British American Tobacco (LSE: BATS) is a British company that makes and sells cigarettes and other tobacco products. They own some of the world’s most popular brands in 180 countries including Lucky Strike, Kent, Rothmans, Pall Mall, and Dunhill. It is an FTSE 100 company.
Read on for our step-by-step guide to investing in British American Tobacco shares.
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Step 1: Sign up with a share broker
British American Tobacco shares are listed on four stock markets: (LON: BATS), (NYSE: BTI), (JSE: BTI), and (KN: BAT). You'll need a broker with access to at least one of these stock markets in order to buy their shares.
Before deciding on a broker, there are a few key points to consider.
- What is their commission on trades? Many are now commission-free, particularly for US shares.
- What markets and tradable assets do they have available? Although you may be interested in buying BATS shares now, in future you may want to invest in commodities, ETFs, or something else.
- Do they support fractional share investments? This option is very useful if you want to diversify your portfolio with more expensive stocks and you’re somewhat limited in terms of budget.
- How much do they charge to convert currencies when buying on overseas markets? Although the broker may not charge a brokerage fee on trades, if you’re investing in shares listed overseas in a different currency, you’ll almost certainly be charged a fee. This can add up if you put on a substantial trade.
- Do they have a mobile app? Ideally, a broker has native Android and iOS apps. Check the respective app store first for reviews.
Step 2: Fund your account
Once you’ve chosen a broker and registered your account, you’ll need to deposit funds in your account to begin investing.
You can fund your account in several ways. Bank transfers and debit cards are among the most common funding methods, although some brokers will also accept credit cards and PayPal.
Keep in mind that it can take time for funds to be cleared into your account before starting trading.
Step 3: Choose how much to invest
Keep in mind that the value of an investment in shares can go up or down, so you should only invest what you can afford. Avoid the temptation to over-extend yourself and risk getting into trouble with your finances.
You can invest periodically to reduce price volatility and take advantage of pound cost averaging over time.
Step 4: Decide between shares or an ETF
With their exposure to a basket of companies, ETFs (Exchange Traded Funds) are regarded by many as a less risky way to invest (although you can never remove the risk entirely).
Being less volatile, ETFs are a way to passively invest for those who would rather not — or haven’t got enough time to — make individual trading decisions.
Step 5: Spec up your order
You can use a market order if you want to buy British American Tobacco shares now and aren't too concerned about slippage (the difference between the quoted price and what you actually pay when the trade is processed).
Depending on your broker, it is typically possible to configure an order to be executed at a pre-defined price, which gives you more flexibility and the ability to plan out a trading strategy.
For those looking to build their position in a company, you could configure an order to buy more shares regularly (for example, once per month).
Step 6: Place your order
Once you have configured your order, submit it to buy your shares.
As well as keeping an eye on the price of your shares, read any news stories that mention British American Tobacco and their competitors, particularly those of a controversial nature. Also, stay up to date with what is happening in the tobacco and vaping industries.
The price of tobacco company shares can be impacted by changes in regulations and changing attitudes towards smoking or vaping. While these changes may not manifest for some time, they are worth considering in terms of exposure to risk. How much spare cash people have to spend can also impact demand for their products.
You can compare British American Tobacco against their main competitors – Imperial Brands (LON: IMB), Altria (NYSE: MO), Japan Tobacco (TYO: 2914), and Philip Morris International (NYSE: PM) — for a better sense of their performance.
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