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Investing for beginners: how I’d start buying shares in the UK

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When you’re an investing beginner, deciding where to start can be overwhelming. There are so many companies to choose from, transaction fees to consider, the risk of making a poor choice and losing your hard-earned cash. But you shouldn’t let these hurdles put you off buying shares in the UK. Investing can be an enjoyable and lucrative pursuit once you understand the basics.

Choose a broker

To begin buying shares you need a broker and there are many to choose from. Brokerages like Hargreaves Lansdown and Interactive Investor are long-standing reliable firms with an excellent reputation, lifelong customers and the ability to invest online with ease. If you only have a small amount of money, transaction fees can make investing for beginners expensive. Nevertheless, they’ve a massive selection of equities, funds and investment trusts available for you to put your money to work. They allow you to begin with as little as £25 a month, but do keep an eye on fees and I think it’s best to be committed to long-term investing.

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Newer kids to the brokerage block are Trading 212 and Freetrade. They offer free transactions, but don’t have the same track record for assurance. These newcomers let individuals buy fractional shares with no dealing costs. This is a way for beginners with little money to start investing. They also provide a platform where you can practice buying and selling shares without using actual money. However, they’ve a much smaller choice of equities and exchange-traded funds to choose from.

Invest in what you know

You may have heard of day-trading. But this is not investing, and for beginners it’s more akin to gambling. Billionaire investors Warren Buffett, and UK equivalent Terry Smith, are committed to long-term value investing. This means buying shares in companies you want to own, because you believe they’ve room to grow, not because they’re ‘cheap’ or you’re following the herd. A Stocks and Shares ISA is the best v toehicle do this because your returns are exempt from capital gains tax.

When actually looking for which UK shares to buy, begin with what you know. If you often buy your clothes from ASOS, you may consider this a company you’d like to own a piece of. If you always shop in Sainsbury’s, your prescription drugs are made by AstraZeneca and your regular takeaway comes from Domino’s Pizza, then each of these companies may interest you. Do your due diligence, determine the state of their finances and make a sound decision based on your findings. A company with a history of profits is a positive sign. But you may have cause for concern if it’s saddled with debt.

Buying shares in the UK

The FTSE 100 is a great place for beginners to look for shares. This financial index is home to the UK’s largest companies, which usually means they’re long established and credible businesses. The FTSE 100 includes companies with a global reach such as alcohol maker Diageo, disinfectant manufacturer Reckitt Benckiser or 5G player Vodafone. The next 250 companies sorted by market capitalisation are in the FTSE 250 index. You’ll find more UK-focused businesses here, but they’re usually high quality too.

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Kirsteen has no position in any of the shares mentioned. The Motley Fool UK has recommended ASOS, Diageo, Domino's Pizza, and Hargreaves Lansdown. 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.

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