When a company wants to raise money it sells shares in that company. The value of shares can rise or fall dependant on the performance of the company, which can be affected by market forces. If shares rise in value, the shareholder will make a profit on resale: if they fall he will make a loss.
A good stockbroker can advise you whether to buy shares in a certain company, or sell the ones you have. However, this is an expensive method of dealing in shares as you will pay for the broker’s expertise.
Another traditional method of share dealing is through a bank, which you instruct, by phone or post, to purchase or sell shares on your behalf. For shares purchased, you would receive the share certificates to retain until resale.
Both of these methods, however, have drawbacks in terms of the amount of paperwork that you have to handle, as well as associated delays. If you instruct your bank or stockbroker to sell shares on your behalf, and those shares drop in value in the meantime, this can result in significant losses. You also have to ensure that if you sell shares, you send back the certificates.
With online share dealing, you have instant access to information on share prices, and are able to monitor the performance of your portfolio. Trading delays are also minimised as you can buy or sell stock straightaway. Furthermore, you do not have to hold share certificates, as shares are held electronically, with you listed as the beneficiary.
Many online share dealing companies charge a small flat rate each time you trade in shares and offer banking facilities, enabling you to withdraw and deposit funds online or by phone.
Most of the online stock brokers allow you to earn interest on un-invested cash. They charge a commission rate per trade, which is usually reduced for regular traders. For more information you can compare brokers.