I’ve been writing a lot on balanced mutual funds recently so I thought I’d get back to basics and talk about how to buy and sell shares online. By now you should know that you need to get yourself a broker to do this. Remember to check how much they will charge you for each transaction as this is key when deciding who to give your money too. Most brokers will charge you less for buying shares online compared to over the phone or, shock horror, by post. Surely no one is doing that these days? Anyway, the most popular way to trade shares on the internet is execution only. That simply means they’ll follow your instructions explicitly. If you tell them to buy a million shares in a golf academy ran by monkeys, that’s what they’ll do. If you do it over the phone you might get a little advice and more value for money. If you do your research properly though you won’t need this. In most cases, a broker will only offer you this you are a big hitter in the stock market. If you’re trading penny stocks then forget it. I know anyone can buy shares online these days but you have be realistic as to what a brokerage company will offer compared to what you’re offering them.

Some online brokers will let you buy shares in real time so you will know exactly how much your paying for stock. This has obvious advantages as you won’t end up with any nasty surprises when you get the bill in. On the other hand the companies that don’t offer real time transactions could save you money as they bundle up the trades and executes them all at once. This is usually at the end of the day so you have to way up the two options. Personally, I don’t make that many trades and when I do I want the price to be right. So I tend to stick to real time brokers. It’s really up to you and how you want to run with it.

In most cases, the shares will be held in a nominee account which means the broker owns the stocks on your behalf. Your name won’t appear on the companies register which means you will miss out on reports and certain perks that holding the shares might offer. Some airlines will offer you discounts if you’re a shareholder and stores will offer you discounts if you buy their goods. You are at the end of the day helping the company to grow by investing your money in them. If you’ve been lucky enough to buy stocks that pay dividends then the profits will also go into this account and you will be afforded the option of reinvesting the earnings back into the company. If you absolutely want the perks of owning shares then you can opt to keep paper copies but they are likely to be more expensive. It will also slow down the speed of your transactions as you’re back to dealing with paper again. Think this through before you decide to go for paper certificates of stock holdings. Is it really worth it? If you want to swap your stock holdings to another brokerage then you’re likely to be charged for this also. It’s another reason why it’s so important to get a good stock broker from when you first start buying and selling shares.

If you plan to be one of those traders who is frequently buying stocks and shares then it’s worthwhile asking if a company offers a discount based on the amount of trades you make. If you’re planning to be a day trader then I’d definitely ask this question as you could save yourself a fortune. The broker will make the discount back by the number of trades you make.

One company which I had holdings with recently introduced an annual management fee so be wary of hidden charges like this also. I have no idea why they would charge me for an account that’s been lying dormant for years. Perhaps it was for exactly that reason? Setting up this account wasn’t one of the best investment options available to me that’s for sure.

Anyway, finding a broker is really dependant on what you’re looking for but there’s a few things you should definitely take into consideration when looking for the best online share trading site.

  • How fast cant they buy shares for you?
  • How good is the quality of their information?
  • Which markets do they trade in?
  • Cost. Cost. Cost.

That’s the basic things to consider so make sure to research his properly before jumping in and making a decision. As I mentioned before, once you buy shares with a company they may charge you to transfer them to another broker.

I’ve included a point about markets that a stock broker may trade in. Foreign markets is something I haven’t really discussed so far at stocks for beginners. In some cases a broker may allow you to trade in other markets such as European or Asian. Check with the broker as sometimes it’s a requirement to fill in extra documentation for shares held in other countries. In most cases the broker won’t allow you to trade until you have filled in this information so don’t worry, they will advise you before you get yourself into any trouble. The point I made about the quality of their information is somewhat negated if you read the posts I wrote about Google Finance and investment advisor software. Google pretty much has all this covered.