The practicalities

Share ownership

The old fashioned way of trading shares was to swap share certificates - basically pieces of paper that proved you owned the shares.

But in the age of electronic trading an electronic system for the settlement of share transactions has been introduced. This is called Crest.

A private investor can open a Crest Personal Account. If you buy shares you do qualify to appear on the company's share register, but you do not need to deal with paper certificates when you make a transaction.

Nowadays however, as instantaneous internet trading has taken off, most online brokers use Crest Nominee Accounts. This means that you will receive confirmation of your transactions, but the broker holds the shares on your behalf.

They are listed on the company's register as the owner of the shares - but your are the beneficial owner, which means you have the rights of other shareholders.

However, holding a nominee account means that you will not have direct dealings with the company. You therefore need to check with your broker that you can get access to annual reports and invites to the Annual General Meeting, for example.

Some people feel more comfortable having shares registered in their own name rather than that of their nominee broker, preferring to get a paper share certificate sent to them as opposed to it being held electronically by the broker.

However, the slower settlement process and the need to post off share certificates every time you sell stock may outweigh these advantages.

Settling transactions

Settlement is where a transaction is concluded - or in other words when money changes hands.

The settlement period is getting quicker all the time as we move towards instant settlement.

The norm has come down from 10 to 5 working days, although one to three working days is becoming more common and real time online brokers often adjust your account balances immediately to reflect the trades you have made.

You should check the settlement periods offered by your broker.