Choosing your own stocks and shares to invest in can be an exciting way to build a bespoke portfolio suited to your investment needs. It's estimated that 30% of investors in the UK bought stocks and shares in 2023, making them the most popular investment security.
But getting started can be difficult, particularly if you're unsure how to choose the right stocks and how to buy shares. In this guide, we'll cover the basics to help you decide whether this type of investment is right for you. We'll also cover some investment platforms to consider including Interactive Investor* and Freetrade.
We'll be primarily discussing how to buy and sell individual stocks and shares within this article rather than funds which are made up of lots of different stocks and shares. If you're interested in funds, you should check out the best-performing funds to invest in right now for further guidance and suggestions.
What are stocks and shares?
The terms "stocks" and "shares" are often used interchangeably to refer to the same thing, but there are subtle differences between the two that you should be aware of.
If you want to own a part of a company, you will typically need to buy a share in that company. Each share is worth the same, so it's easy to work out how much equity you have in a company by working out how many shares you have relative to their price. When people refer to shares, they typically refer to owning a specific number of units within a particular company.
Stocks are a more generic term for largely the same concept - the number of shares you own in a company is your stock in that company. So, for example, you might own 100 Apple shares, but, if asked, you could simply say that you own Apple stock without specifying how many Apple shares you own.
The term 'stocks and shares' is an accepted term used in the UK for stock market investments.
What are fractional shares?
Fractional shares are smaller parts of a single share in a company. Popular shares often trade at high prices, sometimes costing thousands of pounds per share. A share in the US-based construction company NVR costs in the region of £6,000, for example. Fractional shares allow investors who might not have the money to buy a full share in a specific company to buy part of a share instead and, if they wish, accrue more as and when they have the funds.
Changes to the way regulations around ISAs work in the UK mean that you can now hold fractional shares within an ISA and benefit from the tax wrapper. Check out our article on fractional shares if you want to find out how they work and where to buy them.
What are indices?
Most developed countries in the world have a stock market and within each market, the shares are categorised into indices. The largest of these indices are reported on in real-time and monitored by institutions and individual investors to assist with their investment choices.
The main global indices are:
- FTSE 100 (FTSE) - weighted average of the 100 largest UK-listed companies by value
- FTSE 250 Index - weighted average of the 101st to the 350th largest UK-listed companies by value
- FTSE All-Share Index - weighted average comprising around 600 of more than 2,000 largest UK-listed companies by value
- S&P500 - weighted average of the 500 largest US-listed companies by value
- Dow Jones Industrial Average (DOW JONES) - weighted average of the 30 largest US-listed companies by value
- Dax Performance Index (GDAXI) - weighted average of the 30 largest German listed companies by value
- Hang Seng Index (HSI) - weighted average of the 50 largest Hong Kong-listed companies by value
- Nikkei 225 - weighted average of the 225 largest Japanese listed companies by value
Many investors choose to invest in index funds rather than individual shares because an index fund allows you to invest a relatively small amount and spread your investment across many different shares. This means you can diversify and build up your investment over time.
Should you invest in individual stocks and shares?
For those who are happy to manage their investments and want total control over their portfolio, individual shares might be the way to go. This is because if you pick the right individual stocks, you could earn very high returns relative to a fund. A fund will comprise many different stocks, some of which may underperform and drag your portfolio's performance down. As such, growth won't typically be as dramatic when you invest in funds.
But with a great potential for high rewards comes greater risk. Investing in individual stocks typically means less diversification even if you opt to invest in a few different companies. This means that a poorly performing company could drag your whole portfolio down significantly. There is also no guarantee that the stocks you select will outperform index funds even if they do well. It takes a lot of time and effort to manage your portfolio appropriately as well.
This is why some beginner investors prefer to steer clear of individual stocks and shares when they first get started. There is naturally more risk involved with investing in individual stocks and shares. You're essentially putting all your eggs in one basket, particularly if you're primarily buying shares in one or two specific companies.
For the more risk-averse, index funds, like the ones mentioned earlier in this article, might be a better option. As with any type of investment, you could still get less than what you put in, but typically the losses are smaller.
In short, individual stocks could be the right choice for investors willing to take on more risk or those looking to diversify their existing portfolio with a different type of asset.
What are the best stocks for beginners with little money?
If you're a beginner investor with little money, buying stocks in well-established international companies could be a good starting point. Stocks in these companies are often referred to as blue-chip stocks. They have consistently performed well in their sectors and are usually part of major indices like the FTSE100 or the S&P500. They are also household names so you will likely be familiar with them already.
In the UK, some blue-chip stocks include:
- HSBC
- AstraZeneca
- Unilever
- BP
- Shell
People choose to invest in blue-chip companies because they typically carry less risk so they are less likely to lose all their money even if we experience economic turmoil. In other words, they are a "safer bet" in the rather risky world of individual stocks.
Of course, blue chip stocks are often more expensive, but you could choose to invest in fractional shares or simply save up an amount before you buy shares if you would rather buy the whole share.
Many investment platforms also offer a range of learning and research tools to help you select more stocks when you get comfortable with the process.
Should I invest in penny stocks?
On the other end of the spectrum of blue chip companies are penny stocks. Penny stocks, as the name suggests, are extremely cheap stocks in very small publically listed companies typically costing less than £1. Investing in these companies is highly risky as they often don't have the resources to weather changes in market conditions and are not yet established players in their industries. As such, they are highly volatile and you risk losing all your money if they fold.
That said, many beginner investors are lured by their low prices and potential for large returns. The odd penny stock company can do exceptionally well bringing in huge returns for those investors who choose to put their money in them.
But, in most cases, penny stocks are similar to gambling. As long as you recognise that you're effectively speculating and so may not get your money back, you could put some of your money in them if you choose. In any case, you should only invest as much as you're willing to lose.
Best investment platforms in the UK
Once you have decided which individual shares you want to invest in, you'll need to choose an investment platform to help you achieve your investment goals. There are lots of different investment platforms in the UK to suit all tastes from established online brokers like Interactive Investor, to newcomers like Freetrade and Trading 212, to high street banks like Lloyds. We explore some of the best investment platforms in the UK below to help you understand what's on offer.
| Interactive Investor* | Trading 212 | Lloyds Share Dealing | Freetrade | |
| Monthly fees | £4.99/ £11.99 - ISA or GIA
£5.99/£12.99 - SIPP £9.99/£21.99 - ISA + GIA + SIPP |
FREE | £3.33 (£40 per year) | FREE/£4.99/£11.99 |
| Commission-free trading | £3.99 to £9.99 per trade | YES | YES (only for international trades) | YES |
| FX fees | 1.5% for transactions up to £25,000 | 0.15% | 1% | 0.39% to 0.99% depending on your plan |
| Individual shares | YES | YES | YES | YES |
| Fractional shares | NO | YES | NO | YES |
| Funds | YES | YES | YES | YES |
| Stocks & Shares ISA | YES | YES | YES | YES |
| Learning resources | YES | YES | YES | YES |
| FSCS protection | YES | YES | YES | YES |
| Trustpilot score | 4.7 out of 5.0 | 4.6 out of 5.0 | 1.6 out of 5.0 | 4.0 out of 5.0 |
Interactive Investor
Interactive Investor* is an established UK-based online investment service which has been around since 1995. It offers a range of options for passive and active investors alike, including a managed ISA with investment portfolios based on your desired risk level, as well as a stocks and shares ISA which allows you to build your own portfolio. Our Interactive Investor review provides more information about the platform and its key features to help you decide whether it's the right choice for you.
Trading 212
Trading 212 is a commission-free platform that allows investors to buy a range of assets such as individual shares, fractional shares, exchange-traded funds (ETFs), and even CFDs. Trades placed in the same currency are completely free on Trading 212, making it a lucrative option for those who trade frequently. FX fees are low too and are set at just 0.15%. Investors can also make use of a fee-free Stocks and Shares ISA that offers the opportunity to invest tax-free.
Trading 212 is a good option for experienced, DIY investors who are interested in creating their own portfolios. This independent Trading 212 review provides more information about the platform's pros, cons and other features.
Lloyds Share Dealing
Lloyds is a well-known UK-based high street bank which offers a Share Dealing account for customers interested in investments. Scheduled monthly investments are commission-free, as are international share trades. A 1% FX charge, which is on the steep side, applies, however. With Lloyds, you can invest in individual shares as well as funds. There is no option for fractional share investment, however.
It's a good option for less experienced investors who want more guidance and the peace of mind that comes with investing through a well-established player in the space. Its fee-free scheduled investment is better suited to investors who favour passive strategies such as pound cost averaging rather than active trading.
Our Lloyds Share Dealing review is a good point of information if you're looking to learn more.
Freetrade
Freetrade offers commission-free investments in more than 6,200 UK, US, and European stocks and ETFs. Like Trading 212, it also offers the opportunity to invest in fractional shares if this is of interest. There are both free plans and paid plans depending on your needs. For example, if you'd like to invest using an ISA, you would need to opt for the Standard plan which costs £4.99. FX fees range from 0.99% to 0.39% depending on the plan you're on.
This independent Freetrade review provides more information about its pros, cons and other features you might be interested in, as well as a special offer that allows you to earn a free share worth up to £100.
How to buy stocks and shares
Once you've decided what stocks to invest in and what platform you wish to invest with, it's time to buy your first shares.
1. Choose a tax wrapper or share dealing account
If you are looking to invest in stocks and shares then the best way to start is by investing in products where your money can grow tax-free, such as an ISA, Lifetime ISA or SIPP.
The chart below shows the different tax advantages of an ISA, Lifetime ISA or SIPP.
| Product | Tax relief on investment | Tax-free growth | Income Tax levied on withdrawals |
| ISA | No | Yes | No |
| Lifetime ISA | No | Yes | No |
| SIPP | Yes | Yes | Yes |
However, if you have already invested your £20,000 tax-free allowance in any given year, or if you don't want to lock all your money away in a SIPP, then a share dealing account could be a great way to continue investing. This type of account will work well for fractional shares as well, as you can't currently hold fractional shares in an ISA.
2. Find your shares
Once you've opened your account of choice and funded it, it's time to find your shares on the platform. All platforms work slightly differently, but there is usually a simple dashboard to help you search for the companies you're interested in.
Once you find what you're looking for, you'll typically be told how much it'll cost to buy the share and what fees and taxes you'll need to pay on top of the share price to do so. For example, if you're buying UK shares, you may need to pay a 0.5% stamp duty tax in some cases. You'll need to have enough funds in your account to place the deal and purchase the shares.
3. Place a deal
If you're happy with the quoted price, you can go ahead and place a deal via the platform. If you're placing your order during market hours (these vary depending on the shares you're buying and what exchange they are on), you'll usually be able to place your order straight away meaning the prices won't fluctuate between you placing your order and it going through.
To successfully buy a share, you'll need to give the platform an order to buy your shares and ensure you have enough funds in your account to purchase the share you have selected and cover all the fees.
Are individual shares right for you?
Investing in individual stocks and shares could be right for you if you want to have full control over your investment portfolio and minimise the charges you'd pay fund managers. You will need to manage your investments actively and keep up to date with the markets as well as the latest news in your chosen industries so you can tweak your investments as necessary. This requires a certain level of expertise and can take up plenty of your spare time. That being said, investing in individual stocks could yield high rewards particularly if you're prepared to invest over the long term.
However, this type of approach is typically not the right choice for the risk-averse who are concerned about putting all their eggs in one basket. If a company you're invested in underperforms, you're likely to suffer losses. Funds which spread the risk could work better for you if this is the case. Some funds are also actively managed which means they're constantly calibrated by experts who understand the market they're working within to give you the best returns possible.
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