The FTSE 100 index is a guide to the value of the top 100 listed companies in the UK. In 1999 the FTSE 100 peaked at nearly 7000, but since those heady days it had crumbled to just over 3000. The good news is that it is back on the up and as of December 2003 has climbed to around 4400.
During the crash between 2000 and 2003 many individuals held onto their share certificates and subsequently experienced heavy losses. However, in the past few months online trading has increased substantially, a sign that investors are willing to try their luck again.
A Share is, in essence, a share in the ownership of a public limited company. As a part owner of the company, if it is profitable and the board of directors decide that the profits should be distributed amongst the share owners, a dividend is paid out. Dividends are usually paid out once or twice a year.
There are several options available to invest in the stock market.
Buying Shares through a Broker
Perhaps you have read a tip in a newspaper, or have been following a company's products for a while and have decided that you would like to buy some of its shares. You will need a broker who will buy the shares on your behalf. Brokers can be found at Banks, or through online brokering websites.
The broker will charge a flat fee for making the trade and stamp duty, which is simply a tax imposed by the government on the investment. Stamp Duty is currently set at 0.05%
This is probably the best idea if you are buying shares in a company as a one off. Banks tend to be slightly more expensive than buying through an online broker, typically charging a fee of £25. You will receive a share certificate.
If you are intending to trade regularly it may be worth signing up with an Online Broker. Commission ranges from as little as £7.50 up to about £15.
If you sign up for a Crest Account then the broker will hold the share certificates on your behalf and any dividends will be paid into your account. If you sign up for a nominee account then you are not paid any dividends. Clearly a Crest Account is more advantageous.
Investing in a Fund
Perhaps you are a little wary of investing directly in a company and would rather entrust an expert to make the stock picking decisions. Fund Managers are responsible for millions of pounds of investor's money and invest in a number of shares within the fund. You can invest in a tracker fund that tracks, for example, the FTSE 100 or a particular sector.