Buying shares question from novice investor

novice_investor · 5 December 2017 at 5:13PM

I am a new investor who has never bought shares before so apologies in advance if these questions sound very basic.

I did a little bit of research into the whole process but am confused by the fees/taxes etc and want to make sure my understanding is correct before I dive in.

I understand that there is a choice of different platforms and they all have different charges depending on how many deals are made each month. If I was to open, for example, a Hargreaves Lansdown share dealing account, it says on their website that they charge £11.95 for 0-9 deals per months which is about my expected level. What I don't understand is whether this is a one off charge, for example, if I open an account in December and make 3 deals, am I charged a one off charge of £11.95 or is it £11.95 per deal? Also, if I don't make any new deals the following month, do I still have to pay £11.95 (since it says 0-9 deals) or am I only charged for months where I make deals? It says on their website that there is no annual charge for management of a sharedealing account but do I have to pay a monthly or yearly fee to hold my shares on their platform?

I also understand I have to pay Stamp Duty which is paid automatically when I buy shares at 0.5%.

Are there any other fees, charges or taxes that I would pay for buying and holding shares (for example if I buy 3 lots of different shares and hold them for 18 months, what costs would I incur ?).

I have used Hargreaves Lansdown as an example, I know they are not the cheapest but what do people recommend? I understand they are often recommended because there is a lot of information on their platform for investors.

Thanks in advance for all responses.

ColdIron · 5 December 2017 at 5:40PM

If you are a novice investor I'd suggest you avoid individual company shares as this is a very high risk strategy for you. I would imagine that most long term investors manage without buying any individual shares at all. You will be better served with unit trusts and similar collective investments

Eco_Miser · 5 December 2017 at 5:45PM

The £11.95 is for each transaction (buy/sell).
There is also a £1 levy if you buy £10,000 or more of shares in one transaction.

There is usually a platform fee, either a percentage or fixed number of pounds per month/quarter/year.
See SnowMan's spreadsheet for personalisable information. Also Monevator and other sites.

Unless held in an ISA, dividends are taxable in the year they are paid, even if automatically invested in an accumulation fund. First £2000 (£5000 this year) at zero%.
Unless held in an ISA, capital gains are taxed when you sell the asset. First £11300 each year at zero %. This does not carry forward.

Linton · 5 December 2017 at 5:46PM

The £11.95 will be per deal. If you are a heavy user and have more than 9 deals/month they will lower the charge.

There is just stamp duty when you buy shares, no other buy/sell charges.

The charge for holding shares will vary depending on the platform. It will generally be calculated as a % of total value of shares. I believe H_L charge share holdings at 0.45%/year capped at £45. Other people may simply charge on the total portfolio with no cap.

Buying/selling and holding shares may be charged differently to buying/selling and holding funds. Different platforms do things differently.

cloud_dog · 5 December 2017 at 5:57PM

novice_investor wrote: »

I am a new investor who has never bought shares before so apologies in advance if these questions sound very basic.

I did a little bit of research into the whole process but am confused by the fees/taxes etc and want to make sure my understanding is correct before I dive in.

Can I ask why you have decided to dive in to buying shares?

Do you already hold any investments in funds?
I assume because you are not confident in platform/charges that you probably do not have an investment (S&S) ISA?
What sort of money are you talking about ?
Re above, this may indicate whether an ISA platform is really necessary (certainly as you start out).

novice_investor · 5 December 2017 at 6:02PM

cloud_dog wrote: »

Can I ask why you have decided to dive in to buying shares?

Do you already hold any investments in funds?
I assume because you are not confident in platform charges that you probably do not have an investment (S&S) ISA?
What sort of money are you talking about ?
Re above, this may indicate whether an ISA platform is really necessary (certainly as you start out).

I probably shouldn't have worded it that way. I already use a Financial Advisor and have a stocks and shares ISA which I invest in every year, however, I want to buy some individual shares in a few different companies, less than £1k altogether and just thought it might be cheaper and quicker to do it myself rather than pay my FA to do it.

cloud_dog · 5 December 2017 at 6:13PM

novice_investor wrote: »

I probably shouldn't have worded it that way. I already use a Financial Advisor and have a stocks and shares ISA which I invest in every year, however, I want to buy some individual shares in a few different companies, less than £1k altogether and just thought it might be cheaper and quicker to do it myself rather than pay my FA to do it.

Ok.

A large number of posters will, rightly, advise you to be very careful regarding individual company shares as the risks of a failure are so much higher.

Having said that if you are comfortable to progress then that is your choice (one I don't have an issue with).

Firstly, a single investment of £1k is going to make the proportion of charges relatively high; also considering there will be a bid/offer spread, and stamp duty (not all shares have stamp duty associate with them but, that is another story).

A low cost dealer, such as iWeb (£5 per transaction) might fit the bill. iWeb do have an account opening fee £25. There are other low cost brokers.

Depending on your financial set up, currently, and how much you may end up investing stocks directly you may want to consider opening an ISA account rather than a general investment account (GIA) / dealing account.

I would echo the positive sentiment towards Snowman's spreadsheet, it is excellent for understanding the impact of charges against your own profile, i.e. number of transactions / holdings etc. Download it and have a play.

novice_investor · 5 December 2017 at 6:17PM

cloud_dog wrote: »

Ok.

A large number of posters will, rightly, advise you to be very careful regarding individual company shares as the risks of a failure are so much higher.

Having said that if you are comfortable to progress then that is your choice (one I don't have an issue with).

Firstly, a single investment of £1k is going to make the proportion of charges relatively high; also considering there will be a bid/offer spread, and stamp duty (not all shares have stamp duty associate with them but, that is another story).

A low cost dealer, such as iWeb (£5 per transaction) might fit the bill. iWeb do have an account opening fee £25. There are other low cost brokers.

Depending on your financial set up, currently, and how much you may end up investing stocks directly you may want to consider opening an ISA account rather than a general investment account (GIA) / dealing account.

I would echo the positive sentiment towards Snowman's spreadsheet, it is excellent for understanding the impact of charges against your own profile, i.e. number of transactions / holdings etc. Download it and have a play.

Thanks for your reply. My ISA is maxed out at the moment as I put the maximum in every year, so I will have to use a GIA for these. I would gladly invest in a Fund if there was one that covered the disparate individual shares that I am interested in but they are across different sectors so not easy to find. Will take a look at Snowman's spreadsheet.

MallyGirl · 5 December 2017 at 6:34PM

if you just want to have a 'play' with a small amount of money then x-o is £5.95 per trade with no platform fee.

cloud_dog · 5 December 2017 at 6:36PM

novice_investor wrote: »

Thanks for your reply. My ISA is maxed out at the moment as I put the maximum in every year, so I will have to use a GIA for these. I would gladly invest in a Fund if there was one that covered the disparate individual shares that I am interested in but they are across different sectors so not easy to find. Will take a look at Snowman's spreadsheet.

What type of stocks are you interested in? Perhaps we may be able to help. There are also ITs and ETFs to consider (although there can be different risk scales associated with these).

novice_investor · 5 December 2017 at 6:50PM

cloud_dog wrote: »

What type of stocks are you interested in? Perhaps we may be able to help. There are also ITs and ETFs to consider (although there can be different risk scales associated with these).

That would be helpful as I'd actually prefer to invest in a fund if possible. I will compile a list of companies and get back to you.

Buying shares question from novice investor

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