Investing in Stocks and Shares
If you plan on investing in stocks and shares, you'll need to find a competent and professional stockbroker who will do the hard work for you. Essentially, they will be the vehicle that will buy and sell the stocks and keep you abridged of exactly what is happening with your investments.
It doesn't matter how much trading experience you have accumulated over the years, stock and share dealing can be a field which bamboozles even the best of us. Therefore, it is a right and just action to research the different stockbroking services offered, so that you can find the right one for you. Many stockbroking methods also vary, so you need to ensure that the service you actually choose is the right one for you and your investments.
Before going head first into share dealing there are some important factors that you may want to consider:
- Aside from your mortgage payments, make sure you are debt free
- Checking if you have life insurance if you do have any children
- Checking whether or not you are signed up to your employer's pension scheme or whether you have your own personal pension
- Checking whether or not you are protected through your work income protection policy, should you suffer a life threatening injury or be off work for a sustained period because of illness
- Checking whether you have saved up six months of savings, should you inexplicably lose your job
Imperatively, there are a range of stockbroking services offered in the UK market and using one depends on the following:
- Your level of investment knowledge in the stocks and shares sector
- How confident you have become or are with share dealing
- How much time you have invested in researching the stocks and shares process.
It is important to remember that the more involvement a broker has, the higher the fees incurred. If you use their expertise on a regular basis, expect to pay for it. Thus, it is worth doing some of the research and legwork yourself to save you a little bit of money.
This type of service means that the stockbroker you employ makes decisions and trades based on your specific instructions, without giving any professional advice or opinions. These trades are usually initiated electronically or over the phone. Execution-only services mainly suit those with a wealth of experience in the stocks and shares industry, or those who have had previous experience. It is also applicable for those clients who want to live and die by their own decisions.
This is the cheapest brokering service offered, but you have to take into account that you are directly investing in the stocks and shares platform. This means that it can be risky and you could lose some or all of your investments if you do not make the correct call.
There are some firms who provide execution-only services and do opt to offer up-to-date online information as a research tool. This helps the client make informed decisions before the decide to invest. Most of these execution-only firms who offer this service also provide funds as well, making these businesses be more commonly known as 'fund supermarkets'.
The Discretionary Service
This type of service basically means that the broker has permission to sell and buy stocks and shares on your behalf; however, this is based on outlined requirements that you have stated beforehand. This allows the broker to make on-the-spot, professional decisions about how to use your investments and where to invest your money. Thus, deals can be done promptly and brokers can respond to the ever-changing stock market. It also means that your broker does not need to contact you about every decision made; they can rely on their experience to get the best deal for you.
Typically, investment in this type of service is quite high and you will need to have a fair amount of capital in order to make money. Therefore a usual minimum of £100,000 is expected, as this amount will give the broker wiggle room so they can make wise and informed investments on your behalf.