What investors should know before investing in the British stock market

The British stock market, the largest in Europe, is well-known for its long history. For decades, investors have flocked to this part of the world, searching for high returns. They are likely to be well rewarded if they understand what to look for when investing in stocks. 

During the 19th century, the London Stock Exchange was separated into two different exchanges. The A-share market for foreign investors and the B-share market where British citizens could trade their stocks. It is worth noting that this separation lasted only until 1973 when the two were united under one roof. 

Currently, there are roughly 450 companies on the main trading floor in London, with an additional 1,600 securities listed in total (a total of 2,050 stocks). This number is still significantly less than New York’s 3,600 listed securities. It is nevertheless impressive since many feel Britain’s smaller size is responsible for its limited list of publicly traded firms.

High volatility of the British stock market

As mentioned before, investors flock to London in search of high returns that they hope will compensate them for the increased risks associated with investing in stocks. Although it is true that historically, the British stock market has provided above-average returns, it does come at a much higher risk than other forms of investments such as bonds and gold. Stocks are an extremely volatile investment meaning that they can both rise dramatically or plunge sharply over short periods; investors should be prepared to weather these storms.

Be careful of emotional trading

Another thing for investors to note about the British stock market is that several factors influence its performance on any given day (or year). Many feel that one reason for Britain’s impressive returns during the last century was their victory in WWI which resulted in Britain becoming one of the world’s economic superpowers by 1945. However, despite boasting these impressive returns, the market often falls prey to emotional trading and long periods of stagnation. 

In Britain’s case, this is mainly due to the state of its industry, which has been lagging for years. Without a steady source of income from industry, investors have had little choice but to invest their money in real estate or other forms of investments that create a continual cash flow until British business begins to see some form of improvement. 

Where do Britons invest their money?

When it comes to investing, Britons have a lot of options. With the London Stock Exchange (LSE) and its competitor as the AIM, there are plenty of opportunities to buy shares in various companies across many sectors. 

However, not all exchanges operate under the same rules and regulations for those that invest in them. The Financial Conduct Authority (FCA), Britain’s independent regulator for finance and markets, keeps a list of all countries and stock exchanges that trade securities or conduct investment services within their borders. 

Even with all these significant obstacles facing the British stock market today, it is still the largest in Europe and one that over 2 million people worldwide already rely on as their main source of income. With such a strong following and more than 40 years’ worth of history behind it, there’s no denying that this is one of the best places in the world for investors to make a significant return on their money. 

When investing in this market, choosing an exchange-traded fund (ETF) is best. These are traded on the stock market and hold assets that track indices or sectors at a lower cost. This can be beneficial when trading multiple assets at once without buying each one individually. 

Picking individual stocks might seem like another profitable option – but remember, these are frequently held by institutions already, which means they can be expensive for you to buy into.


It is possible to see high returns by investing in smaller companies, but it can be difficult for new investors to invest in these without the assistance of a fund management team. New investors are also advised to use a reputable online broker like Saxo Bank; get more info here.


News Reporter

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