Beginner's guide to investing

scwal

Hi,

Seeing as though interest rates have plummeted and putting cash into savings accounts becomes less attractive, I possibly considering investing in stocks/shares, particularly because they are relatively cheap (?)

However, being a complete novice, would really appreciate some advice on a couple things:

1) How do you actually go about buying shares/unit trusts/ETFs etc? Are there any good sites or books that you can recommend which is bit of an idiot's guide into the nuts and bolts of actually beginning to invest?
2) I'm thinking of using my stocks + shares ISA; I've currently put £3600 in a cash ISA for this year; does this mean I can put a max of £3600 into a S&S ISA for this tax year? This is probably the max amount that I'm thinking of investing.

Any initial bits of advice/recommended reading would be much appreciated!

Stavros_3

Read and research.....http://www.fool.co.uk/news/investing/investing-strategy/2008/12/12/how-to-invest-in-shares-for-the-first-time.aspx

sh856531

2) I'm thinking of using my stocks + shares ISA; I've currently put £3600 in a cash ISA for this year; does this mean I can put a max of £3600 into a S&S ISA for this tax year? This is probably the max amount that I'm thinking of investing.

I don't know the exact amount you can invest tax free but I know it was in the same sort of region as your cash allowance so you're probably spot on.

I addition to saving in an ISA you can also get tax free status buy saving into a dedicated pension. I think my pension gets much the same tax protection as my ISA so thats another option - though clearly a pension isn't even remotely liquid.

In terms of investing outside the realms of pensions there are loads of ways you can do it depending on how you want to play it.

If you want to pick individual companies, you can probably do it through your banks share dealing service although you may not get the best commission rate depending on the amount and how often you want to make a trade.

I'm currently using http://www.hoodlessbrennan.com/ because they offer the best commission rates for the amount and quantity of trades that I want to make (i.e not that many).

If you want to invest in a broad range of equities and want to just pay in the money and let it run its course, you can either get an index tracker ISA that just tracks one of the main stock market indices. Some people strongly argue that these are much better than actual managed funds because you don't have to pay a fund manager to look after them and when fund management fees are factored into the equasion, conventional wisdom states that the humble index tracker will often out perform a managed fund. That's not been my experience recetly but many people still argue this point over the medium to longer term.

Alternatively you could go with a managed fund of which there are *loads*. They tend to be categorised according to relative risk. In theory the higher risk funds invest in much more volatile markest such as the far east and biotech and so on. More cautious funds tend to invest less of the value of the fund in risky investments and hold more of the value in things like cash and government bonds. This will mean that you have a lower chance of losing your capital but also that you won't earn a packet either.

I have a fund managed by www.aegon.com and am currently looking at http://www.invesco.com/ as I've heard a couple of people saying that one of the fund managers in particular is very good.

Hope all that helps matey

:-)

Linton

scwal wrote: »

Hi,

Seeing as though interest rates have plummeted and putting cash into savings accounts becomes less attractive, I possibly considering investing in stocks/shares, particularly because they are relatively cheap (?)

However, being a complete novice, would really appreciate some advice on a couple things:

1) How do you actually go about buying shares/unit trusts/ETFs etc? Are there any good sites or books that you can recommend which is bit of an idiot's guide into the nuts and bolts of actually beginning to invest?
2) I'm thinking of using my stocks + shares ISA; I've currently put £3600 in a cash ISA for this year; does this mean I can put a max of £3600 into a S&S ISA for this tax year? This is probably the max amount that I'm thinking of investing.

Any initial bits of advice/recommended reading would be much appreciated!

How you invest depends on the size of your portfolio and the amount of trading (ie buying and selling) you want to do.

If you have a reasonable sized portfolio (say £10K or more) it could be interesting to go online and deal directly. There are several companies which provide this service. It is not normally considered worthwhile to deal in amounts of less than £1000 because of relatively high fixed charges.

For small portfolios of individual shares you have a lack of diversification - problems with one company could seriously damage your total wealth.

You can buy shares through your bank, but the charges tend to be high and so it's probably not the best way to a sufficient range of shares for diversification.

If you are looking purely at a single £3600 shares ISA an easy way of getting into the stock market is to look at the websites of the unit trust suppliers - M&G, Investec and many others who will can sell you their unit trusts as an ISA. A unit trust by investing in many shares provides some of the diversification you need.

IMHO investing in a good general unit trust is a relatively safe way to start serious investing. Once you have experience of this, and more money, then you can move on to bigger and better things.

By the way - yes if you do have a £3600 cash ISA you can also have a £3600 stocks and shares ISA.

One important point - do not go into shares just because savings rates are low. Saving and investing fulfil two different needs Savings are the best place for the short term. As a new investor you should only buy into the stock market if you can afford to put the money aside for at least 5 years and can stomach the possibility of short term losses.

Primrose

scwal - Yes, You can still use up the balance of your £3600 annual ISA allowance in an equity ISA before 5th April and it makes sense to do so, so that you start the next tax year with another £7200 allowance to use jup if you have spare cash. . Checkout the Hargreaves Lansdown website
h-l.co.uk They have a lot of research on there about the various funds available, and have a recommended list of what they call the Top 150 Wealth funds in which you can invest, either all in one fund, or in different proportions in a "pick and mix" proportion. Years ago as a first time investor I was advised to pick an Equity Income Fund and go for Invesco/Perpetual High Income, reinvesting the income. Over the years I've invested in many other funds as well, but that one has still served the test of time and regularly appears as a favourite pick by financial advisers in their recommended funds.

zaphod_beeblebrox_2

I consolidated my four pitiful pensions to H&L and I agree about the INVESCO High Income fund

sh856531

I consolidated my four pitiful pensions to H&L and I agree about the INVESCO High Income fund

Hi Guys,

I've been looking at this fund today but am having trouble figuring out what the charges are to join as part of an ISA. Do you know off the top of your heads what the management fee is and whether there are any upfront costs for putting in an initial lumps sum?

I'm thinking about putting in £500 up front and then £100 monthly. Do you think that would be worth it? I've never invested in a fund on its own right before - its always been via my pension.

Many thanks

S

Lansdowne

Welcome to the wacky world of "initial charges" for funds. A world where it's often more expensive to buy direct from the 'manufacturer' than via an intermediary.

If it's this Invesco fund you're looking at, that link quotes an initial charge of 5%.

If you buy via Chartwell or Hargreaves Lansdown and maybe other 'fund supermarkets', they discount the entire initial charge although H-L's page says the minimum investment is £1000 not £500. I don't know what you would pay to set up your ISA direct with Invesco, but an advantage of using a supermarket is that you can move to a different fund quite simply in the future.

Obviously check the terms & conditions of whoever you have in mind.

sh856531

Lansdowne wrote: »

Welcome to the wacky world of "initial charges" for funds. A world where it's often more expensive to buy direct from the 'manufacturer' than via an intermediary.

If it's this Invesco fund you're looking at, that link quotes an initial charge of 5%.

If you buy via Chartwell or Hargreaves Lansdown and maybe other 'fund supermarkets', they discount the entire initial charge although H-L's page says the minimum investment is £1000 not £500. I don't know what you would pay to set up your ISA direct with Invesco, but an advantage of using a supermarket is that you can move to a different fund quite simply in the future.

Obviously check the terms & conditions of whoever you have in mind.

Thanks matey - I appreciate the info. A couple of other people have mentioned going through HL as well although I don't really want to stump up 1000 in one go. I may take the plunge though if the general concesus is that the high income fund is a winner.

Thanks again

Aegis

sh856531 wrote: »

Thanks matey - I appreciate the info. A couple of other people have mentioned going through HL as well although I don't really want to stump up 1000 in one go. I may take the plunge though if the general concesus is that the high income fund is a winner.

Thanks again

They'll set you up a regular investment into that fund of as low as £50 per month if you phone them up and ask about it. The £1000 minimum is for lump sums, and they're generally fairly flexible over that figure as well.

Lokolo

They seem to be very flexible whatever to be honest. I am feeding in £100 a month into 2 funds. Last month I had an extra £100 in the bank so I transferred it into HL, asked if I could put this £100 towards my 2 funds which I am already buying and he said yeh thats fine!