How to buy and sell shares

Many people who are new to the investment game — perhaps their interest has been fired by reading Shares — have never had anything to do with the stock exchange, let alone a stockbroker. While they may have an inclination to buy shares, they might imagine that the whole process is a little daunting.

Many people have fairly significant investments in the shares of a range of companies but have had extremely little, or nothing, to do with stockbrokers.

Often an inheritance can provide an individual’s first experience of the stock market.

An increasing number of people have become investors for the first time by applying directly for shares in one or more of the new company floats, recapitalizations, privatizations in recent years. The great majority of such new investors are now sitting on very tidy "paper" profits on their investments. Some might be inclined to sell but are unfamiliar with the procedure involved.

Once a company has floated and issued shares to shareholders, the usual way in which shares are bought or sold is on the exchange.

Normally, the buying and selling of shares in companies listed on the stock exchange is undertaken through a stockbroking firm. So the first step is : find yourself a broker. You may have friends who can suggest a broker to you, based on their own experience. If not, you can get on to the telephone and make your initial contact.

If you wish to discuss your investments, or are intending to buy or sell shares, the person to whom you should speak at the stockbroking firm is one of its investment advisers. Policies concerning the opening of client accounts and the manner in which a firm deals with initial buying or selling instructions from clients (for example, any deposit to be lodged before buying) vary from firm to firm, so it is best to discuss these issues with the adviser.

Stockbroking is a customer and service-oriented profession. It is also a competitive industry. If you don’t like the advice, or the vibes, you get from the first adviser you approach, try another adviser, or another stockbroking firm.

The "brokerage" (that is, commission) rate and manner in which brokerage is charged on buying and selling transactions varies between stockbroking firms. Charges can be discussed in your initial contact with the adviser.

Stockbroking firms do not charge for advice offered, or for client interviews. Basically, stockbrokers earn their money from brokerage on transactions.

Some investors are not interested in receiving advice or any other service from a stockbroker. Their principal interest is simply to have a broker who will dutifully receive and execute buy and sell orders. For such investors, one of the growing number of non-service discount brokers who charge a flat rate for the execution of orders could well be an appropriate choice. Such brokers advertise their services in this magazine and the daily financial press.