Do you want to start trading stocks & shares profitably without having to read through a ton of investment books or attend expensive trading seminars?
Then put the kids to bed early, pull up a chair and grab a cuppa:
Because since I started trading stocks & shares in 2011, I have grown my initial £500 investment into a £39,000 portfolio that is now paying me passive income every month.
Not only that, but I have helped friends and family grow their savings and increase their pension pots at rates well above those they were receiving in their bank accounts and ISAs.
Let me show you how to start trading stocks & shares in a simple, step-by-step manner, even if you’ve never done any trading before.
By the time you get to the end of your cuppa you will have opened a Stocks & Shares Account with a reputable broker, deposited your initial capital and selected your very first investment.
Ready to get started?
How to Start Trading Stocks & Shares in 5 Steps
- Choose Your Investing Objective
- Open the Right Stock Trading Account
- Deposit Your Starting Capital (without fear)
- Pick The Best Investments To Meet Your Goals
- Manage Your Account Successfully
Step One: Choose Your Investing Objective
It’s too easy to get overwhelmed by the bread and butter of becoming a ‘trader’ that you actually forget to think about the practical reason why you’re doing it.
Sure, you want to see some kind of income or growth from the whole thing, but it definitely helps you become more successful if you choose a very specific investment objective at the beginning.
If you aren’t specific with your objective from the off, you will end up making investments without any real awareness of what to buy, why you’re buying it and when to cash it in. Trust me on that one. I’ve been there, done it and got the t-shirt (and lost a lot of money for my troubles…)
Now that I’m older and wiser (and substantially slightly less hursuit) you can benefit from my mistakes and save yourself all that financial pain by getting yourself off to a flying start.
For example, you could have one of the following objectives:
- Protect your cash from inflation
- Receive regular income in the form of interest or dividends
- Grow your investments by increasing their value and cashing them in later
- A bit of everything
What you want your investment to achieve and the timeline in which you need to achieve it has (or should have!) a direct correlation with the investments you make.
Examples Of Different Investment Objectives for First Time Traders
I created the simple table below to give you an idea of the different types of investments you might make to meet your objectives and the timeline you might think about holding them.
This is not meant to be a definitive guide, merely an illustration of how different objectives may lead to different types of investments.
| Objective | Type of Investment | Timeframe |
| Protection (against inflation, or risk to cash, or diminishing savings rates) | Funds or shares in sectors that are resistant to inflation like commodities, precious metals or index-tracking funds. | Medium term 5+ Years |
| Growth (to realise capital growth) | Smaller or newer companies in growth markets or funds designed for growth | Short term 1-3 Years |
| Income (to realise regular income payments) | Old, established companies or income-focussed funds with a strong record of regular dividend payments | Long term 10+ Years |
How to Decide Your Investing Objective
I’m a sucker for a good strapline and my trading philosophy is to Be Happy. Trade Well.
That is to say; life comes first, trading comes second. That means your investments have to suit your lifestyle and life goals and need to fit around your unique circumstances.
In my case, because I’m knocking on 40 years old with two young children (who are utterly oblivious to my endeavours on their behalf!), I’m trying to create multiple streams of passive income to hand over to them later. Therefore, my focus now is on older companies with very strong track records of paying regular dividends.
On the other side of that limited edition Beatrix Potter Coin, I started my investment journey from the point of having virtually nothing to invest (£500 in fact). That required a shorter term view as I tried (and succeeded) to create growth as quickly as possible. That being the case, I invested in stocks that I felt had very short-term upside potential.
Your investment objectives will be unique to you, your available capital, your appetite for risk and how long you have available to you to realise them.
Here are some questions to help you think about your objective and risk:
- How much do you have available to invest?
- How much are you willing to lose? (All/some/none)
- How much time per day will you have to manage your investments? (Lots/some/none)
- When will you need to draw down your investment (cash it in)? (1 year/3 years/5 years/more)
- What do you want most out of your investment? (Protect/grow/income)
Once you’ve decided whether you’re looking to protect your cash, grow your capital or receive regular income – and when you want to cash your investment in – you can confidently choose the right stock trading account to make it happen.
Step Two: Open The Right Stock Trading Account
Hargreaves Lansdown is my broker of choice. Why?
Because they’re a 35 year old British company whom offer everything I need to trade stocks & shares successfully in an easy-to-use platform whether I’m at home or on the go.
Why Hargreaves Lansdown is the Best Provider for Stock Trading Accounts in the UK
- They’re a well established, 35 year old British company who continuously innovate and improve their service offering
- They offer a full selection of stock trading accounts to meet your investment objective
- It’s easy to get fast, responsive help and support from the website or telephone call
- You can invest in loads of different things (more than 2,500 funds, UK, US, Canadian and European shares, ETFs, investment trusts, bonds and gilts).
- They provide high quality (free) news, reports and information feeds
- It’s easy to get started investing with them
It’s so easy to get started investing with Hargreaves Lansdown that I really can’t recommend them highly enough.
They’re a great starting point for new investors without ever compromising on advanced trading features and their stock trading account comparison questionnaire makes it simple to find the right trading account to meet your objectives.
To find the right trading account for you, simply visit the Hargreaves Lansdown comparison page and answer these easy questions:
As you select the most appropriate answers for your situation, the results (recommended trading accounts) automatically refresh, filtering out the ones that are least suitable.
This makes it simple to find the best account to open that is most suitable for your situation.
I currently manage three stocks & shares accounts; my own Stocks & Shares ISA and a Junior Stocks & Shares ISA for each of my bairns.
You’ll probably end up opening a Stocks & Shares ISA, a Self Invested Personal Pension (SIPP) or a Junior Stocks & Shares ISA.
All of these options allow you to trade your own stocks & shares; but each has different tax treatment and rules that will make one more beneficial over another depending on your own personal circumstances.
Get £250 If You Transfer An Existing ISA To Hargreaves Lansdown
If you already have an ISA with another provider, you can get up to £250 free cash simply and easily by transferring your ISA to Hargreaves Lansdown. Complete the ISA transfer form on their website to get started. The total cash bonus you’ll recieve will depend on the value of the ISA being transferred.
Who doesn’t love free money?
Step Three: Deposit Your Starting Capital Without Fear
After you’ve selected which stocks & shares account to open by comparing the available options on the Hargreaves Lansdown comparison page, you can click the “OPEN AN ISA” button to open that specific account.
Filling in the application takes about 10 minutes and you can start from as little as £25 per month.
You’ll need some details at hand to help complete the application quickly:
- Your National Insurance number
- Your debit card details if you’d like to open your ISA with cash (the minimum amount is £100).
- Your bank details if you’d like to set up monthly payments (the minimum monthly amount is £25).
The account opening process is really easy and straightforward:
Once your account is opened and you’ve deposited your starting capital, you’re ready for the exciting part: how to invest in your very own stocks & shares portfolio.
Step Four: Pick The Best Investments To Meet Your Goals
No doubt now that you’ve got your very own stocks & shares trading account, you’ll be keen to get started investing in your favourite companies. I can’t give you specific advice on how you should allocate your funds within your portfolio, but I can share with you a few things that I do when opening new positions.
How To Pick Investments That Meet Your Objective
I mentioned at the very beginning that there were three main types of investment:
- Protection – used when you’re trying to protect your capital from inflation or low savings rates
- Growth – used when you’re trying to grow your capital
- Income – used when you want to receive regular income payments
I’ll give you a couple of examples of each type of investment that *I* would make in order to meet each of the respective objectives.
Investing to Protect Your Capital
If you’re trying to invest to preserve your capital or beat low saving rates, a good strategy is to diversify your portfolio across many asset classes. By doing this, you limit your exposure to risk (don’t put all of your eggs in one basket, for example) and hedge your bets across a wide range of assets that outperform (or keep pace with) inflation.
An easy way to do this with your new account is to invest in ‘funds’.
Unlike stocks in individual companies, a fund is an investment that pools together the money from many individuals. Fund managers then use it to invest in a wide range of shares and/or bonds.
Why Should You Invest In Funds To Protect Your Capital?
- They are managed by fund managers; which means you don’t need to know anything about investing to reap the rewards.
- They spread your investment across many assets, thus diversifying your portfolio and potentially reducing your risk.
- They offer both growth and income potential.
- You can invest from as little as £25 per month.
- The cost of investing in funds is lower than investing in equities (shares).
What You Should Look For When Choosing Funds To Invest In
- The ‘initial charge’ for investing in the fund.
- The performance of the fund over the last 5 years (Annual Performance).
- The price of the fund (how much it will cost per unit to invest).
- The historic yield (shown as a %) which shows you the previous 12 months’ return
- The type of income that gets paid.
- How frequently the income is paid.
- The annual charge for holding the fund.
- Whether the charge is paid from income or capital (if capital, your capital growth rate will be slower)
Although I would definitely suggest you do your own research, here’s a few funds I would be considering if I was looking to protect my capital for the next 10 years:
- Legal & General All Stocks Gilt Index Trust (C) (Acc)
The objective of this fund is to provide a combination of income and growth (if the income is reinvested) by tracking the performance of the FTSE Actuaries UK Conventional Gilts All Stocks Index. - HSBC FTSE 250 Index (Class S) (Acc)
The Fund’s investment objective is to provide long term capital growth by matching the capital performance of the FTSE 250 Index by investing in companies that make up the index. - Fidelity Index UK (Class P)
The Fund’s investment objective is to achieve long term capital growth by closely matching the performance of the FT-SE Actuaries All-Share Index.
Investing to Grow Your Capital
If you’re trying to grow your capital rather than protect it, then investing in stocks and shares with high growth potential is a good strategy.
What is a stock with high growth potential?
If you haven’t already read my guide on stocks & shares for absolute beginners, then you might not be familiar with what a ‘stock’ actually is. I won’t re-hash it in this article but I will summarise; a ‘stock’ or ‘share’ is a type of investment that represents an ownership share in a company.
When you purchase a company’s stock, you’re purchasing a small piece of that company, called a share.
Shares are tradable instruments that get listed on a stock exchange and are priced based on the value investors place on them. Investors’ valuations are typically based on how much profit a company makes and how much of that profit they pay back to shareholders (known as dividend).
Atleast, that’s how it should be but what you’ll find is that stock valuation is ultimately driven by what investors think about a company – sometimes the actual money figures make no difference.
Summarising: A stock with high growth potential is a company that investors think will experience high growth and greater profits in the coming years.
How Do You Find High Growth Potential Shares?
Every trader will have their own ‘systems’ to find shares to invest in but honestly, I never really found anything more profitable or effective than simply following smarter investors than me and doing what they do.
The quickest way to do that is to check which companies are moving on any given day by checking the ‘risers’ and ‘fallers’ for the day. That’s simple to do on the Hargreaves Lansdown website.
Hover over ‘shares’ from the main menu bar and a popup menu will appear:
Scroll down the popup menu until you see ‘UK Markets Latest’:
Select one of the main UK markets (a ‘market’ is just a list of companies. The FTSE 100 is the top 100 companies in the UK, the FTSE 250, the second 250 etc.) I tend to trade only FTSE 250 listed companies when I’m looking for growth in capital because these tend to be companies with developing markets, whereas the FTSE 100 companies are mostly old, established companies – which makes them great for investing when I’m looking at investing for regular income via dividends.
Once you’ve selected a market, you will be able to filter them into ‘risers’ and ‘fallers’. The results are the top 20 companies in that market who had a ‘rise’ in share price or a ‘fall’ in share price during the most recent trading day.
I use these lists to identify companies of interest and typically look for companies valued at between 100p – 500p per share.
If you don’t think you’ll have time to do this yourself, subscribe to my mailing list below and I’ll send you a weekly roundup of shares I’m thinking of investing in and why.
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Why Do Share Prices Rise and Fall?
Share prices rice and fall on investor sentiment. If investors want to invest in a particular share, the price will go up as demand outstrips supply. Converesly, if investors want to be out of a share, the price will go down as shares go back on the ‘market’.
If a price is going up, investors want to own it. If it’s going down, investors want to get out of it. I call this evidence of strength and evidence of weakness respectively.
[pic – evidence of strength/evidence of weakness]
The ultimate measurement of strength or weakness in a share is the share price. The share price is the price you pay if you want to own one share of the company you’re interested in.
Remember, prices move when sentiment changes. If a share price is increasing or decreasing, it means investor sentiment is changing and this may provide you with some good opportunities.
A Couple of High Growth Potential Examples I Might Invest In Today
1. Galliford Try Holdings PLC [GFRD]
This is the kind of stock that I look to invest in for growth. Why?
- Recent evidence of strength (share price moving consistently upwards recently as shown by the price action since the beginning of 2019)
- With a share price of 171.16 pence per share, (£1.72 p/share), it represents good value for investors with smaller capital amounts (£1000 would buy you 574 shares in this company after fees).
- They pay regular dividends. GFRD paid 58p dividends per share in 2019 which would give you a 33% yield! Or, £332.92 dividends for a £1000 investment!
- View more information or trade in this stock at Hargreaves Lansdown now
2. IP Group PLC [IPO] – High Risk
This is a company I would consider investing in for high growth if I was prepared to wait 5+ years for a return and was not afraid to lose 50% or more of my investment.
IP Group presents an exciting opportunity for investors because they invest in a portfolio of early stage clean technology and life sciences businesses. Their objective is “to systematically create, develop and deliver outstanding intellectual property-based businesses in order to provide attractive returns for all our stakeholders.”
Why would I invest in IP Group PLC?
- Recent price action indicates that strength is returning to this stock. The share price has experienced a prolonged period of weakness since 2015 (with prices going down) but since Jun 2019, there is evidence of some confidence/strength returning to the stock.
- They hold a portfolio of exciting clean tech and lifesciences businesses and any one could be the next big thing.
- The current price of 78p makes it relatively cheap to buy wih lots of potential upside if one of their portfolio businesses comes good.
- View more information about IP Group PLC on the Hargreaves Lansdown website
This would be a high-risk investment for me and I would only place the trade if I wasn’t worried about losing my investment. On the flip side, it could experience huge growth over the next 5 years as their portfolio companies mature.
Investing for Regular Income
If you want to invest your capital and receive regular income then investing in older, more established companies or funds whom pay regular dividend or interest payments is a good strategy.
If you haven’t read my guide to stocks & shares trading for absolute beginners yet and you’re not familiar with what a dividend is, it is a payment made by a company to it’s shareholders.
You get paid a dividend when you own the share at the start of the ‘ex-dividend date’.
If you buy the stock on its ex-dividend date or later you will not be eligible to receive the declared dividend. Rather, the dividend payment is made to whoever owned the stock the day before the ex-dividend date.
For example, in the image below, the 27th February 2020 is the ‘final ex-dividend date’ for Barclays plc (BARC), Bristol Water (BWRA), easyJet plc (EZJ), LPA Group plc (LPA), Plus500 Ltd (PLUS) and Shoe Zone plc (SHOE).
To get paid the dividend, you need to own the stock at the close of the market on the 26th February 2020.
Dividends can be issued as cash payments, as shares of stock, or other property. Cash dividends are the most common.
How To Find Stocks That Pay Dividends
You can find dividend-paying stocks with Hargreaves Lansdown really easily.
From the homepage of HL, hover over ‘shares’ and then click on ‘Financial diary’ from the popup menu. (If you’re on a mobile, click the burger menu icon at the top right and scroll down to ‘financial diary’.)
A calendar will appear of the current month with a list of all of the financial events expected to happen on any given day. You need to look for all the ‘ex-dividend’ dates. They usually happen on Thursdays in the UK but not always.
Click on any of the ‘ex-dividend’ events and a popup will appear listing all the companies expecting to go ex dividend on that day.
Now that you have a list of companies with their EPIC codes, you can use the regular search bar at the top of the page to find a share and check the current share price and the dividend amount.
I’m currently developing an app that will collect this information automatically for you so that all you have to do is press a button and you’ll be able to see a list of dividends scheduled to be paid, when they’ll be paid, their yield and and when you need to buy them to receive them. To be notified when it’s available, sign up to my mailing list here.
In the example above, Barclays will pay you 6p dividends per share if you are the owner of the stock at the close of the market session on the 26th February 2020.
Dividend Payment Example:
| Total Investment | £1000 |
| BARC Share Price @ 26th Feb 2020 | 166.04 |
| Total Shares Bought | 602 |
| Dividend Paid Per Share | 6p |
| Total Dividend Paid | £36 |
| Yield | 3.6% |
Not all stocks pay dividends though and that’s why you need to have a clear investment objective in mind before you start.
If you’re ready to get started investing, visit the Hargreaves Lansdown trading account comparison page and find the right trading account for your circumstances.
Step Five: Manage Your Trading Account Successfully (Profitably)
Of all the aspects of trading, I think this is probably the most difficult. It’s difficult for one reason: we’re not very good at sitting around doing nothing. For some innate reason, we tend to think we should always be ‘doing something.’
If you’ve never heard the cautionary tale of Jesse Livermore, let me distill (in my opinion), one of the greatest bits of investment advice you could ever receive:
After spending many years on Wall Street and after making and losing millions of dollars I want to tell you this: it never was my thinking that made the big money for me. It always was my sitting.
Jesse Livermore; Reminiscences of a Stock Operator
In the last 11 years of my trading, I can tell you that this is good advice. My biggest profits have always come by holding onto positons as long as I could. Sometimes that means through downturns, sometimes that means long past the point where I originally thought to sell.
An example would be holding onto a position despite it breaking previous highs.
My conclusion; no one knows where the market goes; so don’t rush to get out of a position that is in profit – in fact, start thinking about adding more to it!
If You’re Not Confident About Managing Your Account
If you’re not confident you will have the time or skill to manage your account regularly (check it, buy and sell shares), then you should invest in a fund and leave the managing of it to the fund managers.
Investing in funds takes the pressure off you by leaving it to the experts. It does still give you the option to control your investments to a far greater degree than if they were in the hands of a financial advisor, however.
I check my positions daily with the Hargreaves Lansdown mobile app and although I check daily, I probably only make one trade per month on average.
If You’re Still Unsure…
If you’re still unsure about investing for yourself, subscribe to my mailing list below and I’ll send you weekly thoughts and opinions that might help you navigate your way to higher profits, stable income and growth.
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