Share Trading for Beginners

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Share trading for beginners
Think you can spot a stock market winner, but don't know how to invest? Then read our guide to share trading for beginners

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Patrick Collinson The Guardian, Saturday 19 June 2010 Article history

Think you can spot a stock market winner? Photograph: AP I'm a complete beginner. Where do I start? The cheapest way is to set up an online account (see table). With your bank details and a debit card, you can start trading almost immediately with just a few hundred pounds. That said, if you set up an account with a company you've never had any dealings with before (eg, if you opt for Halifax share dealing but your bank account is with Lloyds), you won't be able to start dealing until you receive a password in the post. The dealer may also require a minimum deposit, often around £100. Most of the providers offer dealing services by phone, though these may cost a little more per deal. For example, Halifax charges £11.95 per trade online and from £15 per trade over the phone. There's a full list of brokers at the Association of Private Client Investment Managers and Stockbrokers (APCIMS). Killik & Co offers old-fashioned personal stockbroking, but with a minimum trading fee of £40. How do I find the right account for me? There are dozens of online stockbrokers, all charging different fees. We found the cheapest flat-fee deals at Interactive Investor and the Motley Fool at £10 for UK trades with no other charges. Hargreaves Lansdownhas two services at £9.95 a trade, though its Active Trader service carries a £12.50 quarterly admin charge too. If you prefer the comfort of a big banking name, Halifax and HSBC cost £11.95 and £12.95 a trade. If you are starting with very small sums, it's worth looking at the Share Centre. It charges 1% on trades, with a minimum of £7.50 for real-time trades. But that becomes pricey once you start dealing in sums much above £1,000. Watch out for sites that charge higher fees if you trade bigger sums. Hargreaves Lansdown's £9.95 deal on its Share Account is only on trades up to £500. That jumps to £14.95 between £500 and £2,000, and to £29.95 for more than £20,000 (the Active Trader service charges a flat-rate £9.95). What do I actually have to do to trade? Select the stock name you want and you are given an indicative price quote, normally in pence per share. Then you choose the amount you want to spend, and deal. You'll get a real-time quote and have around 15 seconds to execute the deal. The money is cleared from your online account. Obviously you can only deal with the amount of money you have deposited with the share dealer. Do I have to pay tax?

Yes. There is a 0.5% stamp duty reserve tax on all share purchases and profits from the shares are taxable, too. This will probably all change in Tuesday's emergency budget, but for now you are allowed to make profits of up to £10,100 before you are charged capital gains tax at 18%. Expect the rate to rise to 40% and the exemption limit to fall. What's the best account for regular traders? Many sites offer regular trading accounts for people who deal frequently, where the cost per trade can be as low as £1.50. Barclays Stockbrokerscharges £12.95 per trade, but this falls to £9.95 if you trade between 15 and 24 times a month, and £6.95 for 25-plus. How easy is it to get stung? If you are contacted out of the blue by someone inviting you to invest in shares, say no. It is almost certainly a share scam, or a boiler room scam, where highpressure salespeople try to convince you to buy a stock which they say is about to take off. It won't. One way to build your confidence in share dealing is to join an investment club, where you can learn about the stock market and swap ideas. ProShare has lots of information on setting up a club. Where can I find more information? Share investment is an area with almost endless information available on the web. The BBC's Market Data pages are a rich source of information, as is Citywire, while you can find individual data and stock quotes atReuters and Yahoo. Share sites such as ADVFN, Motley Fool, Digital Look and Morningstar are also worth a look.

Share Deals table Photograph: Guardian

Taking stock: Pumped up by oil prospects After years of avoiding shares investment, I'm one of those who has bought BP stock in the belief its price has gone below its true value,writes Miles Brignall. Fed up with 2%-3% returns on savings being wiped out by inflation, I bought a few hundred shares at a price significantly higher than they were trading this week, though I am holding out for their long-term revival. I'm clinging on to the fact that BP made £22bn last year, and that the Americans still use oil like the rest of us use water: I can only see oil prices going in one direction over the next decade ± up. I signed up to buy the shares online with broker TD Waterhouse, which took a bit of time but was relatively easy. I paid an online commission of £9.95, though you need to be aware the broker applies charges for dormant accounts. I won't be day trading, and remain sceptical as to whether share investing is a good bet.

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Online investing and women Playing the stock market has always been a very male thing. Now a new wave of women working from home is changing all that 51 comments Related 17 Oct 2009 FTSE 100: Is it time to get out « or invest? 15 Oct 2008 Should banks be allowed to pay dividends to shareholders, even though this could mean it would take longer to repay taxpayers? 16 Sep 2008 FTSE 100 plunges through 5000-mark as share rout continues 18 Mar 2007 Heather Connon: For a bigger life payout, you're much better off with shares

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