Looking to start investing today? Doing so might be easier than you think. Thanks to online sharedealing, it is relatively straightforward and inexpensive to open an account and start buying and selling shares in a variety of listed companies.
Can you buy just one share?
The short answer is: yes. But don’t rush off quite yet!
Although buying a single share is possible, buying just one share in a company may not be cost-effective in many cases. The dealing charges may be greater than the cost of the share, depending on its price. It may, therefore, be a good idea to wait until you are able to buy a larger number of shares.
Furthermore, investing in just one company is typically a higher-risk approach. Rather than investing in just one company, buying shares in a diverse range of companies may be the best way to obtain a favourable risk/reward ratio and potentially enhance your wealth in the long run. This can mean investing in the shares of multiple companies individually, or purchasing an investment that is inherently diversified, like an exchange traded fund (ETF).
Regardless of what approach you decide on, the following are the steps you’ll need to take to get up and running and start investing.
Opening an account
Thanks to comparison sites such as The Motley Fool, it has never been easier to find an online stockbroker. Comparing their various offerings in terms of cost and by considering customer reviews is a good place to start.
It may also be worth considering different types of account, such as an ISA, in order to obtain greater tax efficiency than a standard sharedealing account offers.
You can often open a sharedealing account or an ISA online in a matter of minutes. Details such as your financial situation, address history and bank account are likely to be required, so it is a good idea to have them to hand.
Funding an account
Many sharedealing accounts are funded by using a debit card. This is a simple means of quickly transferring sums that can often be invested in shares straight away. Some banks may have limits on how much can be spent on a debit card in a single transaction, so it is worth checking this before seeking to transfer money to a sharedealing account.
Other brokers may require that the sharedealing account is funded by bank transfer. A bank transfer may take longer than a debit card payment, so it may not be possible to fund an account and buy shares on the same day.
Some accounts, notably ISAs, have limits on how much can be paid into them within a given tax year. For an ISA, the annual limit is £20,000. Any money that is withdrawn cannot be repaid unless part of the annual allowance remains.
It is also worth factoring in the cost of buying shares as well as stamp duty (0.5% of the total cost of shares purchased) when funding an account. In other words, you will need to transfer more money into your account than the total cost of the shares you want to buy in order to pay dealing costs and stamp duty.
Once a sharedealing account or ISA is opened and funded, the process of buying shares is relatively straightforward.
The company in which you would like to invest can usually be found by using a search facility within your sharedealing account. You select the company then enter the number of shares you want to buy; a live price is usually then displayed. This price is often only available for a set period, often 30 seconds, so it is important to confirm the trade within the required time. If the trade is not confirmed, then the process can be repeated – although the price may be higher or lower in subsequent attempts.
Once shares in a company are purchased, a confirmation email or contract note is usually sent by the online sharedealing company to the investor. It may be worth double-checking that the correct company name and number of shares appear on the confirmation.
Building a portfolio
As mentioned, buying just one share of a company may not be cost-effective. Dealing costs could mean that in many cases it is extremely difficult to generate a profit from owning such a small part of one company. It may, therefore, make sense to wait until you can afford a larger number of shares.
In time, buying shares in a range of companies can help to reduce risk through diversification within a portfolio. A portfolio of shares might produce a more robust return over the long run that provides greater stability while also offering the prospect of an improved financial situation.
Some offers on The Motley Fool UK site are from our partners — it’s how we make money and keep this site going. But does that impact our ratings? Nope. Our commitment is to you. If a product isn’t any good, our rating will reflect that, or we won’t list it at all. Also, while we aim to feature the best products available, we do not review every product on the market. Learn more here. The statements above are The Motley Fool’s alone and have not been provided or endorsed by bank advertisers. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool UK has recommended Barclays, Hargreaves Lansdown, HSBC Holdings, Lloyds Banking Group, Mastercard, and Tesco.