What are Stocks?
Stock is ownership, or equity, in a company. Investors buy stock in the form of shares, which represent a portion of a company's assets and earnings (capital). As a stockholder, the extent of your ownership (your stake) in a company depends on the number of shares you own in relation to the total number of shares available.
Further details about shares such as dividends and order types.
How do stocks work?
Stocks in publicly traded companies are bought and sold at a stock market (also known as a stock exchange) for example, The London Stock Exchange.
You can buy a share in a stock when a company first decides to trade itself on the stock market - that is, at flotation or privatisation; or you can buy through the stock market once the shares are in circulation and being traded.
To buy or sell a stock you go to a stockbroker who does business with the stock exchange on your behalf.
Once you have bought your shares your broker can hold them electronically in a nominee account on your behalf, or you can hold them as paper certificates.
When you have bought or sold the shares, your transaction is usually completed (or settled) electronically through a service known as CREST. This system links banks, stockbrokers and company registrars together.
How risky are stocks?
Investing in stocks carries an element of risk because prices can go down as well as up. The price of stocks is a function of demand, which is based on investors' perceptions of the company's future earnings prospects.
The choice of stock - income or growth - is usually a question of the investor's attitude to risk. Income stocks are generally safer and are preferred by more conservative investors.
Growth stocks are inherently more risky, but offer far greater potential for wealth accumulation through capital gains in the stock price. Of course, until you sell your holding, these gains will not be realised. As an investor, you should assess your appetite for risk and, based on this, select the stocks with which you are comfortable.
Learn about methods to help you choose your investments.
Which account should I choose to invest in UK Stocks?
You can trade in UK Stocks through our Trading, Regular Investment, Regular Investment ISA, Certificated, Trading ISA and SIPP Accounts.