Or cheaper – dealing shares via the web has never been easier.
Execution-only brokers have driven cost as little as a fiver plus stamp duty and many have done away with the old percentage-based method of calculating the commission in favor of an easy to understand flat fee.
That said, there is still a bewildering array of alternatives offered by the High Street banks and scores of bespoke internet dealers – all vying for your business.
Despite plummeting prices and more transparency, there are some potentially costly pitfalls await the unsuspecting trader new to online investing. Below I show how to avoid them:
Choosing a broker should be easy and based on the best available deal. But you may wish to pay extra for a reliable service a bit. By this I mean a website that does not crash or freeze as soon as you login, and is simple and easy to use. As a general rule, do not pay more than £ 12 per transaction. And watch out for the hidden costs such as annual fees that drive up the cost of the service.
A good tip is to open two competing brokers and chose the most impressive accounts. Among the hidden costs of trade tax. Every time you trade are subject to duty, which is levied at 0.5pc stamp. And if you are lucky enough to make in a year a profit of more than £ 8,500 you will be liable for capital gains tax, which is levied on a sliding scale of 10st-40pc.
Registration is simple enough. Most sites have a wizard that will guide you through the process of opening an account in just ten minutes. Ironic then that you may have to wait a week before the service is fully functional because the paperwork must be mailed, signed and returned with proof of identity. Most brokers require a utility bill and bank statements and one even asks for your Social Security number. So these going on. Some electronic brokers you may have to deposit money – usually around £ 500 – and purchases will be funded from this. Others simply debit and credit your account.
Once you have registered you will be provided with a username and password that gives you access to the trading screen. Log into the active area of the website and your senses are immediately attacked by all kinds of information.
First step is to decide which country you want to exchange shares. It is fair to say that most people will choose the UK. It is then a matter of deciding what specific share you want to buy or sell. It would be simple if you just the company name and press the Return key. But instead, most sites will insist you a two or three letter code – called EPIC – that identifies the company. You will have a search function that allows you to look up to find. Make sure you enter the correct EPIC, otherwise you’ll end up buying shares in the wrong business. Believe me, I’ve done it and it costs me to sell what I bought. Approximately 30 pounds back
Once you enter the unique code of conduct will be presented with two awards for shares in the company. The lower of the two is the bid price – the amount per share of the broker will pay for your stock. The higher figure is the bid price, or what you will pay to acquire shares. The difference between the two is called the spread and it is the profit of the broker makes buying and selling stocks. Again, you must be careful to get the right number of shares to enter – count the zeros. You do not want to buy 60,000 shares of £ 1 each if you meant 6000 to sell at 10p. Luckily I have not done this.
Some basic rules of investment. Always do your research. That means reading the financial pages and bookmarking sites such as Reuters, and the BBC ADVFN.
Relying a tip from a guy in a bar will seriously damage your wealth.
Set a stop-loss. Very simply, if you buy shares you expect them to go down instead of up. As they begin to the south then consider selling if the price drops between 15st and 20st. Reinvest your dividends. It is a no-cost way to grow your investment. Invest only in companies you understand.
Good luck and be careful out there.
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