Introduction to Stocks and Shares

When you buy shares in a company you become a part-owner aka ‘shareholder’. When the company gains so do you.

Introduction to Stocks and Shares

Introduction to Stocks & Shares from MOXI Wealth

What’s the difference between stocks and shares?

Stock is the collective name for shares. For example, you could say ‘I bought stock in Apple…’ or ‘I bought shares in Apple…’, it’s the same thing.

How do I make money?

You can benefit in two ways from owning stock. First, when the company pays out a portion of their profit to shareholders. The profit they pay-out is called dividends. When deciding which stock to buy you should look at the dividend history to see how much as a percentage of the share price has been paid and how often. Any dividends received are labelled as income and taxed as income. There are tax efficient ways to deal with this.

You can also make money if the stock price rises and you sell your stock. Your gain will be the price difference multiplied by the number of shares you have. This is a capital gain, again there are tax efficient ways to manage this.

Buying shares from public companies

You can buy shares from public companies using an online broker account which gives you access to stock markets. To buy shares in a company, you’ll need the stock code. Google can provide this info! A quick search of ‘apple stock price’ and ‘NASDAQ: AAPL’ appears, which is the stock exchange and the stock code.

If you have not yet done your research, you should read-up and find signs that the company will perform in the future. Here are two guides to help you on this: 5 Tips to Buying Shares and 4 Tips to Investing Smartly.

Top tip: As companies go through periods of high performance and low performance, share prices can be volatile. Hence you should look at a longer-term investment (say minimum of 5 years) rather than short term gains.

Buying shares from private companies

Through crowd funding platforms it is possible to buy shares in private ‘start-up’ type companies. But go into this with the mindset that these shares may not be easy to sell in the future – you could be tied into the investment for a long time. You would have to wait until the company sells or goes public.

That’s the advantage of buying shares in public companies – they are easier to buy and sell on an exchange because there is the infrastructure to do this at a click of a button and there is a larger pool of traders, aka there is more liquidity.

The fees involved

Most brokers charge a dealing fee which is a fixed charge whenever you buy or sell, usually around £10. This charge is significantly more if you transact over the phone. You should also consider the ‘spread’ that’s the difference between the buy and sell price at any time. For example, you may see Apple’s share price at $207 but the price to buy is $208 and the price to sell is $206. In this case, that is 1% spread which is a direct cost to you. Lastly, depending on the type of account you hold the broker may charge an annual fee.

Want to know more? Read this handy Guide to Stocks & Shares

Enter your e-mail address to receive updates straight to your inbox

My Newsletter

You can easily unsubscribe at any time by clicking on the unsubscribe links at the bottom of each of our emails

About Author

Moxi Wealth

Empowering you to make your money work harder. MOXI is like a best friend, who works in finance. Ask us any question and we'll provide a trusted answer. We are dedicated to building your knowledge and confidence in finance. Providing educational content and tools to help you plan your saving and investment goals.