How shares work

Important information - the value of investments can go down as well as up so you may get back less than you invest. Direct shareholdings should generally form part of a well diversified portfolio of other investments. This information is not a personal recommendation for any particular investment. Eligibility to invest in an ISA and tax treatment depends on personal circumstances and all tax rules may change in the future. If you are unsure about the suitability of an investment you should speak to one of Fidelity’s advisers or an authorised financial adviser of your choice.

When you buy a share in a company, you’re effectively becoming a part owner of that company. As a shareholder, with an equity stake in that business, the investment return you earn depends on the success or failure of the company itself. Companies may pay dividends to shareholders or may prefer to reinvest profits for further growth.

It often takes careful research and consideration to confidently build your own share portfolio. Here are a few things to consider before investing in shares:
 

• Diversification - If you’re considering investing in shares, ensure you have a good mix of other investment choices and assets in place already.
• Do your research - Use the investment factsheets to examine balance sheet and income statements and get a view of the company financials. Keep up to date with company regulatory news service (RNS) feeds and statements.
• Check the facts - Any important information will be available as part of financial statements and factsheets online.
• Tax efficient allowances - Have you made the most of any tax-efficient allowances available to you, by opening a Stocks and Shares ISA first? If you’ve already used your ISA allowance, you can still invest in shares through our Investment Account.

• Your investments may become too concentrated in one company, type of product or industry so be sure to stay diversified
• Not actively managed by an expert, so you will have to manage your portfolio yourself, and you may have to spend more time analysing your investment to understand the factors affecting it
• If the company under-performs or the market works against you, the value of your shares could go down, so you might get back less than you invested.