1. Find the right investment platform for you
2. Choose the right type of account to invest with
on the platform and buy their shares!
An investment platform is a place to buy and sell stocks and shares (and other types of investments). They’re also known as stock brokers, online stock brokers, investment apps, trading platforms, trading apps – to name a few!
eToro is a hugely popular trading platform. Not just because of it’s awesome trading features and being completely commission free, but because you can join a community of traders from all over the world, to trade, chat and learn together.
It’s also got the largest range of assets to trade, including stocks, ETFs, crypto, CFDs, currencies and commodities (such as gold).
68% of retail investor accounts lose money when trading.
Trading 212 is a platform built for everyone in mind, it’s great for beginners to get started, and perfect for experienced investors too with a huge range of investment options.
It’s also the cheapest platform out there, completely commission free, and the lowest fees when buying foreign stocks.
Interactive Investor is a popular investment platform with a flat fee, making it a cheap option if you have over £30,000 of investments. There’s a huge range to choose from, their website and apps are great and their customer service is excellent.
One of the cheapest traditional brokers out there, with a good reputation and established history. The customer service is great and there’s a huge range of investment options.
We’ve reviewed investing platforms extensively – if you’d like more options, here’s the full range of investment platforms (including options where experts will handle everything for you).
To determine the best investment platform we’ve reviewed the following criteria:
If you’re doing your own research, this criteria is a good guide. Fees and range of investments are super important when it comes to picking the best investment platform for you.
If you’re not quite sure what a stock broker actually is, and why you need one, here’s a quick run through.
In the olden days, you needed an actual real person to buy investments for you on the stock market, which you’d call up or meet face-to-face, and they’d go off and buy the investments for you, as you need a licence to buy investments. Although they do still exist, now they are more of a financial advisor who can provide the right investment advice for you too.
These days, stock brokers are all online (and so is the stock market). They’re websites (platforms) and apps which you can use to easily buy stocks and shares yourself. All you need is some money and an internet connection.
And because they’re online, they are much cheaper – in fact often commission free (so no fees to buy or sell at all). Which has given rise to the retail investor! – Everyday people able to make investments for themselves and grow their wealth just like the rich.
After you’ve chosen your new investment platform (online broker), it’s time to decide which account you want to invest in. And you have quite a few options, although not every platform will have every option.
This is your standard investing account, which you’ll get with every investment platform. It can also be called a share dealing account, trading account or brokerage account.
There’s no tax-free benefits, so everything you buy will technically be liable for tax (you might have to pay tax on it) when you sell, or if a stock generates an income (called a dividend), or an investment pays interest.
The 3 types of taxes are Capital Gains Tax, Income Tax and Dividend Tax (more on those below).
However, you might not actually pay any tax as you get some nice tax-free allowances first. We’ll cover tax below.
You can have as many General Investment Accounts as you like too, so you can open an account with any platform or online stock broker you like to check them out first, before committing to a Stocks & Shares ISA. Which brings us on to…
With a Stocks and Shares ISA (Individual Savings Account), everything you make within your account is completely tax free! There’s no tax to pay whatsoever, forever. How great is that?
You can invest as much as £20,000 per tax year (April 6th to April 5th the following year). Which is your ISA allowance.
However, you can only pay into one Stocks and Shares ISA each year, but you can keep any older ones open (just not pay into them).
This is a type of private pension, so a pension in your name, that you manage, and you decide what to do with it (rather than a workplace pension which is set up and managed by your employer).
And with these, you can buy investments, just like any other investment account, except you benefit from the massive benefits of a pension too.
So any money you pay in, you’ll get a 25% bonus from the government (which is a refund of any tax you’ve technically paid on your income).
And if you’re a higher rate or additional rate taxpayer you can claim back tax you’ve paid at those rates too (40% and 45%). You’ll do this on a Self Assessment tax return.
You can have as many personal pensions as you like too. However you can only contribute as much as your total income each year, or up to £60,000, whichever is lower.
A regular personal pension (rather than a self-investment personal pension) is often managed by experts rather than yourself – find these with our best personal pensions. We highly recommend considering this, it is your retirement income after all!
And not every investment platform offers self-invested personal pensions.
Interactive Investor¹ is one the best for an SIPP (here’s our Interactive Investor review). You can also find the full range with our best self-investment personal pensions.
A Lifetime ISA (LISA) is a great option for saving for your first home. You get a massive 25% bonus on everything you put in!
However you can only use this for your first home. Or you’ll have to wait until you’re 60 to access the cash (without paying hefty fees). And there’s a limit of what you can put in – £4,000 per year.
Note: this is not a replacement to a pension. Personal pensions are much better. Here’s why: Lifetime ISA vs pension.
All that’s left to do is buy, buy, buy! But obviously don't over stretch yourself!
When you buy shares, you’ll normally be shown the total cost of the transaction, which includes the cost of buying the shares and any fees if you’re not using a commission free broker. Also, any Stamp Duty or additional charges, such as a currency conversion fee (foreign exchange fee). We cover fees in detail below.
Here’s a run down of all the fees you might expect when buying shares.
Some stock brokers will charge a fee per transaction. Which is often called a share dealing fee, share trading fee, or simply commission. This can range from £0 (commission free), to as high as £11.95 per deal (with more traditional brokers like Hargreaves Lansdown).
Some brokers will charge an account fee, which can either be a percentage of how much you have invested with them every year, or a flat monthly fee for an account. Some brokers don’t charge a fee at all either! (Such as all our recommended platforms above.)
When you buy stocks in a foreign currency, for instance buying US stocks in Dollars, you’ll have to convert your Pounds to Dollars first to buy the shares. This is often all handled automatically when you go to purchase the stock, and you’ll be shown the fee.
This can range quite a bit, from 0.15% all the way to 1.5% per transaction depending on which broker you use. Some of the lowest fees are with our recommended brokers above. There's a reason why we recommend them! eToro¹ and Trading 212¹ come in the cheapest with foreign exchanges fees too.
When you buy shares in the UK and these shares are listed on the London Stock Exchange’s main market, you’ll have to pay Stamp Duty (although not on the smaller market called AIM). Stamp Duty is 0.5% of the purchase price. It’s technically called Stamp Duty Reserve Tax (SDRT).
You won’t pay Stamp Duty on transactions on foreign stocks (such as American stocks). It’s just UK companies.
If you trade with eToro, they’ll actually pay this for you! That’s one of the reasons they’re super popular. Here’s our eToro review to learn more.
With the most popular trading platforms, again such as eToro¹, you can actually invest as little as you like! Even less than the actual share price.
That’s thanks to a fairly new invention called fractional shares. This is where you can simply buy a portion of a share instead (a fraction).
Let’s look at an example. Imagine Netflix cost $600 a share but you only want to invest $100 in Netflix (it’s a US stock), you can invest $100 and get ⅙ of a share in return. Pretty great right?
This means you can add higher priced shares to your portfolio without having to commit to more money than might be realistic and safe for a well managed portfolio. (A portfolio is the total amount of investments you have.)
They’ll hold the shares for you, you don’t need to do anything! Just log back in when you want to sell them.
However, you should consider buying shares as part of a well-rounded investment strategy, rather than simply buying the share because you like the company or brand.
Is it a good business? Do you think the share price will increase in value in the future? Questions like this are called fundamental analysis, and it’s about finding out if the company is in a good position to be a good long term investment.
You can find analysis on the better investment platforms after you sign up. Along with key stock ratios to help with your research, such as earnings per share (EPS). More on those below.
Note: there’s also technical analysis, which is analysis of the price and its historic performance (so other traders investing behaviour), rather than the company performance itself.
You could consider trading CFDs (Contract For Differences). This is where you aren’t actually buying the stock directly itself, you are entering into a contract with the broker (trading platform) about the price of the company (share price) in the future, and you will settle the difference (in price), between when you bought it and when you sell.
This gives you the opportunity to leverage trade, which is trading with more money than you actually have, for instance, if you want to invest £50, you could trade with 5x leverage and effectively buy £250 worth of shares.
If the stock price then went up 10%, you’d make 10% of £250 rather than 10% of £50, which is a profit of £25 rather than £5. Quite a difference! It’s a return of 50% on your initial capital (money).
However if the stock ended up going down 10%, you’d lose £25 instead. Which is 50% of your capital. Not great!
It’s high risk, but can be a good addition to your trading strategy. We only recommend this for more experienced investors and day traders. And not for long-term investing. Please be careful! Most retail traders lose money when trading CFDs.
CFDs also allow you to trade the price going down too (called going short, or shorting). So you could effectively bet the price will be lower in the future and profit from it. You cannot do this when you just buy the stock itself with an online broker.
With all advanced trading platforms, they also offer trading tools to help you trade better. These include stop-loss orders (setting a price at which you will automatically sell the stock if the trade goes against you), and limit orders (setting the price you want to buy at). Plus lots more day trading tools – even help with position size and risk management.
The best platforms for CFD trading is eToro¹, Trading 212¹ and IG¹.
If you are investing within an ISA you won't have to worry about any taxes, but if you're using a General Investment Account you might have to pay the following taxes:
Note: investing with a self-invested personal pension is tax-free, however you may have to pay Income Tax when you withdraw. Here’s where to learn more about personal pensions.
If you make a profit on your investments, you might have to pay Capital Gains Tax. A profit is defined as the difference between the price you bought an investment for and the price you sell it for, and you’ll only pay tax on the actual profit amount.
However, you’ll only pay this if your total profits within a tax year is above £6,000.
The rate you’ll pay is 10% if you’re a basic rate taxpayer (have a total income of less than £50,270 per year), or 20% if you’re a higher rate or additional rate taxpayer (earn more than £50,270 per year).
If your investments pay an income, such as interest payments, then you’ll pay Income Tax.
You’ll pay this just the same as with any other income you have, for instance your salary (it will show up in your pay cheque). So the rate you’ll pay is:
Dividends are when the company pays out its profits to its owners (the shareholders – people who own shares). And can happen fairly regularly if the company is very successful and makes a lot of profit. It can happen every quarter (3 months), or sometimes 6 months and sometimes once per year.
Your stock broker or trading app / platform will collect these for you and they should automatically appear in your account when the company pays the dividend.
You get a £1,000 allowance per year, after that, you’ll pay tax and the rate you’ll pay depends on your income too. Here’s what you’ll pay:
Earnings per share is a measure for an investor to quickly work out how profitable a company is. You take the net profit of the company (how much it makes after all its expenses), and divide it by the total number of shares (called shares outstanding).
For instance, if there are 100 shares outstanding (the total number of shares), and the net profit is £100, then the EPS is £100. Which means the company makes £1 in earnings for each share there is (£100 divided by 100 shares = £1).
It’s a great way to compare similar companies, or companies in the same industry, to see which are more profitable, and therefore potentially better investments.
This is used to value a company by measuring the current share price vs its earnings per share (EPS), as described above. And another way to compare similar companies, or the same company over time, and to determine if a company is overvalued or undervalued.
It is essentially working out how much you would need to invest to earn £1 (or $1) of the company’s earnings.
You work it out by taking the current share price, and dividing it by the EPS.
So if the current share price is £10, and its EPS is £2, you would divide £10 by £2, to get 5 (or 5x) as the P/E ratio (price earnings ratio). This means you would be paying 5x the earnings per share by investing at the current share price.
It’s sometimes called the price multiple, as the share price is a multiple of the earnings per share.
The lower the P/E, generally the better for investors and the business itself – you don’t need to invest as much to get a good return in earnings, and so the company might be undervalued. A high price earnings ratio means a company might be overvalued, or investors are expecting big things in future (they are happy to pay a higher price for the earnings per share).
This is the total amount of shares a company has. For instance, Apple has 16 billion shares outstanding, it's a pretty big and popular company!
Shares outstanding is used as a base number to measure a lot of things such as EPS (above).
However it’s not a permanent number, a company can issue new shares and this number will of course increase, and therefore reduce the value of each share that already exists. This could be in the form of a ‘stock split’ where it issues more shares for every existing share, often to reduce the share price so more investors can purchase shares.
A company can also ‘buy back’ shares and effectively destroy them (remove them from circulation), and this would increase the value on all remaining shares.
The market cap is used to understand how much a company is worth in relation to its share price. You simply add all the shares outstanding (the total number of shares), and multiply it by the share price.
For instance, if a company has 100,000 shares outstanding, and the share price is £1, it’s market capitalisation is £100,000. And you could say that is the value of the business. Although there are other ways to value a company.
There are different categories when it comes to the market cap.
The larger the business is, the more safer the investment is seen, as they’re typically hugely profitable and very established. Smaller companies are seen as more risky investments, as they are still growing, and won’t generate as much profit (in the short-term anyway).
Pound cost averaging is where you drip feed your money into an investment, such as shares, rather than buying them all at once as a lump sum purchase.
Drip feeding your investment is a great way of reducing the potential effects of market volatility (change in share price) and reduce risk, in case the share price falls after you purchase. You buy with regular amounts over time whatever the price might be.
This means you can actually benefit if the share price falls (as it reduces your average price of your investment in the company). Although if share prices rise, you’ll lose out. There’s no best way to invest a lump sum – it’s up to you and your risk tolerance.
However, it is often seen as a good idea to invest regularly, for instance monthly payments from your salary.
Although we don’t recommend investing in a single stock like this, if it's your only investment – it's often good to diversify.
We recommend regularly investing with experts – using an expert managed investment platform, sometimes called a ready made portfolio.
They’ll handle all the investing for you, and aim to grow your money in a safe and sensible way over the long term. Here’s where to find the best expert managed investment platforms.
A shareholder is simply someone who owns shares in a company. This can also be known as a stockholder.
A stock exchange is a place to buy and sell shares (also called a stock market). There is a major stock exchange in almost every country in the world, and sometimes a few!
In the UK there is the London Stock Exchange (LSE), and in the US, they have the New York Stock Exchange (NYSE) and the NASDAQ (National Association of Securities Dealers Automated Quotations), plus a few more. In Japan, it’s the Tokyo Stock Exchange (TYO).
You can also trade other assets too, such as investment funds, which are groups of investments combined together into a single investment.
A stock broker will interact with the stock exchange, and make the investments for you.
The Alternative Investment Market is part of the London Stock Exchange (LSE), but a smaller exchange dedicated to small and medium sized companies that are growing. They can often be great companies and great investment opportunities, but seen as higher risk as they’re smaller.
Exchange-traded funds, or ETFs, are groups of investments (such as shares) combined together into one single investment that is also tradeable (can be bought or sold) on a stock exchange. They often represent a theme, such as clean energy, electric vehicles, artificial intelligence companies etc.
They can also represent a stock exchange itself, which can represent the economy of a country. For instance, you could buy an ETF that contains the top 100 companies in the UK (FTSE 100). This is also called an index fund. Here’s how to invest in index funds.
ETFs are super popular, as they make investing a lot simpler and cheaper – you only have to buy the ETF rather than all the individual shares to build up your portfolio of investments.
Buying a range of shares in various companies to build up your portfolio is seen as a good investment strategy, as it increases diversification (the range of investments you have) – which reduces potential risk. if one share drops in value you will only see a small drop in your investments.
Buying shares in only one (or a few individual companies) is higher risk, as your money is only linked to that company – which could underperform, or things happen like changes in government regulations. Although the opposite is also true and you could benefit more (but that’s the risk).
When buying foreign shares listed in the US (so trade on a US stock exchange), you’ll have to also fill out a W-8BEN form beforehand. Which is simply to declare you are a non-US resident for tax purposes. It’s all online via the investment platform and super quick.
When it comes to investing, the things you buy (the investments) are also called assets – so the stock itself, bonds, a property, and even bitcoin and crypto. All the different types of assets are called asset classes.
There’s no best asset class, it’s up to your personal investment strategy as to which asset class is best to invest in. Although stocks and shares (and share based investments) are of course the most popular.
Although bitcoin and cryptocurrencies are gaining popularity fast – if that interests you, here’s how to buy bitcoin and how to buy ethereum.
It’s a great idea to diversify your investments across a range of asset classes too. That way, you reduce risk if one type of asset, such as shares (equities) all perform badly (such as a stock market crash).
We hope everything is super clear and you are ready to buy
Jefferies Financial Group
If so, here’s a reminder of the best investment platforms to use:
Good luck investing!
eToro is the best place to buy shares. It’s commission free!Buy shares¹
68% of retail investor accounts lose money when trading.