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How to buy and invest in Lloyds shares
Lloyds is one of the largest banks in the UK and investing in Lloyds shares is a good way to gain exposure to the financial sector. Here’s everything you need to know about buying them.
Buying Lloyds stock: how to invest
- Learn more about Lloyds shares
- Open an online share dealing account or download the IG Invest app
- Decide how much money you want to invest
- Make your investment
- Monitor your position
How much will it cost to buy Lloyds stock?
| Standard commission | |
| IG Invest | £0* |
| Hargreaves Lansdown | £11.95 |
| AJ Bell | £5 |
| Interactive Investor | £3.99 |
*Other fees may apply
What to consider before buying Lloyds shares
When investing in stocks there’s always the risk that you’ll lose more than your initial outlay. To help prevent this, it’s important to develop a clear investment strategy before buying Lloyds shares.
Understand your financial goals
Establishing clear financial targets for both the long and short term enables you to make key decisions such as the amount of capital you’d like to invest and how long you intend to hold it before potentially taking profit.
Know when you’ll need the money
Generally speaking, Lloyds shares offer greater returns than cash savings when held over a long period of time (ideally at least a decade). If you think you’ll need the money sooner, lower risk options such as high-yield accounts or bonds may worth considering.
If you’re still looking to invest, then it’s recommended you opt for larger cap stocks that are considered to be low risk.
Lloyds is considered to be a medium risk investment where its cyclical nature, as is common with all banking stocks, means it tends to underperform during periods of recession as customers are more likely to default on their loans.
Whilst it’s no longer considered too big to fail, Lloyds is one of the largest UK banks, which means it’s more able to withstand periods of economic uncertainty better than the smaller banks.
Know how much risk you can take
Financial markets frequently fluctuate and there’s the risk you could lose money. To help manage this risk, it’s important to implement an effective risk management strategy.
Here are some ways you could manage this risk:
- Spread your investments across different industries
- Commit to holding Lloyds stock for at least 10 years
- Stay informed about economic factors that may impact the performance of banking shares
How to research Lloyds stock as an investment
Fundamental analysis examines Lloyds financial data and market conditions to help determine if its shares are valued fairly. Here are a few key data points to analyse.
Net income
Net income refers to the total amount a business makes once the cost of all expenses, tax and interest have been deducted from its overall revenue. It’s a good indicator of Lloyds’ profitability and an effective way of assessing its operational efficiency and financial health.
Underlying profit
Underlying profit is a metric designed to accurately represent the amount of money a company makes. This calculation excludes one-time, infrequent charges and is designed to be a more accurate reflection on a company’s profitability.
P/E ratio
Calculating Lloyds’ P/E ratio helps gauge whether its shares are priced fairly. This metric is calculated by dividing the market value per share by the earnings per share (EPS).
To accurately assess whether its shares are overvalued, it’s important to compare Lloyds’ P/E ratio with other banking stocks. A high P/E ratio could suggest its shares are undervalued and a low P/E ratio could indicate they’re overvalued.
Why buy Lloyds shares?
Lloyds is one of the five biggest UK banks and could be a strong investment choice if you’re looking to gain exposure to the UK financial sector.
The bank has a strong retail franchise and has restructured to focus more on the domestic and commercial aspects of its business and has mininised its exposure to investment banking which is considered higher risk. Its stock price is renowned for being stable and having low volatility.
Lloyds is also one of the largest mortgage providers in the UK, and its share price is closely tied to the performance of the domestic property market. Although this comes with risk, strong performance from the UK housing market can result in a potential upside of Lloyds’ shares. The stock could be a good investment choice if you’re looking for indirect exposure to the housing market.
On top of this, the company offer stable and consistent dividend payments making it an attractive choice if you’re seeking a passive income.
Looking for more exposure to the UK financial sector? Find out how to buy Barclays shares
What to do after you buy Lloyds shares
Once you’ve invested in Lloyds stock, it’s important to frequently check its performance through our investing app or online platform. Keeping track of any price fluctuations can enable you to recognise any potential risks or investment opportunities.