How do you buy shares?

What are the options for individuals looking to invest their hard-earned cash in the stock market?

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It’s never been easier to buy shares. There are a variety of means through which you can invest in the stock market, with new technology providing the opportunity to make this almost effortless.

Here are a number of ways of buying shares that could be of interest to a wide range of investors.

Online sharedealing

Perhaps the most common means of buying and selling shares is through online share-dealing providers. And, with a range of tax-efficient accounts available online, investors may be able to turbo-boost their returns at minimal cost.

In recent years, the cost of buying and selling stocks online has fallen significantly. This means that small investors, or individuals who want to invest small sums on a regular basis, can do so without commission costs hurting their overall returns significantly.

Using aggregated orders could further cut the cost of online sharedealing. This is where a sharedealing provider combines the orders of a number of investors into one trade and passes on its savings from doing so to customers. Although this means there is less control over when a trade is executed, the cost of buying shares can be as little as £1.50 per trade.

In order to reduce the effort required on the part of an investor, various share-dealing providers offer regular-investing opportunities. This can involve setting up a regular payment from a current account that is then invested in specific shares. 

Wealth management companies

For consumers who prefer a more personal touch, it is possible to buy shares through a wealth management company.

A customer may have their own investment manager, who is their main point of contact. The investment manager may be able to provide advice on which shares to buy and sell, with the aim of creating a diverse portfolio of investments.

The cost of using wealth management companies can vary significantly, but may be relatively high. Also, wealth management companies may specify a minimum portfolio size, meaning their services are only available to people investing a certain amount in shares.

Investing apps

There has been a significant increase in the number of mobile apps aimed at making investing easier. Investing apps are becoming increasingly popular and could be attractive to time-poor consumers. 

A notable app that appears to be relatively popular is Moneybox. It links to an individual’s debit card and rounds up the cost of all transactions to the nearest pound. The additional money from rounding up the cost of goods or services is invested in one of three tracker funds that have varying risk tolerances.

The idea behind Moneybox is for an individual to invest without being actively aware of it. The company estimates that its customers on average invest £8.41 per week, which could lead to a sizeable nest egg in the long run, depending on investment returns.

Moneybox costs £1 per month plus a 0.45% annual platform fee. The cost of tracker funds is an additional charge, with their average cost being 0.23% per year. Given the relatively small average investment, the charges can be high when compared with having an online share-dealing account.

Other mobile apps aimed at making investing easier include Nutmeg and Wealthsimple. They offer a variety of investment options that are aimed at smaller investors who may otherwise find it difficult to obtain a diverse portfolio of shares. As with Moneybox, it is a good idea to check their total charges and compare them to investing through an online sharedealing provider.

Tip: consider tax efficiency

Whether using online sharedealing, mobile apps or wealth management, making use of tax-efficient accounts is worthwhile. Products such as a Lifetime ISA, stocks and shares ISA, and a SIPP can offer significant tax advantages in the long run that can have a material impact on portfolio value as well as an individual’s lifestyle in older age. As such, focusing on tax efficiency as well as convenience and costs could be the best way to decide how to approach buying shares.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

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