Owning shares in a company means you own a part of that company. As a shareholder you could benefit from dividend payments and experience a growth (or a loss) in the value of your shares. This sketchnote explains how to buy shares and become an investor.
Private companies Vs public companies
Before we begin, it’s useful to understand the two main types of companies. This example is UK-focused, but similar principles apply in other countries.
Private limited companies:
- Also known as Limited or Ltd companies.
- Will only have a handful of shareholders.
- Shares in these types of companies are not available on the stock market.
Public limited companies:
- Also known as PLCs.
- Examples include Tesco PLC, Unilever PLC and AstraZeneca PLC.
- Have lots of shareholders and anyone is allowed to buy the shares via the stock market.
Unless you are buying into or becoming a partner in a small business, the shares you buy will most likely be in PLCs or their international equivalents like Tesla Inc.
How to buy shares in PLCs
PLC shares are traded on stock markets through stock exchanges. The main one in the UK is the London Stock Exchange.
But don’t think you can just waltz into the London Stock Exchange and start picking up shares off the shelf like you’re doing your weekly supermarket shop!
Nope, instead there are people called brokers who act as the middle person between investors and the stock exchange. Nowadays many of those brokers are online platforms and make it super easy to find and buy shares. They include Interactive Investor, Hargreaves Lansdown, AJ Bell and Fidelity.
When you buy shares through a platform, you’ll be able to buy individual shares in companies you like the look of. So if you think Best Pork Pie Co is going to be profitable, you can purchase their shares.
Or if you don’t fancy being a ‘stock picker’ you can choose to invest in a fund. A fund is a collection of shares either actively picked by a fund manager or one that passively tracks a stock index like the FTSE 100.
So in a nutshell…
- Most people buy shares in publicly traded companies like Tesco or Tesla.
- Shares are traded on the stock market through stock exchanges.
- Brokers act as the middle person between the stock exchange and investors. Many brokers have online platforms, which makes it super easy to buy shares.
- Shares can either be bought individually or as part of a fund.
Thanks for reading 🙂