits are made from the biggest risks. Do not invest more than you can afford to lose.
  • Stocks and shares are a long-term investment. Expect to wait five years for a significant profit.

While you are holding these shares, remember to keep an eye on their movement. As a novice trader, you might think it impossible to forget your shares, but as you build up a varied portfolio, it is easier to forget and miss opportunities for profit.

 

Conclusion:

Our conclusion – some final thoughts on stocks and shares for beginners

Stocks and shares are a suitable investment for beginners, but it is not one for the faint hearted. The market can move quickly, influenced by daily events that can see profits soar or losses stack up. When choosing a broker, keep an eye out for scams and make sure you are happy with your choice, particularly looking for good customer services because as a novice trader, you are likely to need it. Consider a stocks and shares guide carefully. It is often recommended to initially invest in solid performers such as the ones on the FTSE100. They may not see the biggest profits, but equally they are far less risky. As you develop as a trader, you can start considering greater risks. Starting with a demo account is strongly recommended and can be a valuable tool in finding out if a broker is the right one for you. When you do see losses, remember that investing in stocks and shares is a long-term investment, and over time, you have a much better chance of it proving to be profitable.

Stocks Highlights