Time to get started on an investment ISA.

al_yrpal

EdInvestor wrote:

BP PLC (Resources)
HSBC Holdings PLC (Financial)
GlaxoSmithKline PLC
Vodafone Group PLC
Royal Bank of Scotland Group PLC (F)
Royal Dutch Shell PLC (R)
AstraZeneca PLC
Barclays PLC (F)
HBOS PLC (F)
Anglo American PLC (R)
Lloyds TSB Group PLC (F)
British American Tobacco PLC
Rio Tinto PLC (R)
Tesco PLC
Diageo PLC
BHP Billiton PLC (R)
BG Group PLC (R)
BT Group PLC
O2 PLC

6 resources, 5 financials and 3 telecoms creeping up on the inside....

Doh! Then you can spend all your spare time worrying about this lot.

IMHO, when starting out, keep things simple

david78

You might want to track a global index rather than a UK one.

EdInvestor

al_yrpal wrote:

IMHO, when starting out, keep things simple

Hi al-yrpal.

Any thoughts on how to do that?The minute you look under the bonnet of any fund it starts getting complicated.

I reckon it's not a bad idea to build up a portfolio of shares by buying one blue chip share at a time as you can afford it .Start with a bank, then an oil company, then a retail stock, then a telcom...... that sort of thing. Build up to 10 or 15 diversified shares all household names.Collect the divis, and watch them perform.

You would learn more than with a tracker, probably make more money bcause it's less risky as more diversified, and pay lower charges.

Anyone who likes this idea could consider using something like use a Halifax Sharebuilder account, which is very cheap,

al_yrpal

EdInvestor wrote:

Hi al-yrpal.

Any thoughts on how to do that?

Ed, Yup, read at the original post. The guy is asking about a £50 a month first venture into investment. Why risk hard earned cash on an inexpertly chosen first time punt on a single share? If he invested in your list, his first year's savings would be taken up in dealing charges.

Investment in relatively safe trackers is a sensible first step in building up some wealth, after you have got some savings. When you get to the position that you and I are at, where you can afford to loose a bit, that is the right time to start looking at shares, or more risky investments.

Most people want a buy and forget investment. I know that is the wrong attitude, but its what people want.

I don't understand the attitude 'hold shares, funds and Trusts etc are for wimps'. My approach to investment is to actually make some money with my savings. IMO, through bitter experience, it is far, far easier to consistently make money with funds and trusts, especially for a beginner.

EdInvestor

Ed, Yup, read at the original post. The guy is asking about a £50 a month first venture into investment. Why risk hard earned cash on an inexpertly chosen first time punt on a single share? If he invested in your list, his first year's savings would be taken up in dealing charges.

How? if he used Halifax Sharebuilder it will cost him 1.50 to buy the share and nothing thereafter on a long term buy and hold basis. No annual charges.Definitely cheaper than buying a fund long term.

If he picks a share with a high dividend ( eg Lloyds Bank, or BT, to mention just a couple out of the 20 shares he would be invested in if he got a tracker anyway, he will be the pleased recipient of (tax free) dividends in the 5-7% range every year as well.

[If he's doing this long term he should disregard the share price going up and down and look at the divi income, it's better than savings interest for the top paying blue chips and the real returns from shares long term are all made up of dividends anyway. ].

If he chose one share per month, after 12 months he would have a nice portfolio ( and perhaps wouldn't be quite so riskily overweight in banks and mining companies as a tracker is.)

And by observing the behaviour of his shares, he will have learnt a lot more about buying shares and about how the market behaves.

A tracker may look simple, but it actually isn't as you can see, and IMHO it doesn't teach you much - other than the fact that the stockmarket index goes up and down, but you knew that anyway.

Investment in relatively safe trackers is a sensible first step in building up some wealth, after you have got some savings. When you get to the position that you and I are at, where you can afford to loose a bit, that is the right time to start looking at shares, or more risky investments.

It beats me where this idea that trackers are "relatively safe" comes from.

Trackers are most certainly NOT "relatively safe": as I have pointed out earlier, a UK tracker fund is invested in a very unbalanced way with more than 50% of the money in banks and natural resource companies and more than two thirds in 20 shares.One major reason that trackers have still not recovered their losses is that 5 years ago the top 20 stocks in the index - where most of the tracker money goes - included a load of tech stocks, which subsequently crashed and have not recovered.

No way is this kind of "all eggs in one or two baskets" style relatively safe.

A 15-20 share diversified portfolio of blue chip FTSE100 shares with low debt, a decent dividend a history of increasing it,along with good divi cover is much safer than a tracker.You only have to look at the performance of equity income funds over the last five years compared with trackers to see that. Equity income funds contain shares like the portfolio I described.

jackthelad_2

Quote
If he picks a share with a high dividend ( eg Lloyds Bank, or BT, to mention just a couple out of the 20 shares he would be invested in if he got a tracker anyway, he will be the pleased recipient of (tax free) dividends in the 5-7% range every year as well.

I think divi,s are taxable, only main benifit of holding shares within an ISA is if you use your CTA.

EdInvestor

No, divis are tax free to basic rate taxpayers, 25% tax payable for HRT.

ISAs will protect against capital gains tax, but since the annual tax free allowance is 8,500, it's hardly worth bothering about for someone starting out with 50 quid a month to invest.

cloud_dog

EdInvestor wrote:

No, divis are tax free to basic rate taxpayers, 25% tax payable for HRT.

I think you'll find divi's within an ISA are taxed (obviously HRT are taxed additonally).

cloud_dog

tomstickland

Great info, thanks.
I'm quite happy to do my own share buying.
I could just cherry pick companies out of the FTSE 100 to make my own tracker fund - starting with the top 20. Actually, some of those companies I'd rather not be buying shares into.

al_yrpal

Ed

You go your complicated way (been there done it lost money, and got the tee shirt), and I'll go mine.

I am now realising why so many of Edinvestors posts are so heavily criticised. Many of the young people requesting information in this forum have recently dug themselves out from horrendous debts accumulated by lack of financial savvy. Your advice in this thread borders on the irresponsible.
My advice to anyone investing for the first time equates to your signature "Do your own research". It is clear that you signature says this because you see yourself as an expert investor and above the need to pay in any way for financial advice. I would say it because dipping your toe into shares, you need to be very well prepared. You evidently have 'buy shares' running through you like a stick of rock, and anyone listening to what you have to say needs to know that, and the fact that you have a deep hatred of Financial Services of any sort.

My advice would be 'if you are interested in investing in shares for profit, first join an investment club to learn the many things you need to know in order to do it profitably'. Learn to read balance sheets, company reports. Read Jim Slaters Zulu book and much much more. Shares are the last thing you should invest in if you cannot afford to lose a proportion of your savings.

I suggest you re-read the original question.