Buying Shares

SuperStar

Hi

Ive got a quick question about buying shares, where is the best place to go to buy shares? I want to put in £500 for now, just to see how it goes say i want to

£250 worth of BT shares
£250 worth of Lloyds shares

I know id have to pay a fee on this, but anyone know where i should go? Or am i unable to buy shares with such a small amount?

bowlhead99

Lots of places you could go. www.x-o.co.uk is an example of a cheap execution-only broker. You can buy one single share if you really wanted, the dealing fee to them is a flat £5.95. Not very efficient. Buying 1000 or 10000 shares means the fee would be a lower percentage.

Say you want to buy 300 shares of Lloyds. At 80p a share that's £240, plus £1.20 for the half a percent stamp duty and £5.95 for the commission. You've paid out £247.15. In order to get £247.15 back after paying another lot of £5.95 commission you need to achieve £253.10 gross proceeds which means selling the shares for 84.33p each.

So, you need five and a half percent improvement of the price just to get your own money back without losses. With a more expensive broker it's an even bigger return needed. This is why most people don't buy small amounts of shares. If you don't have a lot of cash, makes more sense to buy a share in a fund which in turn owns lots of other shares, so your eggs are not all in one basket, turning on the fortunes of just Lloyds and BT. Or, simply run a virtual portfolio for the thrill of the game without real losses.

eskbanker

Have a read through http://www.moneysavingexpert.com/savings/cheap-online-sharedealing

C_Mababejive

I would say the amount of money you are investing is too low to dabble in shares.

Cherokeebluesome

Hi, Superstar, the cheapest platform for buying and selling shares is X-O who charge £5.95 to buy and £5.95 to sell. So if you wanted to buy £250 worth of BT shares, the following is a calculation of that transaction ( BUY )
250.00 less 5.95 = £244.05p
less 0.5% stamp duty = £1.2203 leaving you with £242.8298 to purchase the shares, which at the current price of 455.75p, you would get 242.9298/ 4.5575 = 53 shares at a Total cost of53 x 4.5575 =£241.5475 and then add on the transaction costs of 5.95 + 1.2203 = £248.718. So in order to sell them without making a capital gain the share price would have to be as follows:( 248.718 + 5.95) =254.668/53 = 480.51p meaning your shares must increase from 455.75p to 480.51p, or 5.43%. The amount of money you are proposing to spend on the purchase is woefully small and it would not be in your interest to proceed. Back to the drawing board, me thinks.

SuperStar

eskbanker wrote: »

Have a read through remoed link so i can post.

I did have a look, but really wanted some advice aswell from here.

C_Mababejive wrote: »

I would say the amount of money you are investing is too low to dabble in shares.

Its only a starter, only putting in £500 just to see how I get on, id rather start small and put more in once i know what im doing.

Cherokeebluesome wrote: »

Hi, Superstar, the cheapest platform for buying and selling shares is X-O who charge £5.95 to buy and £5.95 to sell. So if you wanted to buy £250 worth of BT shares, the following is a calculation of that transaction ( BUY )
250.00 less 5.95 = £244.05p
less 0.5% stamp duty = £1.2203 leaving you with £242.8298 to purchase the shares, which at the current price of 455.75p, you would get 242.9298/ 4.5575 = 53 shares at a Total cost of53 x 4.5575 =£241.5475 and then add on the transaction costs of 5.95 + 1.2203 = £248.718. So in order to sell them without making a capital gain the share price would have to be as follows:( 248.718 + 5.95) =254.668/53 = 480.51p meaning your shares must increase from 455.75p to 480.51p, or 5.43%. The amount of money you are proposing to spend on the purchase is woefully small and it would not be in your interest to proceed. Back to the drawing board, me thinks.

Thanks for the breakdown. Would you know if i have to pay tax on any of it? Or is it only if i make more than X amount? I know its low, but if rather put in a small amount first to work out what im doing etc than a large amount and mess it up and loose it all, ill put in more once i understand it better, but id rather loose £500 than loose thousands.

Linton

SuperStar wrote: »

.....Would you know if i have to pay tax on any of it? Or is it only if i make more than X amount? I know its low, but if rather put in a small amount first to work out what im doing etc than a large amount and mess it up and loose it all, ill put in more once i understand it better, but id rather loose £500 than loose thousands.

Two taxes apply:

1 - dividends are tax free for basic rate tax payers but taxed at 22.5% for higher rate tax payers. BT pays dividends now, Lloyds will soon.
2 - if you sell the profit you make is subject to capital gains tax. There is an £11K allowance each year, so I dont think you will be troubled for a while. Long before then you should have moved into an S&S ISA where neither tax applies.

Drp8713

Why don't you open a S&S ISA with Hargreaves Lansdown, you can buy FTSE 350 shares at £1.50 using their regular saving method. Just set it to £250 to BT month 1, £250 to Lloyds month 2, and then £0 from month 3.


£3 on £500 wont make much difference if you are holding them for 10 years.

redux

I'd say start with one or two investment trust monthly savings schemes and trickle in from £30 upwards per month.

Much lower (mostly nil) charges, and a manager is picking the portfolio.

gkerr4

Go for it!

do lots of reading and find the lowest cost of execution broker you can find.

Your investment amount is low - and as noted above, costs will be a big chunk of returns. If this is your 'first' then i'd consider investing in a single share of £500 rather than splitting it. We've all got to start somewhere.

Good stuff.

theoretica

If you want to see how you get on have you considered fantasy share dealing to start with? Several of the investment sites will let you try it out this way.