How does investing in shares work
Shares are a way for individuals to invest in a company without needing huge sums of money. A share is like a small piece of the company you are investing in. This means, when you buy a share in a company, you own a small piece of that business. The more shares you buy, the larger the percentage of the company you own.
So how does investing in shares work?
People tend to invest in shares in two main ways. The first is to buy individual shares. For example, if you wanted to purchase 50 shares of company X and each share was priced at £1, you would need £50.
The second method for investing in shares is to use a fund. Funds are collections of shares that are put together by a fund manager. People can approach the fund or go straight to the stock market and invest their chosen amount of money. Funds are typically broken down by percent. For example, fund A is 40% company 1 and 60% company 2. If you were to invest £100, £40 would go towards buying company 1 stock and £60 would go towards buying company 2 stock.
Funds allow people to invest in multiple shares and other investment vehicles with a single purchase. That means if one business you own shares in struggles or closes, you only lose a portion of your investment.
You may be saying to yourself, but how does investing in shares work? In other words, how do you go about buying shares or investing in a fund? Thankfully it is a lot easier than heading down to the London stock exchange. One of the most common options is to buy online. There are companies called share dealing platforms that allow you to buy shares or funds yourself. This can cut down on expenses and allow you to manage your purchases more easily.
When choosing a share dealing platform remember to watch out for fees. The most common types of fees are:
Accounting fees - These are essentially a subscription fee for using the account and can be monthly, quarterly or yearly.
Inactivity fees - these are fees you have to pay if you do not meet a certain number of trades in a given period.
Selling or buying fees - These are charges for buying or selling a share.
Stamp duty - Some purchases will be eligible for a 0.5% stamp duty fee.
It may not be possible to completely avoid fees when you are buying shares but it is crucial to do your homework. If you sign up to a platform with higher fees you are essentially giving up some of the money you could make on your investments.
Once you choose a share dealing platform you will need to set up a trading account and add money to it so that you can pay for your investments. Then you simply sign in and search for the share or shares you want to buy. You can choose either to buy a certain number of shares or buy a certain amount of money's worth. Once that is done you make your purchase and you now own shares.
If you need money and can not wait for your investments to pay out, Everyday Loans may be able to help. We provide a variety of loans that can help you. Contact us today to learn more.