If you’re based in the UK and you wish to get your hands on some stocks and shares, you’ll be pleased to know that there are a number of ways to do so, and hundreds of FCA-regulated brokers active in the online space where you can get your hands on shares with low commissions.
In this beginner’s guide, we explain how to buy shares in the UK in a few easy steps and reveal the best platforms to do so.
How to buy shares in the UK in 3 easy steps
Want to buy shares right now? Follow our steps below to buy shares with eToro, a top-tier FCA regulated UK stockbrokers offering access to 800 shares commission-free.
Buying Shares in the UK: A beginner’s guide
There are many ways that you can invest in shares in the UK. The specific option that you go for will ultimately depend on your long-term investment goals.
Below, we explain how to buy shares using UK stock brokers.
Step 1: Choose a Share Broker
As noted above, the easiest and most-effective way of buying and selling shares is to use an online broker. With that being said, with hundreds of platforms now active in the market, knowing which broker to sign up with can be challenging. For example, while some brokers offer super-low fees, others excel by listing thousands of companies to invest in. Below, we list the best UK stock brokers for 2020.
eToro - Best All-Round UK Share Broker
eToro is the safest, cheapest, and most cost-effective way of buying shares in the UK. The platform is regulated by the FCA, CySEC, and ASIC - so your funds are safe at all time. With hundreds of shares to choose from, eToro does not charge any trading commissions. You can get started with an account in minutes, and then deposit funds with a debit/credit card, bank account, or e-wallet.
- Social trading leader
- Best mobile trading site
- Paypal accepted
- Limited technical analysis tools
- Not well-suited for the more advanced investor
2. Plus500 - Best Commission-Free Share Broker for CFDs
Plus500 is a heavily regulated CFD based in the UK. The platform allows you to trade thousands of shares across dozens of stock markets. As Plus500 specializing in CFDs, you will have the ability to apply leverage and short-sell shares. You can deposit funds with heaps of payment methods, and there are no commissions to pay when trading stock CFDs.
- Minimum deposit of £100
- Over 2,000 trading instruments
- Mobile app available
- No education material
- Not suitable for beginners
3. AVATrade - Best Stock Trading Platform for Advanced Investors
If you're the type of trader that has a number of years under your investment belt, it might be worth exploring the merits of AVATrade. The share trading platforms also specializes in CFDs, meaning you can buy and sell shares on leverage. You can also short-sell a company if you think it is likely to go down in value. Crucially, AVATrade offers heaps of advanced chart reading tools and technical indicators - so it's perfect for seasoned traders.
- Spreads from just 0.9 pips
- Multiple licenses
- Both MT4 and MT5 supported
- No research features
- Does not offer 2FA login
- Only 56 forex pairs supported
Step 2: Open a share trading account
Firstly, click here to open your eToro account. By using a newbie-friendly UK share dealing account provider like eToro, the process rarely takes more than a couple of minutes. In fact, you simply need to provide some basic personal information.
- Full Name
- Home Address
- Date of Birth
- National Insurance Number
- Email Address
- Telephone Number
You will also need to choose a username and a strong passport – which you’ll later need to use every time you wish to sign in to your account.
Step 3: KYC & Account verification
FCA-regulated brokers are required to identify each and every client that uses its platform. This is to ensure the broker remains compliant with UK laws on anti-money laundering. As such, you’ll need to upload a copy of your passport or driver’s license.
The good news is that eToro is often able to validate your ID instantly. As such, there is no requirement to wait days on-end to have your documents manually checked.
Step 4: Deposit funds
As soon as your eToro account has been verified, you will then need to deposit some funds. The platform offers a range of payment methods to choose from, which includes:
- Debit Cards
- Credit Cards
- UK Bank Account
Unless you are using a bank account, all deposit at eToro are credited instantly. There are no fees to deposit funds, although a £5 withdrawal charge does apply.
Step 5: Buy your first share or trade share CFDs
So now that you have opened an account with eToro, verified your identity, and deposited funds – you are now ready to buy some shares! Take note, eToro lists more than 800 stocks on its platform, so you might want to spend some time thinking about the company you wish to invest in.
In our example below, we are buying shares in Facebook. To go straight to the trading page, we enter the name of the company.
Click on trade
To go straight to the trading page, you’ll need to click on the ‘Trade’ button.
You will now need to place a ‘buy’ order. Before you do, you need to enter the amount that you wish to invest. Take note, eToro denominates everything in US dollars, so enter the amount of shares you want to buy in USD. As you can see from our example, you don’t need to buy whole shares at eToro.
Even though Facebook shares are priced at £117.03 per stock, we are investing just £50.
Buy shares or trade share CFDs
Brokers like eToro also give you the option of trading stock CFDs. This would only be suitable if you want to short-sell the stock (meaning you think its price will go down), or you want to apply leverage (where you trade with more than you have in your account). If you wish to trade stock CFDs, be sure to elect a stop loss, leverage and take profit amount before you click on place order.
Which type of shares can I invest in as a UK resident?
Wondering the types of shares that you can buy in the UK? There are hundreds of companies listed on the London Stock Exchange, and then many hundreds more on the Alternative Investment Market (AIM). As such, your best bet is to create a diversified portfolio of companies from multiple sectors.
This might include:
Top stock picks for 2020
It is important to reiterate that you will be responsible for choosing your own investments when you join an online stock broker. This can be an intimidating process if you have little to no experience in the trading scene. As noted earlier, the best way to overcome this is to create a diversified portfolio of shares that contains companies from a range of different sectors.
Nevertheless, to help you along the way, below you will find our top 10 share picks of 2020. Just make sure you perform your own research prior to making an investment, and never invest purely on the back of somebody else’s advice.
For those of you looking to invest in a British hallmark firm at a discount, it might be worth considering Marks & Spencer’s. Priced at 539p per share in 2015, the very same stocks can now be bought at just 95p.
Standard Life is a UK-based global investment firm with a number of subsidiaries under its belt. Much like Marks & Spencers, you can obtain its shares at a huge discount. Priced at 527p in 2015, they are now priced at 207p.
The telecommunication company has grown from strength to strength in recent years, with Vodaphone now with operations in dozens of countries. Launched in 1982, the company now has a market capitalization of £28 billion.
Aviva is a UK based insurance and pension firm with operations in multiple jurisdictions. This includes everything from pet insurance, home insurance, car insurance, and life insurance. The company has been struggling in recent years, which is reflected in its share price. However, this also presents an excellent buying opportunity.
If you’re looking to gain exposure to the pharmaceutical space, it might be worth exploring Astrazeneca. The company has a huge market capitalization of £101 billion, making it one of the largest firms on the LSE.
Although the supermarket chain has experienced a turbulent time on the stock markets in recent years, it still retains its lion share of the industry.
With a 16% market share of the UK grocery space, Sainsbury’s is an additional supermarket chain to consider adding to your portfolio of stocks.
Fancy gaining exposure to the ever-growing craft beer space? If so, it might be worth buying shares in BrewDog. Not only has the British brewery company attracted a major consumer base in the domestic arena, but its since expanded to international markets, too.
Tesla shares have sky-rocketted in recent years. It isn’t too late to jump on board – especially when you consider that Tesla is only just about getting cars out to the consumer marketplace.
The global financial powerhouse has a presence in every corner of the world, with more £2 trillion worth of assets under management. At a current share price of405p, HSBC is still worth just a fraction of its all-time high in 2000.
Important terminology to know
The stocks and shares space can be an intimidating battleground if you’ve got little to no experience in trading. As such, check out the key terms listed below that you are all-but-certain to come across when investing online.
When is the best time to buy shares?
If you’re wondering when the best time to buy shares is, there really is no time like the present. By this, we mean that stocks and shares should be viewed as a long-time investment. This is for two key reasons. Firstly, the stock markets will always go through ups and downs.
As such, by holding onto your stocks over a long period of time, you stand the best chance possible of riding out these volatile waves. Secondly, it is wise to consider re-investing your share profits so that you benefit from the fruits of compound interest. This is where you earn ‘interest on your interest’.
How much money should I invest in stocks and shares?
There really isn’t a one-size-fits-all answer to this question, as it really depends on how much you can afford to lock away. In terms of getting started, you have a couple of options at your disposal. For example, some traders prefer to invest a single lump sum, and then sit on the investment for a number of years. Alternatively, others prefer to invest a bit at the end of each month. If you have the means, we would actually suggest doing both.
Firstly, by investing a bit at the end of each month, you will continue to grow your money over the course of time. In other words, what might seem like an insignificant sum of money right now might grow into a considerable amount in 20 years times. Secondly, by also investing a lump sum when you first get started, this will allow your money to grow faster. Once again, this is linked to the impact of compound interest.
Tips for Investing in Shares
Never purchased a single share in your life? Don’t worry, the process is super-easy. With that said, we would suggest reviewing the tips outlined below before starting your stocks and shares journey!
Tip 1: Dollar-Cost Averaging
You’ll likely be wanting to start off with small amounts at first, which is fine. In fact, this is actually a good strategy to employ to benefit from dollar-cost averaging. The overarching concept is that by investing small amounts on a frequent basis (say monthly), so stand the best chance possible of riding out volatile waves.
For example, if the price of IBM stocks is £100 in month 1, £80 in month 2, and £120 in month 3 – this means that you have paid an average price of £100!
Tip 2: Don’t be Afraid to Sell
Some commentators involved in the investment space will tell you to hold onto your shares for at least five years. In doing so, you stand a good chance of riding out market waves. Although this is often the case, it’s not a sure-fire rule. As such, never be afraid to sell an investment at a slight loss if it appears tough times are ahead for the company in question.
Tip 3: Avoid Leverage as a Newbie
Although leverage is a sophisticated tool used by seasoned traders, it might be worth avoiding it until you become more comfortable. Crucially, while leverage can amplify your profits, it can do the same thing for your losses.
How can I sell my shares?
When it comes to selling your shares, the process is just as straight forward as making an investment. All you need to do is head over to the online broker that you bought the shares from, and elect to exit your trade. As long as you do this during standard market hours, the trade should be executed immediately, and the funds returned to your account balance as cash. You then use the cash to invest in other shares, or simply withdraw it back to your bank account.
How do I hold shares?
When you use a regulated online broker like eToro, everything is facilitated in-house. By this, we mean that as soon as you buy shares, the investment is represented in your brokerage account. The shares will remain there until you decide to sell them. This is the case regardless of which broker you use. Long gone are the days of receiving paper shares in the mail!
How to invest in a stocks and shares ISA
If what you’re interested in is investing in a stocks and share ISA, consider talking to a financial advisor. For those unaware, ISAs allow you to earn a certain amount of interest each year without paying any tax. In the case of stocks, this relates to capital gains.
For example, if you buy £5,000 worth of shares, and then sell the same shares at £7,000, your capital gains amount to £2,000. Ordinarily, this £2,000 would be liable for tax. However, if you open a stocks and shares ISA – you can shield the first £20,000 from tax.
Be aware that in order to invest in a stocks and shares ISA in the UK, you will need a larger capital to begin with, such as £5,000 or more. The typical commissions charged by financial advisors is around 3%, which would be £150 if you’re starting with a capital of £5,000.
Alternatively, you can invest in stocks and shares ISAs by going through a do-it-yourself online platforms, such as The Moneyfarm.
In a nutshell, consider your personal circumstances and be sure to select the right platform when buying shares. We recommend eToro which ticks most boxes and where you can buy and trade shares commission free.
Finally, keep in mind that, while the share dealing space can be a great way to grow your money over time, there are underlying risks. Only risk what you can afford to lose.
eToro: Best UK Stock Broker for 2020
- Choose from over 800 stocks, 0% commission
- Buy stocks outright or trade stock CFDs
- FCA, CySEC and ASIC regulated
What is the easiest way to buy shares in the UK?
The easiest way to buy (and sell) shares in the UK is to use an online broker. You simply need to open an account, deposit funds, and choose which companies you want to invest in.
What payment methods can I use to buy UK shares?
The best UK share brokers allow you to deposit funds with a range of everyday methods. At a minimum, we prefer brokers that support debit/credit cards, e-wallets, and bank accounts.
What fees do I need to pay when buying shares?
Some brokers charge a monthly/annual maintenance fee, and then a commission every time you buy or sell shares. This can either be a flat fee or a percentage against the amount you trade. Some platforms - such as eToro, do not charge any maintenance fees or commissions, so it's just the spread you like to look out for.
What is the minimum amount I have to invest to buy shares?
This depends on the platform in question. You normally need to meet a minimum deposit amount, and a minimum trade size. For example, eToro has a £200 minimum deposit, and a £25 minimum trade amount. Check with your chosen broker before signing up.
Can I buy shares with leverage?
You certainly can. In the UK, you can trade stock CFDs with leverage of up to 5:1. This means that a £100 account balance would permit a maximum trade of £500.