Someone once said that a journey of 1,000 miles begins with a single step. To be perhaps a bit too literal, it’s no good stepping out the door in the hope of going somewhere if you don’t know how to get there.
When we talk of the benefits of investing in shares, of how they’ve beaten other forms of investment for more than a century, of how much better they are than putting money in a Cash ISA… you can’t take your first step to take advantage of them until you know how.
If you read about a bargain at Tesco, all you have to do is pop out to a store and get it. But there’s no local physical share shop where you can hand over some cash and be given a share in return. Yet the truth is, in this digital age, it really is easy to get started buying shares via an online stockbroker.
The old days
Back when I started, it was hard to find a broker at all. In fact, my first few transactions were done through my bank, and involved filling in paperwork (including receiving actual printed share certificates). The first time I sold shares, it took close to a month to actually receive the cash. Things improved when telephone brokers arrived, but having to actually make a call and speak to a human (often waiting in a queue) was a pain. And due to whatever market craze or panic was happening, I even had times when I couldn’t get through at all.
These days, for my most recent share purchase I simply logged into my account at Hargreaves Lansdown and clicked the appropriate link to make a trade. After entering the amount I wanted to invest, up popped a quote that was valid for 30 seconds, and all I had to do was click on the Buy button. Done.
You might ask how the cash got into my account in the first place, and in this case it was dividend money that had accumulated from my other investments. As an aside, that’s how easily dividends work — you don’t do anything and they just show up. I can remember when they came as a cheque in the post.
Getting new cash into my account is done just like moving cash around bank accounts. In fact, my broker works just like online banking, and when I log in I have options to transfer money to or from my bank account. I can also set up regular monthly transfers, which is a very useful option.
One thing I should mention is charges. I pay a fixed £11.95 per transaction, and there’s a 0.5% tax (known as stamp duty) on purchases (but not on sales). Brokers can place an upper limit on the size of a fixed-charge transaction, but if there’s one on my account, then I’ve never reached it.
If you’re just starting out, I’d very much recommend opening a Stocks & Shares ISA, and the comparison sites will help you to find the best deals. Once you’ve chosen one, it really is very similar to online banking.
One thing I can’t tell you is what shares to buy, but I have offered a few thoughts for a great starter portfolio here.
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Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK has recommended Hargreaves Lansdown and Tesco. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.