Advice please for stocks & shares

cloud_dog

Oh dear, I think as cheerful cat points out you've missed the point. The OP appears a novice and therefore your suggestions are extremely high risk and probably unsuitable for a novice, and with due respect you have posted some misleading points.

superscotsman wrote:

The assumption I have made is that anyone reading my missive wanted to do-it-themselves. I have nothing in particular against what you are suggesting. There are many ways of investing the market. I am only sharing the niche I have created for myself. I will rejoice if there is a war is threatened with Iran. Then the market will collapse, and I will then go steaming in with my waiting money, and buy up the blue chips.

Timing investments within the market is risky and something that you need experience of. In your original response you talk in terms of cycles but this is a very broad subject in its own right and again not for the novice.

Accepting that world events (such as a war) do cause extreme market fluctuations these are few and far between. If the OP were to take note of your word they will have been sat on the sidelines waiting for the next such event before investing, missing out on the last two years of growth / rising prices.

There is a flaw with your argument, and it is this: find a good fund manager. OK, suppose you tell us what a good fund manager looks like. To my mind it would be easier to find the company. I sold one stock when they sent me a brochure which contained a photograph of the manager who was managing my fund. There, standing there grinning in a royal blue Savile Row suit was what looked like an eighteen-year-old with a faceful of plooks. I sold that stock as soon as I could.

As an example go to www.bestinvest.co.uk, click on Investments, Research, Fund Managers. You can then look at the top performing fund managers (not funds but the managers) by sectors and periods of time. It is these people who **consistently** perform well. For a novice wishing to invest in a particular sector I would suggest identifying a good manager and then compare this managers fund performace with others.

What you are suggesting is investing in unit trusts. If you want a unit trust, the easiest way to go about it is to take out a life assurance policy. How about investment trusts instead? That way you can buy at ex dividend (my suggestion) and still get your spread.

Couple of points to be wary of here. No, the easiest way is to invest in a UT or OIEC directly or via a discount broker. Also, why on earth would you buy a Life Assurance policy fgs! Surely you would only do this if life insurance was an important factor in your choice of investment vehicle, in which case you would go for lowest insurance premiums? You would also loose flexibility and you would incur much high management charges. I would venture to say this is misleading advise. Investing with UT's / OIEC's would also give the OP the ability to consider investing / switching into other markets without the need to carryout exhaustive analysis of specific companies.

Wrt Investment Trusts (which I love btw) I would suggest they can be higher risk than normal UT or OIEC's. The reason they can be higher risk is because a) they tend not to trade at their NAV, so the OP may end buying shares that actually have a value less than the price (normal supply / demand consideration), and b) they can, and often do, utilise 'gearing', e.g. because they are run as a company they can increase their borrowing (debt) level. Now when this works out well, great, but if it doesn't the downside is magnified, hense not suitable to novice investors.

So far as I can see, there are no inaccuracies in my previous posting: in the words of Hunter, "It works for me."

I think we've covered the inaccuracies, but I absolutely agree that if you have found a method / style that works for you, great, I'm not knocking it but, in the context of the OP as a novice then your suggestions are unsuitable, and extremely high risk.

I don't think I have said anything risky. If you want risk, try penny shares and mining companies.

You are right to say that you could lose your shirt on the stock market, but if you're scared of losing money, stay away. It's as simple as that.

You'll get better odds on the stock market than you will in the bookies.

That's the way I like it, baby; I don't want to live for ever.

Oh, and - er - don't forget the Joker.

As with a number of things in life, risk is in the eye of the beholder, and with regard to the OP I would, again, say your suggestions are too risky for a novice, not necessarily for yourself though. If you want risk you should try spread betting the the US S&P 500 and Dow - now that can be risky!!!

cloud_dog

superscotsman

There is nothing in my posts to disappear. It is packed full of advice that I have picked up in the 33 years I have been playing the stock market. As I have said, there are many strategies to adopt, and it is up to the individual whether to take my advice or not. I am saying that unit trusts are not for novices, with the exception of life assurance. Which unit trust, when to buy, when to sell, how do you tell a good one from a bad one. Only a long time being associated with the market can provide answers to these questions. I have recommended buying ex-dividend. If it makes you only 3p a share, and you buy 50,000, then you will have made a gross capital gain of £1,500. And I am criticised for that? I have recommended Slater's The Zulu Principle; and I have recommended specialisation and research. And I am criticised for that.

I will give you an example. A few years ago I received a brochure from a unit trust company which showed a graph of its previous performance over the previous six years. it had gone up 121 per cent. Then I looked at the graph again and noticed that the x-axis was set at 100 per cent, so in the previous six years, the fund had gained not 121 per cent but 21 per cent. Now there are two schools of thought here, which both contradict one another. One says that the unit trust is duff and incompetently managed and don't touch it with a barge-pole. The other says that because it has only gained 21 per cent there is more room for growth, therefore buy.

Well, Cheerfulcat and Clouddog, you are the advocates of unit trusts for beginners, perhaps you could guide the novice through that little lot. What should the novice do? And why?

I have warned on earlier postings that the stockmarket is a dangerous place, and I have advised any novice to try a make believe portfolio before committing any money. I have also advised that any flaw in one's character will be magnified by the market. It is a test of character. It is a test of self discipline, pluck, restraint, patience, capacity for hard work, a sense of stark reality, an ability to learn from mistakes, among other things. If everybody around you is buying shares, and your money is sitting in the bank, you have to have the stubborness to leave that money in the bank till the next bear market comes along. If you are good at chess and bridge, chances are you will be a success on the market. If you are impulsive, lazy, ill-disciplined, easily swayed etc, my advice to you is to walk away from the market. It will eat you up.

I do not think there is anything high risk about my methods. The argument that cycles etc is only for experienced investors is nonsense. How is anyone to get the experience? Answer: by study and going out and doing it. That's how I got my experience. You are not going to learn much about cycles, bull markets, bear markets, etc by putting your money into unit trusts.

deemy2004

I'll add my bit

1. When you buy a stock - put in a 10% stop loss under it.

2. Look for a buy signal in October going into November.

3.Look for a sell signal April going into May.

Now what Ive got to do is obey my own rules

cheerfulcat

There is nothing in my posts to disappear.

Oh, but there is. Especially if you consider it "advice". You just haven't been here long enough - you'll find out ;-)

superscotsman wrote:

Well, Cheerfulcat and Clouddog, you are the advocates of unit trusts for beginners, perhaps you could guide the novice through that little lot. What should the novice do? And why?

superscotsman, I am not an advocate of UTs, for beginners or anyone else ( though there's nothing wrong with parking money in an index tracker while learning about the market ) - the point at issue here is whether the advice you gave initially was suitable for a novice, and it was not. It is eminently suitable for a discussion about investment strategies ( anyone interested in a new thread? ) but emphatically not for someone just starting out.

al_yrpal

"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."

"There are old pilots and bold pilots, but no old, bold pilots." Springs to mind!

Someone who thinks that he can tutor a total novice on risky investments in a few paragraphs on a chat forum needs a reality check.

EdInvestor

Novice investors should not, repeat not think that what they observe in their local Boots, Tescos, Marks or Dixons is any guide to whether or not they will make money by buying the shares, either long or short term.

cloud_dog

OK, I'm going to answer specific questions becuase I beleive it will add value perhaps for the OP.

But, SS you are banging your drum without actually listening to what others are saying, everyone agrees that if it works for you then great; as you say you have been doing this for 33 years but, how long before you knew what you were doing and what exactly was your investment style?.

superscotsman wrote:

I am saying that unit trusts are not for novices, with the exception of life assurance. Which unit trust, when to buy, when to sell, how do you tell a good one from a bad one. Only a long time being associated with the market can provide answers to these questions.

Firstly, if UT/OIEC's are not for novices then what is?? If a professional manager who has gained many years of experience, knowledge, training, and back-up from an investment organisation isn't suitable for managing people's money then who is (lets ignore doing it ourselves because there are a whole host of other consideraitons wrt that). Also with UT/OIECs (and IT's) you can start monthly investment plans; for a novice this takes the worry out of when to invest,etc, etc. Secondly, a Life Assurance unitised product, *IS* a UT/OIEC but with an added charge for life assurance, etc. If you are talking about endowments then I think we'll leave those well alone.

I have recommended buying ex-dividend. If it makes you only 3p a share, and you buy 50,000, then you will have made a gross capital gain of £1,500. And I am criticised for that? I have recommended Slater's The Zulu Principle; and I have recommended specialisation and research. And I am criticised for that.

Your divi recommendation is, may I suggest, unrealistic for a novice (unless they are extremely wealthy). Take your 3p divi, at an average yield of 3% (yes I know you can get higher Lloyds TSB for example) the investor needs approx £50000 to get the £1500 divi payment (3p / 3% * 100 = £1 share price, therefore £50000). Pretty big money for a novice! If we start reducing this for a novice then costs / returns become a consideration. Aditionally you will not have made a capital gain you will have received additional income (which may be subject to additional income tax charges).

I don't think anyone will criticise you for recommending research and specialisation, in fact I think both myself and cheerful cat endorsed your idea to paper trade.

I will give you an example. A few years ago I received a brochure from a unit trust company which showed a graph of its previous performance over the previous six years. it had gone up 121 per cent. Then I looked at the graph again and noticed that the x-axis was set at 100 per cent, so in the previous six years, the fund had gained not 121 per cent but 21 per cent. Now there are two schools of thought here, which both contradict one another. One says that the unit trust is duff and incompetently managed and don't touch it with a barge-pole. The other says that because it has only gained 21 per cent there is more room for growth, therefore buy.

Well, Cheerfulcat and Clouddog, you are the advocates of unit trusts for beginners, perhaps you could guide the novice through that little lot. What should the novice do? And why?

Firstly, the point is that I (or anyone) does not need to investigate the performance detail of the brochure, I wouldn't rely on a brochure from a company, as you say they have a habit of slanting the truth to fit in with their goals. But, in this day and age of the internet it is soooo simple to find financial sites that will allow you to compare funds or companies against their peers that that is the route I would take, and one I would recommend anyone does. As you say, do the research. Researching and comapring UT/OIEC's even IT's is sooo simple. The problem you have is that often investing in the top fund means you are getting in at the top and it has more potential to underperform the market / peers in the future (hense my comment to focus on consistent managers).

If everybody around you is buying shares, and your money is sitting in the bank, you have to have the stubborness to leave that money in the bank till the next bear market comes along. If you are good at chess and bridge, chances are you will be a success on the market. If you are impulsive, lazy, ill-disciplined, easily swayed etc, my advice to you is to walk away from the market. It will eat you up.

Again, I thyink you need to caveat the above much more susinctly for a novice. For example the bull run that started in the 90's, if I had missed the first three years, i.e. it had risen approx 75% your advice would have me sitting on the sidelines with cash in the bank. But, this would have then meant I missed the growth / increase in the subsequant 5 years (more than doubling). It is these easy / obvious comments from you that people were cautioning the OP against - not that it didn't make sense but that it is not that simple.

I do not think there is anything high risk about my methods. The argument that cycles etc is only for experienced investors is nonsense. How is anyone to get the experience? Answer: by study and going out and doing it. That's how I got my experience. You are not going to learn much about cycles, bull markets, bear markets, etc by putting your money into unit trusts.

Lets agree to disagree on the risk angle. Ok, cylces. Which ones Interest rate cycles, bull / bear cycles, foreign exchange, etc, etc. Again this type of comment needs to be specific for the OP / novice. I still struggle to see why a UT/OEIC wouldn't give you exposure to cycles - they invest directly in companies shares, the same companies you are likely to invest in. Hopefully the OP would gain some protection by the fund manager jumping in / out of shares / cash etc but the OP would still gain valuable experience over a period of time and I'm sure that because they are becomming more investment aware they would look deeper into what / why the prices were doing what they were doing.

SS, you need to understand that no one is knocking you style or idea's, merely that they seemed unsuitable for a novice.

cloud_dog

superscotsman

Cloudog
You say:

"Your divi recommendation is, may I suggest, unrealistic for a novice (unless they are extremely wealthy). Take your 3p divi, at an average yield of 3% (yes I know you can get higher Lloyds TSB for example) the investor needs approx £50000 to get the £1500 divi payment (3p / 3% * 100 = £1 share price, therefore £50000). Pretty big money for a novice! If we start reducing this for a novice then costs / returns become a consideration. Aditionally you will not have made a capital gain you will have received additional income (which may be subject to additional income tax charges)."

In my missive, I have said that the 3p is capital gain. A dividend is income. Can you assure me that you have actually understood what I have said?

One of the problems with these postings that I am trying to get an ocean into a pint pot. I can only speak in generalities, and give basic pointers. I have spoken my truth "quietly but firmly" like it says in the Desiderata, and I find myself assailed from all directions by people talking about pilots, and asking questions like: "Why take out a life assurance policy?" No one is forcing anyone to take out a life assurance policy. But I wouldn't like to be that person's widow or orphan.

I have asked you to sort out a genuine problem that arose with a unit trust. It included a trap that would ensnare any novice. I asked you what you would do in that situation. How about an answer.

While you are answering that question. You might also like to tell any novice investor out there about the difference between bid price and offer price, how much it will cost them, where that money will go, and how you think it is superior to a corresponding investment trust. I am sure any novice investor is looking forward to your straight answers - as, indeed, am I.

cloud_dog

Ok, my last post on this subject as I feel we are going downhill rather than assisting the OP.

In my missive, I have said that the 3p is capital gain. A dividend is income. Can you assure me that you have actually understood what I have said?

Accepted, have re read your divi text and thought you bought for the divi, instead you seem to buy after a divi in the expectation of what may come in the future. Again, IMO I would feel this strategy is not for a novice.

I have spoken my truth "quietly but firmly" like it says in the Desiderata, and I find myself assailed from all directions by people talking about pilots, and asking questions like: "Why take out a life assurance policy?" No one is forcing anyone to take out a life assurance policy. But I wouldn't like to be that person's widow or orphan.

No one has been assailing your investment idea's, merely questioning the value to a novice investor. But, surely why point someone who is looking to invest at a Life Assurance product; apples and pears spring to mind.

I have asked you to sort out a genuine problem that arose with a unit trust. It included a trap that would ensnare any novice. I asked you what you would do in that situation. How about an answer.

In all honesty I thought I specifically answered that one. Wrt performace figures given to you by the company, throw them away and use the tools available to you. In this instance I would find www.trustnet.co.uk particularly helpful and as I have said www.bestinvest.co.uk is also useful (there are loads of others). The point is, is that you don't need to play at there level, using their information, compare like for like with readilly avaialble tools.

While you are answering that question. You might also like to tell any novice investor out there about the difference between bid price and offer price, how much it will cost them, where that money will go, and how you think it is superior to a corresponding investment trust. I am sure any novice investor is looking forward to your straight answers - as, indeed, am I.

I have not stated or implied that UT/OEIC's are 'superior' to IT's, in fact I stated that I am a fan of IT's (because of gearing, NAV discount, etc). The three are investment vehicles with different facets to each thereby making one more suitable to the others depending on a specific requirement / circumstance. The reason I think IT's are slightly more risky than UT/OIEC's is that they have a bid/offer spread, can trade at a premium to the NAV, and can employ gearing. Incidentally, OEIC's do NOT have a bid / offer spread (although I'm sure they recoupe the money in other charges).

Again, I am not 'having a go' at you or your investment style. I did, however, feel that some of the information was not ideal for a novice. Hopefully I've answered your questions; the original OP has a better understanding of the complications of investments and, we can all look forward to a Merry Christmas.

cloud_dog

superscotsman

And a Merry Christmas to you Clouddog
I would however disagree about the venom of my assailants. I suppose these are the people who didn't see 1987 coming.

EdInvestor wrote:

Novice investors should not, repeat not think that what they observe in their local Boots, Tescos, Marks or Dixons is any guide to whether or not they will make money by buying the shares, either long or short term.

You say one cannot learn about the state of a company by keeping your eyes and ears open. Well, get a hold of this, will you?
I want to tell you a true story. You may know about Gerald Ratner's remark about the decanter, and how everybody knows how that nearly bankrupted the company. But that wasn't the real reason the company was in trouble. I suspected that the company was in trouble many months before the news appeared in the FT.
At the time, I was living in a town with a population of 45,000. The high street had an H. Samuel, which at the time was owned by Ratners. Argos stocked a similar range of products. Suddenly, a Ratners opened about 300 yards away from Samuel. I thought this seemed a very odd thing to do, and I began to suspect that the company was being mismanaged. I did not have any shares in Ratner at the time, but if I had, I would have got rid of them.
Well. the company went splat, they changed their name to Signet, and Ratner departed. The Ratner shop in our town closed down. The share price went down and down. I had been a customer of H. Samuel over the years. I thought their range of products were OK, and , since H. Samuel was a household name, I began to look at the possibility of investing in this company as a recovery stock. I called up the accounts, and they made grim reading. Nevertheless, my wife and I decided that for the H. Samuel and Leslie Davis names alone, either the company would be taken over by a predator, or - as happened - it would haul itself up by its bootstraps. So we invested a large amount of money in Signet.
It took a great deal of pluck to stay with them. Every time I passed a signet shop in my town and in others I would see no one looking in the window and no customer inside, and the management reports still made grim reading.
But as time went on, window shoppers and customers began to appear, and - guess what, EdInvestor? - this showed up in the accounts. The Chairman's reports became more upbeat. A dividend began to appear, the share price started to rise. Several years after I bought Signet as a recovery stock, we sold for several times more than we paid for them. We had made a bundle just by keeping eyes and ears open and keeping our nerve.
We also had a 5 per cent discount card. Any time we shopped in a Signet shop it told the staff we were shareholders, and we were treated like royalty. It also meant that at Christmas and birthdays, we would give people presents bought from the shop of which we were a part owners. We also told anyone who would listen that if they wanted anything from watches, little models of cottages and olde worlde shops, zippo lighters, hip flasks; where better to get them than H Samuel or Leslie Davis.
And this is for any readers who think that equities is a dirty word. I got a hell of a lot of satisfaction over the Signet thing. And not just in the wallet. When that company needed our money we were there when their fairweather friends had deserted them. However small and humble - we had a role to play in the rescue of that company; we helped to save people's jobs, and we helped to create more. Now, thanks to us, and people like us, couples on both sides of the Atlantic can still buy each other love tokens at a fair price.
And all that for being aware of what was going on in the high street.