Advice please for stocks & shares

al_yrpal

I read the Motley Fool's book on investment, and as a reaonably successful investor for over 20 years think its suggestion that trackers are the thing for most people is ludicrous, and its further recommendation for the man in the street to attempt share trading with little knowledge is foolhardy. It is not a very rounded book and it is produced by a money making organisation that inevitably has an agenda.
My suggestion is to read a few more books from the library before you take the plunge (remember what happened to trackers in March 2000, those who held onto them are still counting their losses!). Take a good look at Managed Funds, Bonds and Investment Trusts, as well as shares and trackers, and work out a strategy, including an exit strategy, unless you want to end up burnt.

At the end of a day its a Poker Game,but, you can reduce the odds in your favour by doing the right thing.

Good Luck

EdInvestor

Hi SS

That way you can buy at ex dividend (my suggestion) and still get your spread.

Buying just after the share goes ex div so it's cheaper may be OK the first time, but what about later on?

Are you suggesting that people should sell just before the share has gone ex div (when it will be high as people buy in to get the divi) and thus miss out on the divi themselves?

I believe many people have tried this theory out in the past and have found that in the end on average shares tend to fall by an amount almost exactly the same as the divi that is being paid :)Mr Market is not stupid, you know

There is an investing style over at the Fool called the High Yield Portfolio which is IMHO very useful for beginners, as easy to understand and quite low risk for an equity strategy.It also has very low charges and tax advantages.It is a much better idea than trackers IMHO.

Some details here

One other thing that a beginner stocks investor might find useful is a Halifax Sharebuilder account. This account has far and away the lowest charges in the business - only 1.50 to buy a share. It's deal for people starting out with not much cash to invest.

superscotsman

EdInvestor wrote:

Hi SS

Are you suggesting that people should sell just before the share has gone ex div (when it will be high as people buy in to get the divi) and thus miss out on the divi themselves?

My original posting says:

"It is up to you to work out whether it is worth your while selling before the next dividend is paid."

In other words, you will have to get your calculator out, and judge for yourself.

You are right. It will not work for ever. In one particular case, I jumped on a cycle of a company run by a CEO who is a household name. I jumped on and off for the ride about five times before the CEO decided to change the number of shares issued with the words: "A lot of people are making a lot of money out of our shares." His reissue had the desired effect, and I had to claim another victim.

EdInvestor wrote:

Mr Market is not stupid, you know

I don't agree. One can only make money on the stock market because someone else has lost it. If the FTSE is at a record high, and all common sense tells you to sell the market, then you can only sell, because someone else is stupid enough to buy the shares. It's a market, remember?

Question is: who would you rather invest your money: yourself, or some hormonally challenged teenager who is managing your fund just because he went to the right school?

cheerfulcat

superscotsman wrote:

My original posting says:

"It is up to you to work out whether it is worth your while selling before the next dividend is paid."

In other words, you will have to get your calculator out, and judge for yourself.

You are right. It will not work for ever. In one particular case, I jumped on a cycle of a company run by a CEO who is a household name. I jumped on and off for the ride about five times before the CEO decided to change the number of shares issued with the words: "A lot of people are making a lot of money out of our shares." His reissue had the desired effect, and I had to claim another victim.

But what you are suggesting is not investing, it is trading, which involves far more risk.

I don't agree. One can only make money on the stock market because someone else has lost it. If the FTSE is at a record high, and all common sense tells you to sell the market, then you can only sell, because someone else is stupid enough to buy the shares. It's a market, remember?

Again, this suggests short-term trading, not long-term investing. To suggest that for every "winner" there is a "loser" is a nonsense in investment terms. It is not a zero-sum game.

EdInvestor

I tend to agree with superscotsman about fund managers having met quite a few. There are not many that have real talent.And the system is so heavily benchmarked that even those who do have good skills don't get much of an opportunity to show them off.

But I also think it's very difficult for the retail investor to make money out of trading, not least because the costs are so high.

ReportInvestor

superscotsman wrote:

Question is: who would you rather invest your money: yourself, or some hormonally challenged teenager who is managing your fund just because he went to the right school?

:rotfl: I know what you mean.

But I'm actually having a drink with a Scottish fund manager sometime in the New Year who is old enough to need a larger supply of Viagra than Clearasil .

Although two of the three managers in the New Star recent ads bear a passing resemblance to your description , there are plenty of savvy investors who have benefited from the expertise and long experience of Perpetual's Neil Woodford or Fidelity's Anthony Bolton.

superscotsman

Look. If you don't have the pluck, stay away from the stock market. If you want to invest in unit trusts, get a life assurance policy from a reputable firm - at least that way, your family will be covered in the event of your death.

If you want to reduce your risks. You invest in four or five blue chip companies over the long term. But there are things you can do to increase your nest egg. The general principle for the small investor is to do the opposite to the herd: if everyone is buying, you sell; if everyone is selling, you buy.

I repeat. If you are selling shares, you can only sell because someone else wants to buy off you. If you are buying, you can only buy because someone wants to sell to you. It is a real market, and it shows in stark reality the law of supply and demand in action. And like dealing in, say, antiques, to make a good profit, you have to buy something when no one wants it, and sell it when everyone wants it.

The best work I have seen on the subject, although it is a bit old now, is Jim Slater's, The Zulu Principle. His basic idea is that you specialise, and learn as much as you can about a certain industry or service. You may, for example, specialise in property and construction, or in banks and financial services. You learn as much as possible about the company you want to invest in. That way, you will reduce your risk of losing, and increase your chance of knowing more than the professionals.

A good start is to buy shares in the supermarket where you do most of your shopping. That way, you will be able to see first hand what is going on. If you see few customers and the staff loafing about, you can sell fast. Similarly, if there were few customers, and things get turned round, and you start to see lots of customers ringing up bills in three figures, you can buy in anticipation of the shares going up.

Now let's look at a unit trust. In all but a few cases, you do not know what that company is investing in. You do not know who is investing it and when. Some of them specialise in types of shares. Some of them don't.

And you can get off your high horse when accusing me or anybody else of short termism. Without short termism, there wouldn't be a stock market.

There are all sorts of strategies you can use. But if you buy unit trusts, you are handing over to someone else, be he viagara man or Nick Leeson, your capacity to develop your own market sense.

cheerfulcat

Unit trusts were mentioned in the context of the OP (from a *novice* investor ), as a holding device while he/she learned more. What you have suggested - short term trading - is *totally* inappropriate for someone who is just coming to the stock market. In fact, I'm surprised that Nanny hasn't disappeared your post...

ReportInvestor

I'm not criticising ss for direct investment in the stock market. I use both shares and funds, although I'm not a trader. ss's last post suggested that he might be an investor as well as a trader.

There's too many different ideas (some competing, some complementary) being thrown out in this thread for it to be terribly coherent.

carnet

ReportInvestor wrote:

Although two of the three managers in the New Star recent ads bear a passing resemblance to your description , there are plenty of savvy investors who have benefited from the expertise and long experience of Perpetual's Neil Woodford or Fidelity's Anthony Bolton.

There are also a few savvy investors who have benefited from the expertise, if not long experience, of the "two of the three managers in the New Star recent ads".

I have, or have had until recently, money with all three. The two young 'uns, Jamie Allsopp and James Ridgewell, have made me a considerable amount in recent times, as has the third, Guy de Blonay, who is, IMHO, something of a genius with financial stocks.

In fact, Jamie Allsopp is so highly thought of by John Duffield, who is the founder of New Star (he also founded Jupiter), that he initially gave him £1 million of his own money to invest, and believe he has since increased that sum.