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Investing In Shares

Investing In Shares
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There was a time when investing in shares was seen as the realm of the yuppie. However, times change and these days investing in shares is much more popular. One reason for this is accessibility – the Internet has made buying and sharing shares a much less daunting prospect, now anyone with some spare cash can give it a go. If you’re interested in buying shares but don’t know much about it, we can help with our beginners’ guide to investing in shares.

What is the stock market?

The stock market is where public limited companies and other financial instruments can be bought and sold. In the UK, the most famous is the London Stock Exchange, which is divided into different categories depending on the type and size of company, from the biggest household names to small emerging companies.

How much does it cost?

Contrary to popular belief, you don’t have to be super-wealthy to dabble in the stock market. A monthly commitment of £50 or a lump sum of between £500-£1,000 is plenty to get you started. A stockbroker or fund manager will charge a fee for buying and selling shares on your behalf, make sure you read the small print so you know how much to set aside for extra costs.

Why bother investing?

If you have a decent amount of savings you may decide to make your money work harder for you. Banks and building society interest rates are pretty low, when compared to how much that same money could earn you through investments. Buying shares in a company means you will benefit from any profit made by the company.

Risk

First up, you’ll want to know how risky buying and selling shares is. Are you likely to see much return for your money? Will you have to sit back and watch it go down the drain? We’ve all heard the stories of investors, whose shares have rocketed, making them a fortune in a relatively small amount of time. However, the same thing can happen in reverse, with shares plummeting to make them worth less than you paid. For this reason, you should only invest what you can afford to lose in shares. Treat it like gambling – yes, you may win but you may also lose out. Make sure all your essential outgoings are covered before going onto the stock market, be sensible with the amount of money you invest.

Investing In Shares

Choose carefully

Rather than buying shares in a ‘cool’ company or one that takes your fancy, it pays to be picky and do some research on the company you’re investing in. For example, a start-up enterprise may go belly up before it really gets off the ground, which would lose you money. However, you may see bigger returns on your investment if the company takes off. Make sure you do your research, don’t invest lots of cash without truly believing in the company. If you’re looking for a relatively safe bet then firms that appear on the FTSE 100 – a list of the country’s largest 100 companies – usually involve smaller risk factors, although the profits you make may not be as much.

Diversify

As the saying goes, don’t put all your eggs in one basket. Putting all your cash into one or two companies is a big risk. If those companies go bust, you will lose any money you’ve put in. Therefore, it makes sense to spread your savings over a portfolio of companies. Make sure that you’re investing in different industries or even different countries to minimise the risk.

Funds

It is possible to buy shares directly but it can be expensive and is a bit more risky. Most people, especially those new to the stock market, use what is known as a collective fund. This usually means your cash will be pooled with other people’s investment money, a fund manager will then decide which companies to invest in. There are plenty of other types of funds available so do some research and see which suits your needs best.

 

 

 

 

 

 

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About Maria Brett

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About Maria Brett

Maria is a freelance writer with over 10 years' experience producing content for a variety of publications and websites. When not working or looking after her two gorgeous sons, she can usually be found playing flugelhorn in a brass band, helping out at her local hospital radio station, shouting at the television while watching Formula 1, at the cinema or plonked on the couch with a cold glass of wine.

Website: Maria Brett

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