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Buying and selling shares - what you need to know

Purchasing and selling shares on a recognised stock exchange can provide you with an interesting way to earn additional income, but it can also be a satisfying way to see your investments grow.

Of course, as with any investment buying, shares can be a gamble. So before you begin, it’s necessary to take the time to understand how trading in shares works, how to go about the process and which sort of investments may benefit you the most.

Simple on the surface

In many ways, entering the stock market is more straightforward than you would expect. Shares can easily be found listed on the internet or in financial newspapers and publications, and their current buying and selling price will be listed alongside so that you can easily ascertain their current value. Making an offer on these shares is as simple as deciding how much you are willing to pay and submitting it. If the offer is then accepted you will then receive the shares and pay for them. Selling shares follows much the same structure.

So it’s all straightforward, right? Unfortunately, this is not necessarily true. There are multiple routes to take to get from A to B when buying and selling shares, and prospective traders should be aware of these going forward.

Which way to deal will you choose?

The first way to buy and sell is to enlist the help of a stockbroker. Stockbrokers can either act on behalf of your requests, or work with you to advise you before making decisions.

Another option is to buy and sell shares through a share-dealing service. Most banks and building societies will have this service available, and there are also a number of online entities that provide the same service.

Companies may also directly list their shares as available to buy in newspapers, online or other media including television adverts, allowing people to buy the shares directly from them. To engage in this buying method you’ll likely have to put forward an application form – but if the shares are popular it’s worth noting that you may not get the amount of shares that you applied for.

The last option is purchasing and selling through a share shop. These establishments may be connected to banks or building societies but also can be independent.

Shares can be bought directly from friends and family. Legal paperwork will still be necessary in these transactions, but of course, depending on the shares they already own, the choice is limited and therefore this isn’t a recommended choice for people looking to begin trading.

Find a method that suits you

So which way is best? You need to evaluate the different options available and see which one will benefit you in terms of how it fits in with your lifestyle, especially if you want to continue working in your practice alongside. Every option will have unique ways of dealing and transferring payments – so finding out how they operate is a good first step.

Following this, it’s a good idea to weigh up your time and see how trading can fit into your schedule. If you have the time to do all of your buying and selling in person, more of the options will be viable. However, if time is slim, online options or delegating the actual buying and selling may be a better idea.

If you do choose a third party, it’s important to consider how much control you want to give them – should they check every detail with you or do you want them to exercise their own judgement? It’s a delicate balance to achieve and it’s worth thinking about this aspect before trialling third party methods.

The size of your investment could also play a part. If you are only buying a small amount of shares, a share shop may be the easiest option. For major investments a dedicated stockbroker is probably a better choice, as they will be able to monitor these shares constantly and give you tailored advice as necessary.

Costs of each service must also be factored in – if the gains are unlikely to be high, then there’s no point spending lots of money for services to monitor these assets.

Guidance going forward

Another complication to the share buying is that stockbrokers can trade shares in three different ways. ‘Execution Only’ means that they will buy and sell shares at your given time and given price. ‘Advisory’ is a more flexible choice, as your stockbroker will contact you, offer advice on transactions and work with you to discuss openings in the market and other potential transactions. Lastly, there is the ‘Discretionary’ option – this allows your stockbroker to buy and sell when they think is best, leaving the decisions entirely up to them.

Undoubtedly this can all be a bit confusing for people outside of the industry, especially if you are considering buying and selling shares for the first time. By enlisting the help of experienced Independent Financial Advisers such as those at money4dentists, the process becomes much more simple. With the help of our team you can ensure that you choose a route that is right for you, allowing you to enter this competitive, exciting market armed with the knowledge you need to succeed.

For more information please call 0845 345 5060 or 0754DENTIST.

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