There are several reason to why people buy shares and invest in companies, it cn vary from building a good amount of capital, to earn from shares or it can be just for enjoyment.

No matter with what reason you go with it but there are few golden rules it pays to follow for investment.
Prices fluctuate so any share value that go up can come down

The most important rule is that the value of shares can sink or can even rise. There is no gauranty that any share if doing good from many years will continue doing so. Anything unexpected can happen anytime. The many events happened in past are the proof. The market can take sharp twist and turns to change any company’s fortune.

Another question arises that how much you can afford to loose.?
You shouldn’t invest any money more than you can afford to lose.
Understand your risk attitude

If you want bigger rewards you will have to take bigger risks. This type of attitude can make you big returns but same time you can also lose all your money. Most people want to minimize the risk factor in the share market. To achieve this don’t buy shares of one company only. Different types of investments across a range of different companies in different sectors of the market is good to safe guard you from the ups and downs in individual shares.
There are many ways to spread your risk. Choose to invest in companies in different sectors of the market, like banking, retail and technology, or it can also be done by picking some big companies along with the selection of some small companies.
Large ones can be safer. Big companies, with strong finances and a long history, are very much less risky than new small ones, newly formed company’s strength has not really been tested in the market.

These Large, safe companies are known as ‘blue chips’. (In gambling, blue chips traditionally have the highest value.). But these are also not completely safe. The demise of Marks & Spencer’s share price is testament to that. There’s no self satisfaction in investment.

The opposite side of ‘safety shares’ is that they do not to grow fast, so you could expect a slow continuous and, unspectacular return from this kind of shares.
So you have to be in it for the long time.

To protect yourself from falls or stock market crashes, many experts believe one should plan to keep the investments for a minimum of five years. This way, you’re more likely to overcome any downturn. If you think you will be needing your money before five years, you should be very clear of investing in the stock market.
If you face loss, Don’t panic and don’t sell.

The worst thing you can do is selling the shares at downfall. This crystallizes your losses. Be cool headed and see how shares prices changes for some more months or even years. If losses occur across all your shares and all were linked to a general share market downturn, there are chances that the market will recover as a whole in time. If your losses is because of any specific share, then you have to make a judgement call that whether the company’s fortunes will change or not. If you think the situation will remain same, it will be best to sell the shares.

It’s much easier to buy than to sell. Selling is the only way to with which to can make profit. A ‘paper profit’ is just that – worthless. Many people find it difficult to sell their shares, especially if they have made some earnings.
There is no room for sentiments in investment. It can often pay to accept that you will never sell your shares at the very top of the market. Waiting for the top you cn loose many good and valuable shares.

1. When should I sell it if I buy.?
Ans. It was seen that during the 1990s all shares appeared to be rising so there was hardly any need to sell them. But after that when the market fell down, many people burnt. So it is advicable to be an active trader because winning all the time is not possible, you will have to see both winning as well as loosing from time to time. To be on the safe side and to make sure that losers do not surge over winners is to listen to the star fund manager Hugh Hendry and “hold only those shares whose value is rising”. Try selling the shares whose value is decreasing as soon as you come to know that you have made a wrong choice going for that company shares. Hold only those ones that are going up until the basics change. In a single sentence it would be like – The key is to avoid getting emotionally attached to a share, think business and if any shares are losers, sell them, throw them dump them.

2. At a time what number of shares should I hold?
Ans. It depends on you how many shares you can look after at the same time. So keep only as many as you can follow. Its useless to own shares of 100 companies if you are not able to give reasonable time to every share. Its better to own less company shares so that you can give time for every share.

3. How can I buy and sell my shares tax efficiently?
Ans. Inside a self-select Isa. There are many brokers who offer this facility: they provide you with an empty Isa wrapper. You are then allowed to fill it with £7,000 worth of shares a year and to trade them freely. Now any capital (money) gain you make will be tax-free.

4. What are Penny Stocks?
Ans. Penny stock does not means that they cost just a penny to buy. Penny stocks or penny shares refer to shares that are marked by inquisitive interest because of their low value. To define a stock as a penny stock there are different criterias. The criteria changes from one financial analyst to another. For some analysts it may be any capitalization less than 100 million pounds, while for another analyst a share ranging between 50p and 3pounds can be the penny stock. Though its not the point. An analyst use any criteria to describe a penny stock, the basic idea is that these companies will have a small amount of intrinsic monetary value and a very short history. Because of all this, penny stocks are marked by inquisitive interest and tend to vary often which makes them both- an interesting trading prospects or at the same time very risky.

5. What does Buying on margin means?
Ans. If you buy a stock on a borrowed money then it is called as buying on margin.
Lets take an example – Suppose you have to buy 150 shares worth 6000$, but you are out of money. So what you can do is approach a brokerage firm and ask them to lend you the money. A brokerage firm can lend you up to 50% of that so that you can buy that 10 shares. So at the end of it all you need id 3000$ to buy those 150 shares. Most of the brokerage firms have set 2000$ as the minimum amount of equity. Now this means that to buy shares you have to put at least 2000$. Then in return for the loan, you pay interest. This way the brokerage is also making the money on your loan. They will also hold your stock as the collateral against the loan. If you default, they will take the stock. So this way they have a very little risk in the deal.

Glossary words to learn
Vocabulary

1.Bear Market: It is a Slang used for when the stock market is in a general and the stock prices fall continuously for a long duration of time. It is opposite of a bull market.

2.Broker: A person who buys or sells an investment for you [stocks, bonds, commodities, etc.] in exchange for a fee termed as commission.

3.Bull Market: It is a Slang used for when the stock market is in a general and the stock prices rise continuously for a long duration of time. It is opposite of a bear market.

4.Dividend: A dividend is a portion of a company’s earnings that is paid out to shareholders on a quarterly or annual basis. Most dividend policies are set by the current management.

5.Exchange: An exchange is a place in which options, futures, and shares in stocks, bonds, indexes, and commodities are traded. The most famous in the United States is the New York Stock Exchange.

6.Index: An index is a benchmark which is used as a reference marker to which financial performance is measured and compared against. The Dow Jones Industrial Average and Standard & Poor’s 500 are examples.

7.Institution: A word used to describe any company, brokerage house, or entity that is not an individual.

8.Margin: A margin account lets a person borrow money from a broker to purchase securities. The difference between the amount of the loan, and the price of the securities, is called the margin.

9.Market Maker: A market maker is a person, brokerage, bank, or institution that maintains a permanent firm bid and ask price on a certain stock. This means that they are standing and prepared at any moment to pay a particular price to buy or sell a stock.

10.Mr. Market: An investment concept created by Benjamin Graham in the early part of the 20th century. Will be discussed in this lesson.

11.Sector: A group of stocks that are in the same business [e.g., the "Utilities" sector would include Water and Power & Light companies].

12.Volume: The number of shares of stock traded during a particular time period.

There are so much to choose from at London Stock Exchange. It becomes difficult making a choice on which ones to buy? Financial analyst dont guess whether a particular stock is good or not, they depend mainly on fundamental analysis. Fundamental analysis involves using the financial statements as well as the market economic outlook that help making right decision on the best stocks to buy. Fundamental analysis has two parts. The first one is looking at the economic fundamental data to find out which stocks are can perform well in a specific market. If an economy is under a credit crunch, for example, financial companies may not be the right choice. The pure fundamental stock trader looks at a country’s economic data like the GDP, GNP, unemployment reports etc.
Some of the important financial statements on which an investors depends upon are balance sheets, cash flow statements, income statements, and profit and loss statements.

Technical Analysis

The work of a Technical stock analysts is to study market price action and try to predict the future values of stocks by using the past prices.
Technical traders thinks that any value will to repeat itself just like humans are tend to do the same thing over and over particularly if it is beneficial and profitable. The idea is very simple, technical traders look the past records and see how trading was done at those prices. They assume that traders will do the repeat the same thing when values reach the same levels.

That is why technical traders use charts where they have the various methods to identify price action. Technical traders used to make charts by hand in early days but now technology has it made it a lot easier to use them on computers. Some charts are so advanced that traders can trade on them automatically without any interference made by any human.

It took long time for technical analysis to be accepted as a good way to select good stocks. Major banks and financial institutions now have departments where
technical analysts spend their time selecting stocks using these tools. Individual traders are also getting involved and are slowly catching up to the need to learn such technical analysis tools like support and resistance lines, moving averages, and Fibonacci numbers.

Most of the time these words are used interchangeably to refer to some papers that shows ownership in a specific company. they are called as the stock certificates. But mainly the difference lies in the context the two words are used.
Like – “stock” is a general term used to describe the ownership certificates of any company, and “shares” refers to a the ownership certificates of a specific company. So, if investors say that they own stocks, they refer to their overall ownership in all the companies they are attached to. Technically, if they says that they own shares – a question arises – shares in which company?
So as the result, shares and stocks are fundamentally the same thing. The small difference between shares and stocks is usually overlooked, and it has more to do with syntax than financial or legal accuracy.

Difference between Bonds and Stocks

The problem is not the money but the problem is how to spend it or how to invest it. For the beginner, going through an investment newsletter can be a difficult task. So finding out the difference between stocks and bonds from all the financial aspects can give you a headache.

Stocks in simplest form shows a part ownership in any company. Example – if you own 20 shares in a company that has 100 shares, you will be owning 20% of the company. If the company is doing well you will also do well and vice versa if company is not doing good you will also not do well. Companies have realized that it is cheaper to raise funds for their working by giving them a part ownership in their companies. While bonds are a kind of loan that you give to a company. The company or government will pay you interest for using your money for their activities. For example, if you bought a bond for 100 pounds with an interest rate of 5% over 5 years. The company will give you the interest plus the 100 pounds.

A company is required to pay back all the funds that accrue to any bondholder. However, the shareholder (owner of stock), does not have to be paid anything. The shareholder takes a risk on the company that it will do well and in bad times also investors holds the stock in the hope that everything will get better. On the other hand the bondholder does not care about the good or bad times in a company; All that he wants is his investment plus the interest to be paid back. When making decision about investing in shares in a company or bonds, you should note that bond returns are fixed but the returns on shares can change and are not guaranteed. You should also note that if a company goes down or is bankrupted, it is the bondholders who are paid first and the shareholders are paid at last.
There are bonds as well as shares in a good investment portfolio. If you are only interested in short term returns, then you should have more bonds than stocks in your investment portfolio. With bonds you will be given a consistent income and in cases of market fluctuations, they offer a great cushion.

There are several risks involved When investing in the stock market- its just a nature of the game. Some tips to minimize your risk factor –
1. Must to Have a Plan
To grow your wealth, a practical trading plan is very important. Without a good plan you’ll spend more time rectifying mistakes and spinning your wheels than actually making good investment decisions.
2. Invest At Regular basis
Investing is not a one-time deal. It needs to be done on a regular basis and with a plan to make it work for you,.
3. Keep Your Costs Low
keep trading costs low, or those costs will eat up your profits. Frequent trading will rack up fees, and while some fees are to be expected, hefty fees are counterproductive. so stick with regular, conservative investing with minimal transaction costs.
4. Buy less at a time
It’s a much safe to implement planned buys at times predetermined and amount of money. Same is if u want to buy many shares of the same stock. Spread out your buys over a few days, weeks or months. it helps in taking advantage of the best prices.
5. Diversify
Don’t put all your money in one company. try to diversify it, it will minimize the risk to a great extent. Diversification is a good way to cut down the risk – and it’s good for the long run.
6. Do Your Homework
Research before buying any share. Know the company in which you want to invest, its background, portfolios and everything necessary. And after you buy shares, keep up yourself updated with news stories about that company or industry and even be a regular visitor to the company’s Web site.
7. Don’t get emotionally attached with stocks
Investing has no place for emotions. In fact it is not a game of emotion. To be successful, you need to remain calm and level-headed. Markets experience many fluctuations, ups and downs. You need to have a plan in place to handle them.
8. Know Yourself
Will you do painstaking effort about doing your stock research? Are you confident about your ability of selecting stocks? If not, you should let a professional do everything for you. Though this advice goes against ‘keeping your costs low’ but it’s far better to know that you’re money and investments are being managed properly.

Four selection factor to be considered
1) The quality of information
2) The speed of execution
3) The markets available
4) The cost

Check for the facilities offered by the broker
Optional Telephoning facility is available mostly may be at some extra charge along with online interactive sessions.
If u want to have dealings in international markets then find the extra fee for the service.
Is access to other services or instruments available such as CFD (Contract for Differences- attractive and emerging way of international shares business)
The interest, discounts and penalties should also be kept in view

Questions to be asked
1) Charges levied on Buying and Selling
2) Telephonic and internet facilities
3) If monthly fee is levied
4) If they provide discounts for regular traders
5) The value added services offered such as price alerts and company database research etc

• How much do you charge to buy and sell shares?
• Can I deal with you over the telephone and Internet?
• Do you have a monthly subscription fee?
• Do you have frequent trader discounts? (For example, do you charge lower fees if I trade more than 10 times a month?)
• Do you offer any value added services, such as company research, price alerts, and dynamic market data?
• Do I need to set up a special cash management account to conduct trades?
• How do you place buy and sell orders?

Presently many of the biggest names are the Plus500, 10 pips, Share Centre, TD Waterhouse and Squaregain; and the other high-street banks. There are many more and some offer flat-fee dealing for under £10.

Comparison making sites, such as Moneysupermarket.com and Interactive Investor, are also good places where you can start looking for a broker, as is the London Stock Exchange’s Locate a Broker service. But keep in mind that your needs could change in the future; as you will become more confident and experienced, you might want to branch out and look for new types of investing.

The idea of buying and selling shares in individual companies will look like a little discouraging, or even a bit suspicious If you’ve never done it before. Infct the truth is that shares investment in a wide range of UK and overseas companies has never been easier, or less costly, for private investors.

There are three ways of buying stocks, essentially.
1. – You can use the stock broking services offered by your bank
2. – It can be done over the telephone via a traditional stockbroker
3. – Or can be over the internet using an online broker.

Its all depend on you, on how much responsible you want to be and how much confidence you have in making the investment decisions
During the past when the stock trading was supposed to be the game of rich people, many stockbrokers operated on an ‘advisory’ or ‘discretionary’ basis. If you want much needed help then you will have to pay for it. No services come free. The broker with work for you, looking at your present situation he will give suggestions about which share to buy and which not to.

But if you don’t want to do it yourself and give all the responsibility to someone else then you can go for so-called discretionary service. At this place Brokers are free to trade with your money without asking you first, within an agreed strategy. This kind of broking is highly tailored to individual circumstances – and as a result costs much.

Any Stockbroker comes under two classes:
1. Discount brokers
2. Full-service brokers.
A discount broker only carries out your order given to him and that too in reasonable price. You can talk to them via phone or via internet also. But a Full service broker performs what you order as well as this broker gives you their information and experience about shares, so it cost much. They take a higher commission.

However, this is the season when the online brokers rise, which give you the cheap and also convenient execution-services. But any online broker, legally, cannot give any kind of advice to his client in their investment decisions. But most of them do provide you with some tools like getting access to company research, news, share-price graphs and portfolio-analysis software. These type of brokers are old fashioned and are not expensive also.

1. 1st Step
Locate the abbreviated name of the company. It usually appears in the third column (“Stock”).
2. 2nd Step
Look at the 52-week high (“Hi”). It is the maximum price paid by anyone for the stock in the past year. It appears in the first column.
3. 3rd Step
Find the 52-week low (“Low”). This is the minimum price paid for the share in the past year. It appears in the second column.
4. 4th Step
Note the ticker symbol. It is used by the stock exchange to identify the company. This symbol appears in the fourth column.
5. 5th Step
Check the dividend and yield figures. They appear in the fifth and sixth columns. “Div” is the amount of cash that would be paid yearly to any shareholders based on the most recent quarterly payment. “Yld” is the cash dividend divided by the closing price of the share.
6. 6th Step
Check the “PE” figure. It appears in the sixth column. PE means the price-earnings ratio. It is calculated by dividing the closing price by earnings for the past four quarters combined. This provides a way to compare stock values.
7. 7th Step
Note the seventh column, “Vol.”. It shows that the previous business day how many shares of the stock changed hands.
8. 8th Step
Look at the eighth and ninth columns. they show the highest (“Hi”) and the lowest (“Lo”) price paid for the share on that day.
9. 9th Step
Read the last two columns so that you can find out the value at which the share closed for the day (“Close”) and the net change (“Net chg”) from the previous business day.

Some private investors do their own research about stock market, but it’s much easier to find a prestigious stock tip sheet or equity research house that gives all the ideas.

Don’t buy any share i.e. because it is having a nice name or trust investor bulletin boards i.e. don’t beleive if anyone says “this one’s going to be a ten-bagger!”. You cannot depend on such things. Always Remember that the stock market is not random, share prices fluctuate because of fundamental properties and investor’s emotion changes. The key to making money on the stock market is, understanding what causes a share price to move.
Adding to it, a professional stock market analyst has these things:
• Understands the wider market trends
• have information of individual sectors
• experienced in analyzing financial accounts
• has contacts with the stock management
• access to rumours and upcoming deals
• don’t get emotionally attached with stocks
This last point is most of the time looked. It is very simple to get emotionally attached to a share because it shows promise. But if the share price is goes down, the level-headed investor should know when to cut a loss. Stock market tip sheets can take this carelessness out of all this.
So Do some research before buying any shares…

It is very essential to do a good research before buying any shares from the market. It can be any way like :
- You can go through the papers and check which shares are doing good.
- Check out the Company’s annual reports, the ones in which you are planning to invest.
- Sit down and talk to your friends or family who have done this before and have experience of trading in shares. Take a few tips from them.
- Never ignore any suggestions given. At the end of the day you have to make a decision, so don’t hurry and see everything.

The London Stock Exchange have hundreds of stocks. And it would be a tiring job checking the companies to see which one suits best your requirement. You can decide it by flipping a coin or through the rumours heard from here and there, but all this will not work in the end.

If you want to invest in UK then first check the market properly and do some good research. You yourself can do this or you can hire any person to do this for you. These days, stock investors are not interested in doing the research and in spite of that the subscribe to stock trading signal companies.
Traditional full service broker is One of the most common sources for any share research. The full service broker hire financial analysts. Their job is to figure out what share investments are good and profitable for the client. But this research is not free and events have made investors think that full service broker research services are necessary or it can be done without it also.

The Financial Services Authority is the first place to look for information on any company you like, If you the services of full service brokers looks expensive to you or if you do not trust them. In the UK, every company has to file annual reports on their works or operations with the FSA. You will find many basic information like income statements, current management, and other financial data in these reports that will help you in your financial analysis.

The company itself is Another great source for research material. If you own any number of shares already in a company, you get the quarterly and annual reports. You can also contact the company in which you are looking to invest and ask them their annual reports from customer service or investmeny relations department.
Did you ever subscribed for a financial newsletter? Some financial newsletters have more details than major financial newspapers. There you can find many good suggestions in a good newsletter. These newsletters can be free or cost some money also. Make sure you take the right decision on choosing the newsletters, because some are so bad that they should not be printed also.

Another good sources of information can be Newspaper and TV shows. Then Internet interviews of senior company managers, CEO’s, and directors can be useful sources of information though they can be tilted towards positive views of their companies.

Most share traders get their research in their own trading charts and trading platforms In this day of internet technology. Electronically these Fundamental and technical analysis information is sent to the stock trader’s computer and then he has the latest data. These charts can come free also or there are some paid one also, the the fact is that they are a great research resource for the stock trader.

When you get your data gathered make sure it is correct and dependable. The most dangerous thing in stock trading is wrong information or the right information not getting in proper time.You need to collect information that is correct and is reliable. A Good research matters a lot in any investor’s profile instructions
Wherever you get your information, it is important that you ensure that the data is correct and reliable. Nothing is more dangerous to a stock trader than receiving information that is unreliable and not on time. You need to get accurate and reliable data and on time. Good research data can make a difference in an investor’s profits.

Step 1 – You will have to open a Share Dealing Account
A basic share dealing account offers the facility to buy shares through the Internet or over the phone. The easiest service provided is known as “Execution Only”. it means the broker does not give any idea or advice. They simply perform the trade as the client says. For example, buy 1,000 shares in ABC Plc.

A standard trading account usually opens without any cost i.e. for free. Before the investor can buy any shares this needs to be credited with funds from a bank account. Side by side open a Stocks & Shares ISA so that yu can avoid giving tax on any stock market earnings within a certain limit. This is more practical for long-term investing.

Usually, brokers per trade charge £8-£12 (without looking at the trade size). Some brokers also charge an inactivity fee, so whether the shares trading is done or is not done over the 3 month period, a trading fee may be applied anyway. But you can easily find the best affordable broker using a comparison site like Money Supermarket.

You can choose any method to trade, whether it is through your bank or a traditional broker or over a phone, or online, the first thing what will be needed is to open an account with your broker and then sending them some money. And once you have made a decision about it what share you want to buy, you can give instructions to your broker.

At any website that deals with share you will be asked your username and password. Then about the company that is in which company you want to invest and how many shares you want to buy or of how much price you want the shares. Then you will be getting 15-20 seconds along with a quote price. In this shot time span you need to decide whether you want to do it or not.

If you are getting nervous looking at the short time, then relax soon you will be getting used to it. And if you don’t want to trade then you can come back any time later to buy shares but the prices of shares may change.

For more relaxation you can use limit orders or stop-loss orders. Limit orders means that you can’t buy above or sell below a certain price and stop-loss orders is to limit your loss if the market moves against you. And when order has been placed you will be getting a information mail from your broker and that’s it you are done.