Share Buying Guide

Buying shares has always been regarded as a relatively successful form of investment. Profits are gained through the receipt of dividends and from the increased value of the shares when they are sold. In general share prices rise and so profits rise. Although for many years this has been a good form of investment, it has its risks. Share prices can go down as well as up. As a short term investment, the potential gains and potential losses are likely to be greater. It's best to see shares as a steady long term investment.

When buying shares its usually best not to keep all your eggs in one basket, but to spread the risk by holding a diverse portfolio of shares. If you have all your shares in the oil sector and the sector rockets, all well and good. However if there is a slump, in that sector you could be in real trouble.

Which shares should I buy? .

It is probably wise to start with shares in blue chip companies in the FTSE 100, but you may want to dabble in the FTSE 250. Shares in the Alternative Investment Market (AIM) are likely to be more risky. Research is essential. Check out the recent trend in share prices and follow the news. Some people see success through investing in companies that they already know about and where they can see the potential opportunities or pitfalls for the business ahead. There are plenty of sites such as Reuters where you can get up to date share prices as well as share price history.

Is it the Right Time to Buy Shares?
No one can predict the right time to buy shares - either thr right time in the market generally or the right time for one particular stock. Inevitably, the bottom of the market is the time. The problem is, no one can predict when the bottom of the market will be reached and how long recovery will take.

Do I have to use a stockbroker?
To buy shares you need a broker. A traditional stockbroker service offers you advice and you have to pay extra for this service. Most people use an execution only service, often using the internet. Here you're left to your own decisions with no advice but prices for dealing are very low - usually £10 - £15 for smallish trades. Companies such as Barclays and TD Waterhouse offer such services. One of the best deals is the Halifax Sharebuilder Account where you can buy for just £1.50 per trade. The downside is that there are only a limited number of trading days per month and it is not an instant service.

How do I sell Shares?
Selling shares is potentially much less risky, particularly if you use an instant online share dealing service. This will mean that you are pretty well guaranteed what price you will get for your shares

Please remember, our share buying guide is designed to give information, not advice. Please consult a stock broker.