Shares

Ways to invest in shares

There are a number of different strategies you might use when investing in shares. You could:

Alternatively, you can trade on share prices using a derivative product such as CFDs, which enable you to trade on the full value of the underlying shares while only putting up a small percentage as margin.

Find out more about trading CFDs with IG.

Shares are traditionally considered a long-term investment; people tend to keep them for at least five or ten years. The share price is likely to fluctuate during this time and if the company fails, you could lose your initial investment.

Here are some of the ways you can trade shares or share derivatives:

 

CFDs

With IG, you can trade Contracts for Difference (CFDs), which enable you to trade shares without taking on the cost of actually owning them. By trading on margin, you get considerable market exposure without tying up too much of your capital.

With CFDs you agree to exchange the difference in share value at the time you open your position and the time you close it.

You can use your CFD trading account to trade on a range of other markets such as forex, indices and commodities, as well as shares.

To find out how to trade shares as a CFD, please visit our how to trade CFDs section.

CFDs are a leveraged product and can result in losses that exceed your initial deposit.

Stock broking

To buy or sell shares, you’ll need a stock broker to act as the middleman between you and the stock exchange. The role of the stock broker is essentially to buy and sell stocks on your behalf. Their exact involvement in your trading strategy depends on the level of service you require.

There are three main levels of service:

Full-service brokers
Role: Listen to your investment goals, create and execute a strategy to meet those goals.
Commission rate:
High.

Advisory brokers
Role: Provide investment advice and recommend trades, but leave the final decision to you.
Commission rate: Medium.

Execution-only brokers
Role: Simply carry out your instructions, without providing any investment advice. There’s a vast range of online brokers that offer an execution-only service.
Commission rate: Minimal.

With so many different stock broking firms, it’s important that you carefully choose the kind of broker you need. Consider your knowledge of the markets and the amount of time that you’re prepared to commit to watching your portfolio, as this will dictate the input you need from your broker.

Bear in mind that a single broker may offer various levels of service – an execution-only broker may offer advice for an extra premium, for example.

Futures

Futures contracts enable two parties to exchange a fixed quantity of shares (or other assets) at a specified future date, for a price agreed today.

These trades allow owners of shares to lock in their price, thereby limiting their risk if the market moves against them in the specified time period. Speculators charge a fee to take on the other side of the deal.

Options

Options are contracts that give the holder the right, but not the obligation, to buy or sell at a fixed price on or before a certain date.

You can use them to speculate on the performance of a particular share, or to hedge your existing investments.

 

What you pay

Buying shares outright is not leveraged: when you buy shares through a normal stock broker you’ll pay their full value, which is the extent of your exposure to the company’s performance.

On top of the offer price, there are typically some extra charges – click on the slideshow to find out what these are.

If you choose to go through a broker, your fees are dependent on the level of service you're looking for. At the top end, a full advisory service will involve a detailed assessment of your needs and existing investment portfolio, to allow the broker to make suitable recommendations. The broker may charge a fee for this, or take a higher commission rate.

At the other end of the scale, an execution-only service will simply carry out your trade without providing any advice. This service is much cheaper but you will need to do your own research.

Alternatively, you can trade shares as a CFD, where you'll pay a commission of as little as 0.10% of the value of your trade. And as you're trading on margin, you'll initially only need to put up a portion of the total value of your trade.

Do bear in mind, though, that if the market moves against you, your risk is exactly the same as if you had bought the shares outright.

Short selling shares

Known as ‘going short’, this is the practice of selling shares in the hope of buying them back at a lower price. Traders use this method in an attempt to profit from an expected decline in the share price.

The idea is that you borrow the shares from a broker and sell them immediately, with a contractual obligation to buy identical shares back at a later date. You are hoping that the price of the shares falls, so you can buy them back more cheaply than the price at which you sold them and pocket the difference.

Short-selling is largely practised by professional traders, since many traditional stock brokers don’t offer the service to private investors. However, you can go short on shares via CFD trading with IG, along with other derivative products such as options, and futures.

Example of a loss-making trade

  1. Let’s say that shares in Prudential are trading at 1000p
  2. Jonathan decides to borrow 100 shares of Prudential from a broker to sell them for a total of £1000
  3. Soon afterwards, the price of the shares rises to 1200p
  4. Jonathan decides to close out, by buying 100 shares of Prudential for £1200
  5. Jonathan returns these shares to the lender, who now has the same number of shares as before, plus a fee for his service paid by Jonathan
  6. Jonathan’s loss is the £200 difference between the price at which he sold the borrowed shares and the higher price at which he purchased the shares he returned, plus the fee he paid the broker

Example of a profit-making trade

  1. Let’s say that shares in Prudential are trading at 1000p
  2. Jonathan decides to borrow 100 shares of Prudential from a broker to sell them for a total of £1000
  3. Soon afterwards, the price of the shares falls to 800p
  4. Jonathan can now buy 100 shares of Prudential for £800
  5. Jonathan returns these shares to the lender, who is content because he now has the same number of shares as before, plus a fee for his service paid by Jonathan
  6. Jonathan keeps the £200 difference between the price at which he sold the borrowed shares and the lower price at which he was able to purchase the shares he returned. Of course, the fee he paid the broker is offset against his profit


 
 

Trading times

You can trade shares during the opening hours of their designated stock exchange.

In Australia, for example, the buying and selling takes place between the trading hours of 10:00 AEST and 16:10 AEST.

Check the table for a list of opening and closing times on global stock exchanges.

Exchange

Time Zone

Opens

Closes

Australian Securities Exchange (ASX)

AEST (GMT+10)

10.00

16.10

Copenhagen Stock Exchange (CSE)

CST (GMT+1)

9.00

17.00

Euronext Amsterdam (AMS)

CET (GMT+1)

9.00

17.40

Euronext Paris (EPA)

CET (GMT+1)

9.00

17.30

Frankfurt Xetra (FSX)

CET (GMT+1)

9.00

17.30

Helsinki Stock Exchange (OMX)

EET (GMT+2)

10.00

18.30

Hong Kong Stock Exchange (HKEX)

HKT (GMT+8)

9.30

16.00

Irish Stock Exchange (ISE)

GMT

8.00

16.30

Johannesburg Securities Exchange (JSE)

CAT (GMT+2)

9.00

17.00

London Stock Exchange (LSE)

GMT

8.00

16.30

Milan Stock Exchange (MTA)

CET (GMT+1)

9.00

17.25

NASDAQ

ET (GMT-5)

9.30

16.00

National Stock Exchange of India (NSE)

IST (GMT+5.5)

9.00

15.30

New York Stock Exchange (NYSE)

ET (GMT-5)

9.30

16.00

New Zealand Stock Market (NZSX)

NZST (GMT+12)

10.00

17.00

Oslo Stock Exchange

CET (GMT+1)

9.00

17.30

Shanghai Stock Exchange (SSE)

CSE (GMT+8)

9.30

15.00

Singapore Exchange (SGX)

SGT (GMT+8)

9.00

17.00

Spanish Stock Exchange (BME)

CET (GMT+1)

9.00

17.30

Stockholm Stock Exchange (OMX)

CET (GMT+1)

9.00

17.30

Swiss Stock Exchange

CET (GMT+1)

9.00

17.30

Toronto Stock Exchange

ET (GMT-5)

9.30

16.00

Tokyo Stock Exchange (TSE)

JST (GMT+9)

9.30

15.00

Vienna Stock Exchange

CET (GMT+1)

8.55

17.35