How to Invest in Stocks in the UK: 5 Steps to Get Started

Written by Elizabeth Anderson
Fact-checked by Steven Hatzakis
Edited by Jeff Anberg

October 02, 2024

Investing in stocks can be a potential way to achieve higher returns compared to traditional cash savings accounts. But if you're new to the stock market, you might be wondering how to invest in stocks as a beginner in the U.K.

I'll break down the two main ways to invest—buying individual company shares or investing in funds that hold a range of companies. By the end of this guide, you'll have a clear understanding of how to start investing in stocks, tailored to your financial goals and risk tolerance.

Step 1: Determine your investment goals

Before you start investing, think about what you’re attempting to accomplish by investing. Investing should generally be considered for long-term savings only – you may not want to risk putting your money in the stock market if you need the money shortly after for something like a house deposit. Instead, a more appropriate goal is to invest for retirement, or general long-term savings that will make you more financially secure.

With this in mind, you can then think about your investing approach and how much risk you are willing to take.

Active vs passive investing

Active and passive investing are terms generally used when investing in funds. An actively managed investment fund involves portfolio managers picking investments, through skill and judgement, that they think have the potential to perform better returns than a stock market benchmark.

A passive investment strategy involves investing in a fund that simply mimics a stock market. The fund’s performance will be in line with its chosen market rather than having the potential to beat it.

Passive funds have grown in popularity in recent years, as many actively managed funds are not able to beat the market they follow. They are also cheaper to invest in and may have more reliable returns. Money invested in passive funds overtook the amount in active funds for the first time in 2023, according to investment data firm Morningstar. The two main types of passive funds are index funds in the form of certain mutual funds or ETFs (exchange-traded funds).

Risk tolerance

Your risk tolerance is how much risk you are willing to take on your money when investing.

Investing in individual stocks is generally seen as the highest-risk investment strategy. If you invest all your savings in one company and that company goes bust, you’ll lose all your money.

Investing in a fund that invests in potentially hundreds of companies is a way to diversify and reduce the chances of losing everything. But you could still lose money if you withdraw your savings at a time when the stock markets, or the industries the fund tracks, are down.

Generally, your risk level will partly depend on how long you plan to invest. If you are investing for retirement in 30 years, for example, then more risk may be taken than someone who plans to withdraw their money in five years. If your risk tolerance is low, you may want to invest in bonds alongside stocks.

Set a budget

Financial advisers typically recommend you have three to six months' worth of expenses in cash savings before you start investing. This reduces the risk of dipping into your investment pot earlier than planned at a time when markets are down.

Once you’ve got an emergency savings pot in place, look at your total income and outgoings to see how much you can afford to invest. Many platforms allow you to invest small, irregular amounts so you don’t have to commit to a set amount each month.

Featured Offers

Low-cost US and UK shares.

Step 2: Research different types of investments

There are many different types of investments you can hold. The most common options are stocks, ETFs, funds, or investment trusts. I’ll explain each of these in brief below.

Stocks

Investing in individual stocks means you buy shares of a company listed on a stock exchange, such as Apple, Disney, or Tesco. Buying company shares (or stocks) means you own a fraction of that company. If a company is worth £500m and there are 100 million shares, each share would cost £5. You make money on your investment if the value of the company (and the share price) rises, and if the company pays dividends from its profits.

Funds

A fund (also called a mutual fund or index fund) allows you to invest in a range of companies. This means your investments are diversified and not reliant on the performance of an individual company.

Your money is pooled with other investors and is then invested on your behalf by the fund manager. The fund’s value and performance will depend on the value of the underlying investments held within it after fees for running the fund have been charged.

Funds are popular with many investors, including beginners, as there are thousands to choose from and they are generally easy to understand and trade.

ETFs

Similar to a fund, an ETF (exchange-traded fund) allows you to hold a mix of investments so you’re not risking your money on one individual company. ETFs are traded on a stock exchange, allowing you to buy and sell at any time of day while stock markets are open, unlike funds which only settle at the end of the day. The share price of an ETF closely mimics the value of the investments held within the ETF.

Investment trusts

Investment trusts pool investors’ money to invest in a portfolio of companies chosen by the investment trust. Like an ETF, an investment trust is a company in its own right whose shares are listed on a stock exchange. The share price will depend on how in demand the trust is, rather than necessarily being determined by how well the investments held by the trust are performing. You make money by growth in the share price and dividends.

query_stats What type of trader are you?

New to the world of investing? See my picks for the best UK trading platforms for beginners. More experienced traders should check out my guide to the best UK Trading Platforms for Active Traders. If you're looking to trade shares on the go, read my guide to the best UK stock trading apps.

Step 3: Decide what kind of investment account best fits your needs

Before you start investing, you’ll need to choose the best type of account for you. The three main account types are an ISA, SIPP or general investment account.

ISA

ISAs are likely to be your account of choice unless you are saving for retirement because of their tax-free benefits.

Investing through an ISA means you won’t have to worry about tax. Gains made on investments held in an ISA are not subject to capital gains tax, income tax or dividend tax. You can withdraw money from your account at any time.

You can pay into multiple stocks and shares ISAs each tax year, but there is a limit on how much you can put into ISAs each tax year - £20,000.

escalator_warningInterested in learning more about ISAs?

Get the full rundown on ISAs by reading my complete guide to ISAs in the UK. Learn how to open a stocks and shares ISA. When you decide what kind of account you'd like to open, discover my picks for the best providers for stocks and shares ISAs or the best providers for cash ISAs.

SIPP

A SIPP (self-invested personal pension) is designed for retirement income. Investing through a SIPP means you cannot withdraw the money until age 55 (rising to 57 in 2028).

The benefit of a SIPP is that contributions benefit from pension tax relief. In practical terms, this means that a £1,000 contribution would effectively cost £800 to you if you are a basic-rate taxpayer, or £600 if you are a higher-rate taxpayer.

If you are in your 50s or 60s, the tax relief means saving through a SIPP may be the most worthwhile account option as the age restriction is less of an issue or not relevant at all.

saveInterested in learning more about SIPPs?

Learn more about SIPPs by visiting my comprehensive guide on SIPPs in the U.K. I have also researched and chosen my top picks for the best providers for SIPPs in general as well as the best providers offering Junior SIPPs.

General investment account

A general investment account, also known as a share dealing account, does not come with tax benefits but is easy to open and offered by all investment platforms.

General investment accounts could be considered if you have maxed out your annual £20,000 ISA allowance, or if you are only investing small amounts and will not need to worry as much about capital gains tax or dividends tax.

Consider tax implications

Unlike an ISA or SIPP, there are no tax benefits for a general investment account.

However, you have allowances each year before tax is due on investment gains. Everyone in the U.K. can make an investment profit of £3,000 a year before capital gains tax is due and up to £500 in dividend income before dividend tax is due.

If you are only investing small amounts, and are likely to go above the annual allowances, then a general investment account would be fine for you.

Step 4: Compare account fees, minimums, and commissions

Once you’ve considered the investments you want to buy, and the account to invest through, you’ll next need to think about the platform you want to choose. All online platforms offer general investment accounts but not all offer ISAs or SIPPs.

All platforms also have a different charging structure. Some will charge trading fees and account management fees, others will charge one or the other, or even none.

Below is a table summarising the charges and commissions of some of the main UK brokers.

Company	Share Trading: 0-9 Deals/ Month	3 fund trades per year (£30k portfolio)	Annual Custody Fee: £0 - £250,000
Interactive Investor	£3.99	£71.85	£59.88 - £143.88
Trading 212	£0	£0	£0
eToro	£0	N/A	£0
AJ Bell	£5	£79.50	£0 - £625
Hargreaves Lansdown	£11.95	£135	Up to £1,125
Freetrade	£0	N/A	£0 (Basic plan), £71.88 (Standard), £143.88 (Plus)
Bestinvest	£0 - £4.95	£60 or £120	Up to £500 or £1,000
CMC Invest	£0	£120	£120 info
Fidelity International	£1.50 or £7.50	£105	£90 - £875
Barclays	£6	£69	£48 - £500
Vanguard UK Investor	N/A	£105	0.15%

Step 5: Open a brokerage account

Once you’ve compared the costs of different platforms, it’s time to narrow down the brokers that would suit you.

Best trading platforms in the UK

There are many excellent trading platforms in the U.K. In my recent testing of all the main U.K. investment platforms, I found that Interactive Investor, Trading 212, eToro, AJ Bell, Hargreaves Lansdown, and Interactive Brokers were among the best U.K. trading platforms for beginners, while Saxo Bank and Interactive Brokers offer the best trading apps.

Tips for choosing a broker

With so many good brokers to choose from, how do you pick one? Below we outline our three tips for selecting the best broker for you.

Tip 1: See what accounts they offer

Every U.K. investment platform will allow you to deal through a general investment account, but a smaller number offer ISAs and SIPPs. If you are investing large sums of money, you’ll likely want to prioritise investing through tax-efficient ISAs or SIPPs. For most people, it will make a lot of financial sense to choose a broker that offers an ISA or SIPP.

Tip 2: Check the fees

All investment platforms differ in their approach to fees. Some, such as Trading 212 or Freetrade, do not charge trading fees for buying and selling stocks and ETFs. Some will charge annual management fees depending on the account type you have or the investments you hold. These will either be a flat fee or a percentage fee based on the value of your investments.

Tip 3: Check they have the investments you want

Almost all of the twenty or so brokers we review at UK.StockBrokers.com offer the option to buy shares in companies based in the U.K., U.S., and potentially other countries. However, not all platforms offer the chance to buy ETFs, investment trusts, or mutual funds. You may also want to invest in bonds, which is another security that not all platforms offer.

FAQs

How much money do I need to start investing?

Not a lot! Platforms including Trading 212, Freetrade, Robinhood, WeBull, CMC Invest, or XTB allow you to start investing with as little as £1. These platforms allow you to buy fractional shares, meaning you don’t have to buy whole shares. This is especially useful if you are starting with a small amount and want to invest in U.S. shares, where prices are generally higher than U.K. equities. Microsoft, for example, currently costs around $400 (£306) a share. A fractional share allows you to spend a smaller amount for a percentage of one share, removing the need to spend over £300 just to buy a single share.

Bear in mind there are no guarantees with investing. You could lose money if your investment performs badly or if you sell at a time when markets are down. Investing in a fund can be one way to reduce the chance of losses as you have exposure to a range of companies rather than selecting individual stocks.

What are some tips for beginner investors?

Having invested money for around ten years, my main tip would be to get started in any way you can. It’s also a good idea to invest small amounts to begin with as it’s likely you’ll make mistakes at the beginning and you don’t want to risk losing a large amount you can’t afford.

When starting out, aim for platforms that don’t charge trading fees (charges to buy and sell funds or shares). If you invest £100 in shares on the Hargreaves Lansdown platform, for example, you’d pay £11.95 in commission and this would immediately leave you down 12%. If you wanted to sell these shares, you’d be down another £11.95. So £24 of your £100 would be lost to trading charges alone. Using a platform such as eToro, Trading 212 or CMC Invest instead means you’ll not be charged any trading fees – which is quite useful when starting out.

For many beginner investors, investing in a simple tracker fund is often the best way to get started. A tracker fund, or index fund, simply aims to mirror an index such as the S&P 500 or FTSE 100. You can even invest in a global tracker like the FTSE All World. This is a great way to get exposure to many markets and companies at low cost. Platforms such as Hargreaves Lansdown, Fidelity and Vanguard don’t charge trading fees for funds. You will pay fund management fees, but these are typically less than 0.7% a year in total, but can vary between funds.

ETFs work in a similar way to index funds, allowing you to track a stock market, industry, or theme of stocks. They are traded on a stock exchange in the same way as company shares. Keep in mind that you may pay trading fees depending on the investment platform you’re using.

Commission-free investment platforms such as Trading 212 and eToro typically don’t offer funds but do offer ETFs which still allows investors to get exposure to a diversified portfolio.

How do I fill out a trade ticket?

If the stock market is open for trading, you simply select the stock you want and click or tap ‘buy’. Trades are placed quickly if the market is open, or will be placed when the market next opens.

There are two ways to place a trade: either you buy at the current market price or you schedule to buy when the price of a stock hits a certain level. This is known as a ‘limit order’. For example, you may want to buy if the price of a stock drops by 5%. The shares would then be purchased automatically if the price drops to this level and you would be notified.

You can also set up limit orders to sell when the stock rises to a certain level.

You set a timeframe for a limit order to apply – typically up to 90 days. If the stock does not hit your desired price by then, the trade is cancelled.

The following image gallery shows what it looks like to place both a market order or a limit order through the eToro app.

Placing a market order to buy BP stock on the eToro app.

Selecting between a market order or a limit order on the eToro app.

sciencePractice first!

If you've never filled out a trade ticket before, it's generally a good idea to practice doing so with risk-free virtual money first using a paper trading account, also known as a demo account. Fortunately, I have gathered my picks of the top brokers for paper trading apps.

What trading platform offers the best stock trading education?

In our annual testing of around 20 major UK investment platforms, we found that Interactive Investor, Hargreaves Lansdown, AJ Bell, Barclays, and Saxo offer the best educational material for stock trading. Information is usually delivered in a range of formats, from written articles and guides to videos and webinars.

Saxo in particular has good video content aimed at beginners, such as video guides that introduce what stocks (equities) are and how to choose them. However, the Saxo platform itself is generally aimed at more experienced investors.

Popular Stock Broker Reviews

About the Editorial Team

Elizabeth Anderson, lead writer and researcher, has been a financial journalist for more than a decade. In addition to her work with UK.StockBrokers.com, she has written extensively for major publications including BBC, The Times and Bloomberg. A keen investor herself, she is passionate about helping people understand finance and investing.

Steven Hatzakis is the Global Director of Online Broker Research for UK.StockBrokers.com and ForexBrokers.com. Steven previously served as an Editor for Finance Magnates, where he authored over 1,000 published articles about the online finance industry. Steven is an active fintech and crypto industry researcher and advises blockchain companies at the board level. Over the past 20 years, Steven has held numerous positions within the international forex markets, from writing to consulting to serving as a registered commodity futures representative.

Jeff Anberg is a Staff Editor at UK.StockBrokers.com. Along with years of experience in media distribution at a global newsroom, Jeff has a versatile knowledge base encompassing the technology and financial markets. He is a long-time active investor and engages in research on emerging markets like cryptocurrency. Jeff holds a Bachelor’s Degree in English Literature with a minor in Philosophy from San Francisco State University.