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Totally basic question, but I'm clueless :(.

How do I buy stocks (I'm based in UK)? I want to buy shares of index funds. Vanguard in the U.K. offers following options:

  • Invest directly - minimum £100k required per fund (I'd need at least 500k for a portfolio of 5 funds)
  • Invest through a platform (I guess this is what I'm looking for?)

What would you recommend?

Is registering with an online brokerage a good way to do that?

Edit: Follow-up question: From what I've read online brokerage holds my shares electronically. What would happen to the shares and other securities if the company (broker) went bankrupt?

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(FYI- E*Trade is no longer doing business in the U.K. so I removed that reference. There are other online brokerages available in the U.K.) –  Chris W. Rea Dec 23 '11 at 17:46
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3 Answers

It's the only way. Vanguard UK will not let you invest directly. So you'd need to decide among the brokers who handle retail investors. Schwab is among those who have a UK presence.

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1  
Right, that was my point. (I made the logical leap that a self-confessed clueless investor does not have £500K to start.) –  JoeTaxpayer Dec 23 '11 at 18:12
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You don't buy shares of index funds you invest your money in them, a subtle difference. There are other low cost index funds that would be suitable for you such as the HSBC ones http://www.assetmanagement.hsbc.com/uk/advisers/funds-in-focus/indextrack_fund.html

These have very low fees which are comparable to those of vanguard but without the large minimum holdings.

For the follow up question, the shares are held in trust for you and there is no risk to them if the broker went bankrupt. However there is the (small) risk of fraud of the broker using clients money/shares inappropriately (as may have been the case with MF Global (The Case is ongoing)).

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Why do you want to by stocks via a unit trust? with all those extra platform charges?

iShares are ETF's that mirror a number of uk (and other indexes) they are brought via a broker like any other share or security.

Id also consider some of the UK investment trusts some of which have been running for 100's of years and have been paying dividends for decade upon decade.

I would investigate the various uk based dealers and pick one whose charges you like.

Money Observer, Investors chronicle would be a couple of good UK based magazines to read to do research as is motley fool UK.

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