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How to Buy Stocks and Shares

December 2nd, 2008 by jamie | Filed under Daily News, Stocks and shares.

Buying stocks and shares in U.K, or overseas companies, or any tradable entity is, in theory, straightforward.

In practice, it is a little more complicated.

Before the City of London’s financial heart (known as the Square Mile) had it’s Big Bang revolution in 1986, when it became effectively de-regulated, buying stocks and shares was a comparatively upper middle class activity.

The City was often seen as being there for a small set of professionals who ran the stock exchange as their own personal wealth creator. Many of the sons of well-to-do families became stock brokers as a respectable career choice following a good school and fine University.

Then along came Margaret Thatcher with a vision that share ownership should be an ambition of the masses and the City was de-regulated. In simplistic terms the middle class boys moved to advising large financial institutions and rich private clients on their portfolios, and in came the East End barrow boys, who saw trading shares as more fun than selling apples and pears down the local market.

British Telecom was one of the first to be ripped from its near dormancy to a listing on the London stock exchange and in the process made a lot of people quite a bit of money. The big U.K. utilities followed and suddenly most of the U.K infrastructure was up for sale.

The City had changed for ever and for many, this new sense of stock markets being a route to great wealth via ever more complicated trading entities and techniques, rather than for maintaining a balanced stock portfolio, is the source of the current economic woes.

Okay, that’s the history lesson, but it does explain the fact that everyone is potentially allowed to trade anything quoted on stock markets, whether in the U.K. or overseas.

Of course, there are various ways to do it. And funnily enough, if you own a personal pension, whether for retirement, or to support a mortgage, it’s likely you already own shares, although those shares will be handled on your behalf by one of the big City fund managers.

So, if you want to buy shares, you have to use a stock broker, either one of the ones found in London and various locations throughout the U.K., which can handle transactions face-to-face, or online, or you can use one of the many online services.

Do some research though to ensure you are using a regulated firm and one with a good reputation, and avoid a U.S. invention called the boiler shop, which are high pressure sales outfits often selling shares that don’t exist.

And by using a reputable firm, or well-known online service, you will have some protection and maybe some advice as to what to buy and sell.

Good firms will also want to see that you can afford to dabble in what is, effectively, a glorified casino. And in this day and age, the old phrase of “…my word is my bond…” has long gone; now its strictly cash and carry.

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