How to buy shares and other Securities

Successful investing is not just a matter of picking the right investments at the right time but finding the best, and most cost effective way of buying them.

• Buying shares
• Trading in overseas stocks
• Buying funds
• Buying bonds
• Buying other investments

Buying shares

Investing in the stock market is as far removed from the image of the dapper city gent in his bowler hat as you can get. These days you can trade shares through your bank, over the phone or the internet.

The first thing you need to do is decide what type of broker you want. If you want help with your investments you might be best suited to a full advisory service, where the broker will look at your individual circumstances and devise a strategy specifically to suit your needs, monitor your investments and make suggestions on buying and selling shares. Some may even buy and sell shares for you without asking for your approval first. This service, known as discretionary broking, is highly tailored and, unsurprisingly, can prove expensive.

These days most people are prepared to do their own research, which, after all, half the fun of investing. If you are in this camp you need to look for an execution only stockbroker.

Execution only means that the broker will simply take your order and execute it for you. These brokers cannot legally offer you any advice on your decisions and to keep costs down usually operate over the phone or the internet.

This does not, however, mean they will not provide you with any tools to help you make the best investment decisions. Many execution only brokers, particularly the larger firms, offer all kinds of research and online tools for everyone from the novice to the real expert.

To a large degree, finding the right broker for you will depend on your individual requirements but there are four factors you should look for: quality of information, speed of execution, markets available and cost. Generally speaking, the better the information on offer, the more you will pay.

While telephone and internet services may give you access to instant dealing, completing your deal takes a little longer. By law all share deals have to be ‘settled’ two days from when they were struck, often known in the trade as T+2.

Deals can be settled so quickly because shares can now be held electronically rather than in paper form.

Buying funds

The main routes open to investors wanting to buy funds are: directly, through an independent financial adviser (IFA) or through a fund mutual fund company or distributor.

If you want some help picking your investments, you should choose an independent financial adviser who will research the entire market and look at your individual circumstance before recommending funds. Some advisers will charge a fee for this advice, others will take commission from the fund group.

Buying bonds

You can buy government issued bonds, known as ‘PIBs’ simply through the commercial banks or a stockbroker. Corporate bonds can only be bought through a stockbroker.

Buying other investments

If you are a more adventurous investor, you might want to buy other stock market- related investments, such as Exchange Traded Funds (ETFs) or derivative products you should be able to buy them through a stockbroker. The costs of trading should be similar to what you pay for trading ordinary shares.