Are you new to shares but want to buy banks?

Conrad

I keep reading we shouldn't be buying these 10p shares, but on the other hand if we can live without a couple of grand, then surely punt is in order?
Didn't Warren Buffet and Benjamin Graham tell us long ago that markets get over spooked and thats just the time to do the opposite to the market?

Ok don't remortgage your house on it

sabretoothtigger

Thats a reason to buy an index tracker maybe but not an individual share. If you buy the ftse 100 your'll be invested in banks anyway

Masomnia

Conrad wrote: »

Didn't Warren Buffet and Benjamin Graham tell us long ago that markets get over spooked and thats just the time to do the opposite to the market

Yeah but I think that's only when you believe that the fundsmentals of the company are still strong and it becomes undervalued, ie. nothing about the company has changed, only the price is lower. I don't think this is the case with the banks.

They certainly didn't mean buy any share that's falling!

wornoutmumoftwo

please just send me your cash instead. Every day I'll roll a dice, and if it's a 5 or 6 I'll add 1% to your pot of money. If it's less than 5, I get to keep 2% of your money. Sound like a good deal? No? Didn't think so.

Not a bad idea, I started buying shares last year and think I would have had much more satisfaction if I'd withdrawn the money and popped it down the nearest drain!

I'm new to shares and spend £6 a week on them so not too bad in that respect, I started buying them so I could have money in the far off future when my boys were at college/getting married etc etc (they're 5&6 now).

So far I've lost woolies and B&B, I have RBS and HBOS (a few), have put a total of £200 into shared and lost three quarters of it - so far.

Haven't dared buy any shares since november.

malik999

How about if they dont get nationaized where will these shares be in 10 years from now?. No one knows

At the pence price they are a bit of fun and worth a punt to some. I don't think anyone is suggesting buying a large amount. Some people don't/have never owned shares and therefore its something new and a bit of fun with some beer money. These bank shares are no different to playing the lottery you play with money you can afford to lose.

FWIW I am not buying anything atm since i have a struggling portfolio already

Blah99

Thanks for the feedback. Just to answer a few similar points, like this one:

How about if they dont get nationaized where will these shares be in 10 years from now?. No one knows

At the pence price they are a bit of fun and worth a punt to some.

You're right, it's a punt, and I mentioned that in my original post. This thread was intended to be some simple, quick and easy to understand advice to those that are new to shares and suddenly had that brainwave many others have had - "if I buy now and hold, I'll make loads of money". If you want to buy bank shares as a gamble go ahead, it's your money. Just don't fool yourself into thinking that you're actually practicing "investment".

The ability for a company to function does not depend on its share price, it merely reflects investor appetite for such shares. So long as the government is able to back RBS and Lloyds enough to keep them afloat, there's no danger.

There's no danger to depositors. There is every danger to shareholders. The current problem for shareholders is the serious risk of nationalisation or further downratings. Remember, we're in round 2 of the bank bailout, and way back in round 1 good old Mr King categorically stated that the Government may need to nationalise some banks to force them to lend again. There's a reason there is little investor appetite, and it's not to do with the ability for a bank to function. I think everyone pretty much understands RBS (for example) will never "go bust". It doesn't make it a sensible investment though.

So do you think this also applies to taking out shares in other major companies at the moment since their stability is questionable?Should I sit it out before buying shares?Also where have people found the best place is online to buy shares?

As others have said, it depends on what "major companies" you're looking at. Over the last month or so I've made a good return (>10%) on BAE Systems and Serco, so there are definitely opportunities to be had.


Edit, just to add this: when you buy a share you should have a reason for buying it, and you should keep it as long as it performs for you (ie: have an exit strategy). Buying a share for 10p (or 50p, or £1, etc) which then proceeds to hover within 1% of your purchase price is a wasted investment. You'd get a better return in a cash deposit account. Cutting losers and non-performers is a basic strategy of sound share investing, but buying bank shares now prevents you from doing this. There is no way to decide on a sound strategy because there is no way to know how long prices will bump along at the bottom for, or if they will get delisted etc. It's all about investment strategy.

malik999

How about we reword points in your OP like this, example

Q. But I thought this through. If I buy them now for 12p and hold them for eleventy-million years, I'll make a massive profit when they go back to 400p.
A. 'Yes', if they don't get nationalised.

Just maybe in five years time the people that ignored your advice might pulll it off and have done ok for themselves.

Blah99

malik999 wrote: »

How about we reword points in your OP like this, example

Q. But I thought this through. If I buy them now for 12p and hold them for eleventy-million years, I'll make a massive profit when they go back to 400p.
A. 'Yes', if they don't get nationalised.

Just maybe in five years time the people that ignored your advice might pulll it off and have done ok for themselves.

The fundamental problem I have with that is that it's based on pure hope - hope that a bank won't get delisted or nationalised.

You can buy in now at 50p and run the very, very large risk of at best your investment going nowhere for years, and at worst losing your entire investment. Or you can wait for conditions to improve, for support to develop in the price and for prospects to return to the sector and buy in then. Sure, you might be paying 70p, 80p or 90p for shares that are 50p today, but I'd rather sacrifice a bit of growth for some caution.

mrposhman

Blah99 wrote: »

The fundamental problem I have with that is that it's based on pure hope - hope that a bank won't get delisted or nationalised.

You can buy in now at 50p and run the very, very large risk of at best your investment going nowhere for years, and at worst losing your entire investment. Or you can wait for conditions to improve, for support to develop in the price and for prospects to return to the sector and buy in then. Sure, you might be paying 70p, 80p or 90p for shares that are 50p today, but I'd rather sacrifice a bit of growth for some caution.

the best case scenario is not a stand still share price.

gozomark

agree - far rather buy at £ 1 on the way up than now