Saving for your future? Saving for your pension portfolio? FCA-regulated broker Pepperstone reviews how to invest in UK stocks.

Why invest in UK stocks? 

Are you saving for your future, investing in shares for your pension portfolio? Perhaps you have decided to invest in UK stocks to help boost your savings for your initial down payment on a property. Whatever your reason, it is never too late to start. 

Since its inception, the FTSE100 (the main UK stock market index) has made an annual return of 5.7% without dividend payments taken into consideration. This outstrips what you could have made leaving your money on deposit in the bank. 

You own part of a PLC company

Directly investing in shares will result in you owning part of the company, no matter how small your shareholding.  Any investor can buy shares in a PLC. 

PLC stands for a Public Limited Company. A similar abbreviation for the United States is INC, standing for incorporation.  A company that is a PLC has a proportion of its shares floated freely on the London Stock Exchange (LSE).

Investing in a company comes with ‘limited’ liabilities. You are not responsible for company losses, should they occur. 

Floating on the LSE (IPO)

When a company decides to ‘go public’, there is a dedicated day when they float on the exchange. This is when a proportion or the whole of the company is offered for purchase to the marketplace. It is called an IPO, an initial public offering. 

An IPO can attract a lot of interest from pension funds, hedge funds, professional and retail investors. 

There are a limited number of shares on offer. You may hear that the shares were ‘oversubscribed’ meaning that there were more investors willing to buy the stock than were available. 

Investing in single stocks

Like most ventures, there are pros and cons to investing in single stocks. With the right amount of research, you can find gems within the marketplace. 

Although this can be financially rewarding, it can take substantial analysis to establish, what you believe to be, good value for a stock. Furthermore, you will need to monitor your portfolio, adjusting your investment levels when the outlook changes. 

For example, a lot of tech stocks like Amazon and Netflix performed well through the lockdown period that was caused by the outbreak of the coronavirus in 2020. 

In times of recessionary periods, the best companies to invest in are usually essential services. This includes your daily basics like healthcare, food (supermarkets), and clothing. Another inevitable requirement for some unfortunate souls is funeral services. Providers of alcohol also tend to prosper with ‘stay-at-home’ drinking increasing. You may need to rebalance your portfolio when the market dictates. 

Understanding accounts

Let us look at some basic information that you should analyse before setting an investment level for a stock. You are going to need to dig deep into the company accounts. This information is normally readily available on the company website, especially if it is FTSE100 stock. 

We are going to look at the FTSE100 leader, SHELL PLC (SHEL LSE).

When is the company next due to report?

Companies produce annual financial reports with income statements every three months. You should be aware of these dates and what is the estimated forecast for the report. A big beat or a big miss can have a substantial impact on the company’s share price. 

This information is readily available either on the company website or via a good charting package. Here we can see the next earnings report due for Shell on the 27^th  of October 2022.