How To Buy Stocks Online (UK Beginners Guide)

Let's take the guesswork out of online stock investing and begin making your own investments with conviction.

Updated: May 18, 2024
Matt Crabtree

Written By

Matt Crabtree

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Are you interested in buying stocks online, but need help knowing where to start? Buying stocks online isn't as scary or complicated as many people think.

It's an effective way to get your foot in the door of a global market and can help you build wealth over time.

In this article, we will explain how to buy stocks online and provide practical tips to ensure a successful trading experience. We'll discuss online brokerages, the type of stock you should look to buy, and key strategies to maximise your online purchases.

How to Trade Stocks Beginners Guide

Let's take the guesswork out of online stock investing and begin making your own investments with conviction.

Understand How the Stock Market Works

When it comes to investing, one of the most important decisions you will make is determining which stocks you want to buy. From growth stocks to income stocks to penny stocks and more, a wide variety of stocks are available to investors.

Understanding the differences between these types of stocks can help you make informed decisions about how to best manage your money and create a diversified portfolio that meets your investment goals.

Let's take a look at the five most popular forms of stocks:

1. Growth Stocks

These are generally issued by larger, well-established companies with a steady revenue stream and high growth potential. Investors who buy growth stocks typically look for companies with new products in high demand. These stocks are usually higher risk, but they also offer the potential for higher rewards.

2. Income Stocks

For investors looking for steady income, income stocks are the way to go. These stocks are issued by companies that generate consistent and reliable dividends, making them ideal for someone who wants to build a retirement income portfolio. The dividend payments allow investors to benefit from the company's profits without taking on additional risk.

3. Value Stocks

Value stocks are issued by companies with undervalued shares. In other words, investors believe that the stock is currently trading well below its true value, which means it could be bought at a discount. Value stocks are ideal for investors looking for long-term potential or those who want to take advantage of bargain prices.

4. Blue-Chip Stocks

Blue-chip stocks are issued by companies that are well-established and have strong financials. These stocks are generally not as volatile as growth and income stocks, but they also come with the security that comes with large, established businesses. Typically, these stocks are considered some of the safest investments around.

5. Penny Stocks

Penny stocks are typically issued by new companies that have yet to establish a solid track record. Due to their low price, these stocks carry high risk, but they also offer the potential for significant returns. 

Regardless of which types of stocks you choose to invest in, it is crucial to understand the differences between them and the risks associated with each. Proper diversification is key to building a successful portfolio, and these are just a few of the many types of stocks available for investors.

Research the Companies You’re Considering

Knowing which companies to invest in and having the proper knowledge about them is key to making sound decisions when purchasing stocks. Investing without conducting thorough research can often lead to costly mistakes. Here's why it's essential to do your research before committing your hard-earned money.

First and foremost, research allows you to better understand the company you're looking to invest in. Having a better insight into a company's business model and operations, current stock and financial performance, as well as any potential risks will ensure you're investing in the right business. 

Research can provide investors with the answers they need to any questions they may have and help them determine if the potential return will justify the risk.

Additionally, thorough research can help uncover critical information about a company's current financial position. Knowing the market capitalization, short and long-term debt, and other metrics such as return on equity can all give a great deal of insight into the current financial situation and highlight potential risks.

Access to this wealth of information can help an investor decide if the company would be worth investing in.

Conducting primary and secondary research helps to identify the industry trends, affords you the opportunity to understand the safety provided within various stock markets, and compares multiple stock options.

Furthermore, researching the short-term and long-term prospects of a company, its strategic initiatives, and any potential threats helps an investor better understand how a company will be performing in the long term.

Finally, research allows investors to identify potential investment opportunities. Looking into a company's history and performance over a period of time can help investors find profitable and safe investments when the time is right.

Now that we know the basics, it's time to start trading!

Set Up Your Online Trading Account

Choose a Brokerage Firm

Choosing the right brokerage firm is one of the most important decisions you can make when investing in stocks online. The right broker can give you the knowledge, resources, and tools to make smarter, more profitable investments. Here are a few tips to help you choose the best trading platform.

1. Research The Available Options

Before selecting a stock exchange, compare fees and commissions, review trading platforms, and consider customer service accessibility. Pay close attention to minimum account balances and any other requirements.

2. Understand The Types of Brokerage Firms

Various brokerage firms are available, ranging from full-service brokerages to online discount brokers. Full-service brokerages provide comprehensive investment advice, while discount brokers are generally more cost-effective with fewer services.

3. Consider Trading Fees and Minimum Account Balances

Pay attention to the fees and commissions associated with the brokerage firm you choose. In addition, not all brokerages require a minimum account balance for you to open an account. Make sure to select one that fits your budget and meets your trading needs.

4. Evaluate The Quality of Customer Service

Before selecting a brokerage firm, research the different customer service options they provide, such as telephone support, email support, and chat options.

Choosing the right brokerage firm for your online stock investments can be a challenge, but with a bit of research, you can make the right choice. Consider these tips beforehand so you can start investing with confidence.

Gather Your Personal Information

As with any financial service, signing up for a stock trading platform requires providing some basic information about yourself. This can include your name, date of birth, address, phone number and email address. You may also need to provide your National Insurance number, so it's important to have this document handy.

In addition, your stock trading platform may ask you to provide some financial and investment information. This could include details of your assets, income and investments, as well as information on your tax residence and any dependents.

You'll also need to provide a certified ID, such as a passport or driver's licence.

The platform may also ask you to answer some questions to ensure you understand the risks associated with stock trading. These could include questions about your financial situation, your knowledge of stocks and exchange traded funds, and your investment objectives.

Finally, it's important to note that you'll need to provide all of this information in accordance with UK data protection regulations. This means that your stock trading platform must securely store and process your data in line with the law.

With all these documents and information ready, you're prepared to sign up for a stock trading platform. Providing the platform with the correct information should get you up and running quickly, so you can start trading and making money without delay.

Fund Your Account

Here are a few deposit methods for your online stock broker.

Bank Transfers

By far the most popular method of funding your account is by transferring money from a bank account into your brokerage account. Generally, you will need to provide your bank details so that the funds can be securely transferred, and it usually takes a few days to go through.

Many online brokers also allow you to set up recurring deposits so that your account is automatically funded regularly. If needed, bank transfers can also be used to withdraw money from your brokerage account.

Credit and Debit Cards

More and more brokers are allowing customers to fund their accounts using credit and debit cards. It's a swift and straightforward process, and your funds should arrive in your investment account within a few minutes.

However, credit and debit card transactions may be subject to an additional brokerage fee from the broker, so checking the terms and conditions before completing the transaction is essential.

Cheques

Cheques are also accepted by some brokers and can be used to fund your brokerage account. The main downside to this method is that it can take several weeks  to clear and for the funds to be credited to your account. Cheques may also be subject to additional fees, so it's worth checking with your broker before sending one.

No matter your method, it is crucial to accurately enter all your funds and personal information when setting up your account. Armed with the knowledge above, you should have an easier time funding your brokerage account and setting the stage for a successful investing career.

Place Your Stock Trade

Decide How Many Shares to Buy

Knowing the correct number of stocks to buy can often take a lot of work to accomplish. Still, with the proper research and due diligence, anyone can gain the knowledge to make confident decisions about their investments.

The first step is to understand how much you're willing to invest. Knowing how much skin you want in the market will be the foundation for making educated decisions when investing. With this in mind, it's important to research and evaluate the companies you are interested in investing in. 

Once you've identified a few companies you think positively of, investigate their financials and examine their performance track record to understand their current standing and potential for growth.

When researching a company's financials, it's vital to get a feel for the stock's volatility and its current price-to-earnings (P/E) ratio. Generally, it's wise to invest in stocks with lower volatility and P/E ratios that are below the average for their respective sector. Investigating these two metrics can provide insight into the potential for growth for the stock and its current worth.

Once you've established your overall strategy and risk tolerance, you can decide how much stock to buy. A good starting point is determining how much money you are willing to invest in stocks. 

If you've decided to invest, say, £1,000, then you can divide this amount among several investments. For example, if you're looking to buy stocks in four companies, you might purchase £250 worth of each stock. This way, you're spreading your risk around and diversifying your portfolio. You could even diversify the type of stock, such as £250 of blue chip or growth stocks.

Market or Limit Order?

When investing in stocks online, one of the most important decisions you need to make is whether to place a market or limit order. This choice can have a tangible impact on the success of your investment, so it's worth taking a look at the pros and cons of both.

Market orders are the simplest type of order to place.

When you place a market order, your broker will purchase the stocks you want to buy at the best available price. This type of order guarantees an immediate purchase as long as enough stocks are available on the market.

The downside to market orders is that you may end up paying more than you wanted to since you're paying the current market price. That said, they're the best option if you're looking to purchase stocks quickly.

Alternatively, limit orders let you specify the maximum price you're willing to pay for the stocks you're buying. Your broker will only purchase the stocks at this maximum price, guaranteeing you won't overpay. This can be an intelligent way to go if you're looking to save money, as you won't be shelling out extra cash to purchase the stocks you want.

The downside to limit orders is that, since you’re setting the maximum price, you might miss out on purchasing stocks if their price rises above your limit. This can be frustrating if the stocks you’re targeting for purchase suddenly surge in price.

When deciding which type of order to place when buying stocks, it really depends on your individual circumstances. Market orders are best if you're in a hurry, while limit orders can be a smart way to save money. Whichever type of order you choose, it's essential to know the difference.

After Entering The Trade

The stock market can be an enriching and exciting environment to trade in. But after you've entered a trade, what do you do next? Knowing what actions to take after pulling the trigger can help protect your capital gains and minimise losses. Here's what you need to do after hitting that purchase button.

1. Monitor Prices and Performance

Once you've entered a trade, ensure you monitor the stock's performance and price movements frequently. Keep an eye on news related to the company and its sector, as it may affect the stock's performance. Remember, it's crucial to stay up to date and react accordingly if necessary.

2. Set Up Stop-Loss Orders

A stop-loss order is a protective tool that can automatically sell stocks once they reach a specific price. Setting these up is vital if you want to protect yourself from significant losses in case of an unexpected event, such as a major drop in the stock's price.

3. Have an Exit Plan

Having a predetermined plan for getting out of a trade is necessary and will help you know when it's time to exit. For example, you may decide to sell stocks if it has yet to achieve your desired gains within a desired timeframe.

4. Take Profit

Once you've achieved your desired profit, you must take them and get out of the trade. Holding onto the stock for too long increases the risk of losses and should be avoided. Taking profits also helps to keep your losses to a minimum and prevent you from becoming too emotionally attached to a stock.

By following these steps, you can maximise your profits and minimise your losses when trading in the stock market. Knowing what to do after you enter a trade can help you become a more successful and profitable investor.

Tips for Trading Stocks Online

Consider Using a Virtual Trading Account First

Are you considering entering the stock market but aren't sure if you're ready to risk your hard-earned money? If so, consider using a virtual trading account before you make the jump.

A virtual trading account is an online simulation of a real stock market, allowing you to evaluate your stock trading skills without risking your actual money.

Here are some reasons why you should consider using a virtual trading account before entering the stock market:

1. It Offers Risk-Free Training

Knowing precisely what the stock market is all about and what you should be doing can be challenging as a beginner investor. With a virtual trading account, you can learn the ropes without any stake.

2. You Can Try Different Strategies

The stock market is unpredictable, and any investor needs to have a strategy in place before entering. With a virtual trading account, you can experiment with different trading strategies in a risk-free environment. This can give you valuable insights into which methods work best before entering the real market.

3. You Can Get Familiar With Different Platforms

Countless stock trading platforms are available and often have different features and functionalities. A virtual trading account will allow you to explore the best trading platforms and get used to each of them before investing real money.

4. Tracking Your Performance is Easy

Using a virtual trading account, you can follow your performance to see which strategies have had the most success. This can help you refine your skills and develop an investing approach tailored to your individual needs.

Overall, these services can be an excellent way for beginner investors to practice and develop their trading strategy before entering the stock market. By eliminating the risk of losing your hard-earned money, you can move forward into the market with greater confidence.

Be Patient and Have a Plan

In the digital age, it's easy to get caught up in the excitement of stock trading. After all, with the number of online trading platforms available, investing in the stock market has never been easier. However, always remember that stock trading is subject to various risks. As such, it's essential to be patient and have a plan when buying stocks online.

To start, patience is necessary when trading stocks online. The market is volatile and constantly fluctuating, making it essential to take a measured approach. If you're not careful, you may end up buying stocks at a high price, only to have them drop soon after. You can avoid this situation with patience by waiting for the right time to buy.

Having a plan when buying stocks online is also vital.

Before making any investment decisions, ensure you identify what types of stocks you want to own or what industry you want to invest in. Additionally, you should create a budget for your investments and stick to it. This will help prevent you from spending too much money and help you stay focused with your financial goals.

Educate Yourself Before Investing

To summarise, researching stocks online before investing can be daunting. Still, it's absolutely essential if you want to maximise your chances of success. It can be highly time-consuming, but digging into the data, analysing trends, and monitoring the markets can help you develop the right strategies.

With the right know-how, you can make informed decisions that could lead to long-term success. The opportunities are endless, but a lack of effort could mean missing out on potentially lucrative investments. So if you want to purchase stocks online and come out on top, don’t forget to conduct your own research.

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