How To Invest Successfully In Shares

Anthony Burgess (Pension & Investments)

Written by Anthony Burgess (Pension & Investments) on January 21, 2019

Updated March 21, 2019


According to a Schroders Global Investor Study, the majority of investors in the UK expect returns of up to 10% in five years, which is almost the same across Europe. Obviously, investing in shares is lucrative and a wonderful way of investing your money. You can even take an investment IQ test to determine your most influential behavioural characteristics and how best to deal with each of them in regards to investing.

Shares in a company give you part-ownership and essentially some portion of the business available to investors. Purchasing shares transform an investor into a shareholder. In the past, the proof of investment was a share certificate a physical proof of share ownership but not necessary anymore; electronically held shares are available today.

Understanding shares

Shares or equities earn you a small fraction of a particular business or investment. Today you can own shares or get into a fund where you join other people and collect money together for the investment. Investing in such a fund mean that the shares are selected by the fund and a fund manager will manage it and choose the shares. Investing money in funds takes away the headache of selecting the specific investments on your own.

Whether buying shares directly (which makes you a shareholder) or investing in a fund, carry out due diligence and research the fund or the company extensively.

Share investing

Investing in shares correctly

To invest in shares successfully and make money out of it you need to keep them for a specific duration of time. To make something out of shares, the company needs to grow. A growing company usually ends up with valuable shares and your investment will also grow.

You can also earn from shares via dividends received annually from your investment in a company. Investing in businesses that have been around for a while mostly earns you dividends but the companies don’t usually grow rapidly.

If you’re thinking about an income, investing in shares with dividends is a wonderful choice. Perhaps you can reinvest the income and boost your capital. Note that income from dividends will be taxed. Investing in small businesses doesn’t necessarily earn you dividends and is riskier though has the potential of growing rapidly.

With the new tax-free band you can enjoy dividend allowance that’s tax-free annually of about £2,000. Registered civil partners or married couples can actually divide their taxable income from dividends between them to lower tax liability yearly by a maximum 32.5% or £650.

Length of share investing

To invest successfully in shares, you need to give them the time of at least five years. This can be via stock market direct investments or via pooled funds like investment trusts or units. In case five or so years is a long time, reconsider investing in shares and look into others such as short-term investments and savings accounts.

Diversify and invest in shares from different companies and invest for a longer time, perhaps more than five years. It keeps the risk down and offers a longer-time for the investment to potentially grow.

Risk attitude

To invest in shares successfully your attitude towards risk is very important. It influences decisions on investing. By investing in shares you should expect your capital to either dip or grow depending on the performance of the markets. In case you can’t watch your money invested in shares losing value perhaps trading in shares isn’t for you.

To be on the safe side diversify your risk by spreading money in different investments to avoid relying on just one type of investment. A diversified portfolio has better returns and offsets underperforming investments.

Learn from expert approaches

As an individual, accessing lots of critical information that fund managers and huge companies have isn’t always possible. However, it doesn’t mean you can’t learn from their methodology and approaches. For instance, most UK equity investors search for stocks with huge potential growth in the next 3-5years. Buying shares from companies showing potentially big growth prospects is a win, including those with attractive prices in contrast with their competitors.

A company to be optimistic about can be one with a strong service or product that will grow profits. Also, it might be a talented new manager or merger expected to make huge impactful changes. The company can also be in a fast-growing industry. Also, pay attention to world events as news flow has vast impact on investments.

Avoid obsession with one company

Investing successfully in shares is tantamount to using your head more than the heart. Never be obsessed with a specific company so much that your passion leads you to invest everything in it without a keen look at the company from all angles.

In case the reasons you had for purchasing the shares of a specific company have changed, always be ready to cut losses. Accept you were wrong, learn from it and move on.

Test share investing

Before you begin investing in shares, make the most of test accounts. It helps you get the hang of it and how it works, especially if you intend to use a specific platform. Testing helps you learn the ropes before you commit your funds.

Approach any online broker with a platform you intend to use and request the facility (mostly provided free of charge). In the process, you’ll be able to try out your investing acumen perfectly before spending your money.

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