If you’re fairly new to investing, or have invested in funds and bonds but are considering expanding into stocks and shares, the UK stock market is a logical place to start. Read on to find out the key things you need to know about investing in UK stocks.
The main exchange for trading stocks in UK is the London Stock Exchange (LSE). It comprises two key markets: the “Main Market” and AIM.
LSE’s Main Market lists more than 1,000 stocks from the UK and around 100 other countries worldwide, including (according to its website) “many of the world’s largest, most successful and dynamic companies.” As well as stocks in individual companies, the Main Market includes a range of Exchange Traded Funds (ETFs).
AIM is the London Stock Exchange’s home for small and medium-sized growth companies. AIM stands for alternative investment market, and is designed (typically) for business that wanted to raise capital but either couldn’t afford the costs required or didn’t meet the requirements necessary to list on the London Stock Exchange’s Main Market. Investing in AIM companies usually means investing in early-stage companies with a higher risk of failing. But with this increased risk may also come a chance of higher reward if the companies take off, which some regard as a trade-off worth making.
A stock market index is a virtual portfolio of assets that measures and tracks the performance of the included assets as a whole. It gives a good indication of how a stock market, or sub-sections of the stock market, are doing. You can replicate an index either by buying shares in each individual company contained in the index, or by buying a fund that includes all of the assets in the index.
There are around 20 different indices. Some of the key ones you may encounter include:
There are also indices that represent the AIM stock exchange, or sub-sections of it.
There are a few main charges you’ll come across if you want to invest in UK stocks. These may include:
There are a few ways to check the performance of UK stocks.
Bear in mind when you’re checking what returns a stock has delivered in the past, that past performance is not necessarily an indicator of future success. More volatile stocks in particular may be riding high one week, and crash the next. So performance should only be one of the factors you consider when putting together a balanced investment portfolio.
The FTSE 100 is made up of the UK’s 100 biggest companies. Here are some of the best performing FTSE 100 funds according to JustETF:
| Fund | Icon | 5-year performance (to Aug. ’24) | 1-year performance (to Aug. ’24) | Link to invest |
|---|---|---|---|---|
| Xtrackers FTSE 100 (XDUK) |  | 31.44% | 10.09% | Capital at risk |
| iShares Core FTSE 100 (CUKX) |  | 31.39% | 9.60% | Capital at risk |
| Invesco FTSE 100 (S100) |  | 30.75% | 9.76% | Capital at risk |
| HSBC FTSE 100 (HUKX) |  | 11.99% | 6.09% | Capital at risk |
| Amundi FTSE 100 (100D) |  | 11.93% | 5.35% | Capital at risk |
| iShares Core FTSE 100 (Dist)(ISF) | | 8.14% | 5.57% | Capital at risk |
| Vanguard FTSE 100 (VUKE) |  | 8.07% | 5.67% | Capital at risk |
| FTSE 250 | FTSE 100 | ||||
|---|---|---|---|---|---|
 | Centrica |  | AstraZeneca | ||
 | Tritax |  | Unilever | ||
 | Unite Group | | HSBC Holdings | ||
 | Harbour Energy |  | Diageo | ||
 | Convatec |  | GlaxoSmithKline |
If, for whatever reason, you don’t want to buy shares in individual UK companies – perhaps because you don’t have the time to dedicate to research, the funds to diversify properly by investing in this way, or you don’t feel confident about choosing the best stocks for you – you could instead consider investing in funds. Funds that include a wide range of UK stocks are widely available from UK brokers and investment platforms. Many track the performance of UK stock market indices such as the FTSE 100. Funds can be a good way to ensure a more diverse portfolio in a single hit, and are typically regarded as lower risk than buying individual stocks.
Or, if you’re a more experienced investor, you could try derivatives trading. Rather than buying and owning shares or funds, this involves speculating on the movements of underlying assets (such as specific UK shares, or a stock market index) through spread betting or CFDs (contracts for difference). This isn’t an approach for beginners though, as it’s high-risk and lots of people lose money doing so. Find out more in our guide to CFDs vs spread betting.
A diverse portfolio is one that helps to manage your investment risk by avoiding putting all of your eggs (or stocks) in one proverbial basket.
There are a few things you can do to make sure your portfolios is more diverse:
As we’ve outlined above, one of the key things to think about is building a diverse portfolio. This will help you manage risk and minimise the chance of unsustainable losses.
When building your stock portfolio, it’s also important to consider your life stage and your goals. For example, a younger person, investing for retirement in 30+ years time, can likely afford to buy higher-risk (and potentially higher-reward) stocks than someone saving for an event that’s only 5 years away. If in doubt, consult a professional financial adviser.
Think too about whether you’d be better off investing directly in individual company stocks, which requires more time, effort and potentially higher fees, or whether an ETF that gives you exposure to multiple UK stocks in one go would be a better bet.
If you decide to go for stocks, do your due diligence into the companies on your shortlist by looking into their overall financial health and future prospects; don’t rely purely on how it’s performed recently.
Investing in a wide range of UK stocks can help diversify your portfolio, and is an obvious first step for those considering investing in shares for the first time. As with any investments, research the companies you’re considering buying stocks in ahead of time. Assess their past performance, the robustness of their accounts, their future prospects, and whether their ethos is in line with yours (for example if you want to invest in ethical businesses). Compare share dealing platforms too, for the competitiveness of their fees, their ease of use, and the tools and information available.
All investing should be regarded as longer term. The value of your investments can go up and down, and you may get back less than you invest. Past performance is no guarantee of future results. If you’re not sure which investments are right for you, please seek out a financial adviser. Capital at risk.
Find out how to spot some of the best day trading stocks available in the UK and abroad, along with tips for managing your investment portfolio on a day-to-day basis.
We’ve tested, analysed and scored trading platforms to find the 10 best trading platforms in the UK, who they’re best for and the pros and cons.
Some trading apps and platforms now offer competitive interest rates on uninvested cash.
We’ve tested, analysed and scored trading apps to find the 10 best trading apps in the UK, who they’re best for and the pros and cons.
We have listed the top forex trading platforms in the UK, who they’re best for and the pros and cons.
We’ve reviewed the best stocks and shares ISA accounts in the UK, explaining who they might suit and what the benefits and drawbacks are.
Find out how to choose the best shares to buy now, see our list of the top 30 trending stocks today, and find out why they’re trending.
Learn how to invest in the S&P 500 from the UK and discover some of the best S&P 500 index funds and where you can invest in them.
We explain how to buy shares in Howden Joinery, explaining the costs and fees you could come up against. We also have a checklist for anyone looking to invest in a company.
Learn where to buy gold, how to invest in gold and about gold’s historical performance as an investment. Find out all the need-to-knows with our extensive guide.