“There seems to be some perverse human characteristic that likes to make easy things difficult”.
- Warren Buffet
This article provides some simple advice on how to buy shares. You may be surprised by just how easy it is to get started.
1. Buying Shares Online
Perhaps the easiest way to buy shares is to open an online share dealing account. An ‘execution only’ service is one that enables you to buy and sell for a fee, and does not include any financial advice from a broker. Typically fees can range from around £8-12 per transaction, but frequent traders can sometimes get preferential rates that may be closer to the £6-7 range. Shop around, fees for transactions can vary. You can use a range of online money comparison sites to find the best broker for you, such as www.moneysupermarket.com and you can also get good advice from sites like the Motley Fool at www.fool.co.uk, or daily newspapers like The Independent www.independent.co.uk/news/business/sharewatch/ and the Financial Times www.ft.com .
2. Share Buying Advice
Once you are ready to buy shares online, do some research and gather as much advice as possible. There are lots of share buying tips out there but be selective and cautious. The Motley Fool site is a great source of intelligence for share tips, but you will need to do your own research before making up your own mind about what shares to buy. Read as much as you can.
3. Share Buying Tips
Some guidance to inform your thinking about what shares to buy.
• Know yourself. Be realistic, understand your goals, and consider how you will behave under pressure. Learn to be patient.
“Emotions are your worst enemy in the stock market.”
-Don Hays - Investor
• Formulate an approach that you will apply consistently. Do not follow the crowd unless there is a very good reason to do so.
• Manage your exposure to risk.
• Buy quality. A great business at a fair price is far better than a poor business at a great price.
• Look for growth.
• Avoid excessive debt.
• Look for talented management with a proven track record and with a commitment to shareholder value, not their own wealth.
• Avoid investment fads.
4. Keep The Faith
“Believing would be easier if God would show himself by depositing a million dollars in a Swiss bank account in my name”
Keep faith in your approach. Remember that buying shares throughout history has generally proven to provide the consistent investor with a better return than any savings account. Nobody ever became wealthy from the interest off a savings account, and what is more, buying shares is a lot more fun. Some of the wealthiest people in the world today owe their fortune to the stock market, as will some of the wealthiest people of tomorrow.
Take that first step and have fun.
Jamie E. Smith 2009