Share Dealing as a Way to Invest

06 May 2010 - Which Way to Pay

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Share Dealing as a Way to Invest

 

 

Share dealing is generally viewed as one of the most traditional ways to invest capital, but is it much safer than other trade types, such as forex?

 

Share dealing, also known as share trading, is one of the most popular ways to invest money and involves the direct buy and sell of shares.  It does not fall under the derivatives market umbrella – a market which includes CFDs – and is therefore seen as less aggressive or speculative. 

 

However there is more than one way to buy and sell shares.  Below are the two main types - both contain their fair share of risks to your money but one is designed for long-term investment while the other is suitable for faster electronic trade.

 

Day Trading

 

You might think of share trading as the physical buy and sell of paper shares, but in reality you can get involved in day trading – the buying and selling of shares in one day.

 

Here is how it works: using your electronic platform, you make a ‘buy’ decision on shares based on their movements.  As soon as you see your shares falling, you sell as soon as possible.  Not surprisingly this requires care and attention – you will need to dedicate time and patience in front of your monitor! 

 

Day trading is a higher-risk way to trade shares, because the value of your shares are dependent on one day.  So, you could start the day with lots of capital but you could lose it all in one badly placed position.  Day trading requires some background work and trading experience.

 

Buy and Hold

 

Buy and hold means just that – you buy shares in a company and keep hold of them for an extended period of time.  Most people hold shares for longer than 8 years. 

 

This type of trading shares requires less constant attention and care, but you do need to pick shares carefully.  You can receive dividends from your stocks over the years.

 

Buy and hold is a less risky way to trade shares because you are not relying on short-term market movements, but it can be easy to forget all about them!

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