Finance > Investing in the Stock Market
3 Steps to Start Investing
One of the easiest ways to start investing is through an online investment platform, sometimes referred to as a ‘share dealing platform’. Within these platforms, you can choose your investment account and invest in a wide range of listed companies and funds – all of which will be covered within this article.
3 Steps
Investment Platform
How Does an Investment Platform Work?
An investment platform is a marketplace for all your investment needs. Once an account is created and sufficient funds are deposited, you can begin investing. When purchasing, you will be required to enter either a quantity you wish to purchase or the total amount you want to spend. In addition to the cost of your investment, the platform will charge fees for the service it provides. Prices will vary depending on the platform.
How to Choose a Platform
Platforms will offer varying levels of support, charge different fees and provide a different range of products, so it’s important to research which platform best suits your needs. Popular platforms include AJ Bell, Hargreaves Lansdown and Vanguard.
Consider the following when choosing a platform:
- Does the platform support your investment channel?
For example, if you’re investing within a stocks and shares ISA, you want to ensure your platform provides this type of account.
- Support
- Fees
In addition to trading fees and stamp duty, investment platforms will charge a fee for their service, either as a flat fee or as a percentage of your investment.
- The breadth of products you wish to invest in
Some platforms will give you access to more investments than others. So if you have an idea of what you want to invest in before signing up to the platform, it is best to check whether it’s available first.
Investment Account
An Individual Savings Account (ISA) is an appropriate starting point due to its low cost and tax-efficient benefits.
What is an ISA?
An ISA lets you save or invest a certain amount without paying tax on your returns.
For the 2022/23 tax year, you can deposit £20,000 across all your ISAs, and any income received or gains made are tax-free. There are multiple types of ISAs and specific criteria surrounding their uses – read our article below for more details on what’s available.
Choosing Your Investment
When it comes to investment options, there are many… maybe too many. For this reason, you must do your own research and understand where you’re putting your money.
Two common investment options are funds and shares.
- Share
A share is essentially a slice (usually a very small one) of a company. Shares can earn you money in two ways:
1) You sell for a higher price than you bought
Investors buy shares as they believe the company will perform well over time, leading to an increase in demand for the shares and an increase in the share price.
2) Dividends
If a company makes a profit, it might give some profit back to investors in the form of a ‘dividend’. Whether the company pays out dividends and the size of them will vary.
- Funds
A fund uses money from multiple investors to buy a large number of shares in the market. So instead of trying to pick an individual company, you buy a fund comprised of lots of different companies.
Funds will tend to have an area of focus, e.g., location, industry, company size, etc. For example, you may wish to invest in an index fund, such as a FTSE 100 tracker. This fund invests in the 100 companies listed on the London Stock Exchange with the highest market capitalisation. Therefore, its focus areas are location (UK) and company size (largest 100).
What Should You Buy?
Whilst I’m sure you’re hoping we’re going to tell you what the next Tesla will be; unfortunately, we’re not. We’re not financial advisors and would hate to point you in the wrong direction. Fortunately, there is a wealth of free information available. Below are a few places to get you started, but please speak to a financial advisor if you’re still unsure.
Hargreaves Lansdown – Free newsletters, guides and investment tools
Motley Fool – All the latest company news, broken down company-by-company.
Please note: Although social media is riddled with supposed 10x returns, picking winning stocks is time-consuming and can be extremely difficult. So make sure you do your research before you start investing.
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