Student Loan into shares?

pjrobertson

Hi!

I'm a first year student, and have all of my loan (as fortunately I have some saving and my parents are paying for uni eductation).

I'm looking at getting into shares, and was wondering whether it was a good idea to invest my student loan in them, or if it's a risky business?

My logic is that at the moment with the credit crunch, I can make more money investing in shares than sticking it in a ~3% account.

Does anybody have any advice on getting into shares, and who's good at the moment?

I'm thinking possibly FTSE 100 as it should be fairly safe (?) and it's on its way up, and also Apple, as their shares plummeted when Steve Jobs announced his illness (plus I'm an Apple man!)
Will it cost me more to trade Apple shares as they're overseas?

I'm planning on signing up with Hoodless Brennan for an online account, but can't at the moment because it says my DoB doesn't make me 18 - which it does!
Is this the best bet, or should I open a shares ISA account?

Thanks for any suggestions

Edit: One thought!
Am I exempt from any tax paying / stamp duty as I'm in full time education? I'll be nowhere near the limit for income tax so that's irrelevant. Just a thought!

gozomark

My logic is that at the moment with the credit crunch, I can make more money investing in shares than sticking it in a ~3% account. correct - you could also lose alot

I'm looking at getting into shares, and was wondering whether it was a good idea to invest my student loan in them, or if it's a risky business?
investing is risky business,thats what its all about

can you afford to lose any of the money ?
are you prepared to invest for 5 years plus ?

Apple - buying single shares increases your risk- it could eaily double, it could also easily half in price

Aegis

Borrowing to invest is generally speaking a big "NO" because you have to pay that money back at some point. If you borrow and it loses money, then you have saddled yourself with unnecessary debt, which will seriously annoy you when you leave university and get out into the real world.

As for the tax question: no, you're not exempt. You are a taxpayer like the rest of us, so if your income exceeds about £6500 you will pay income tax, if you make sales of assets that result in a profit of around £10k or more, you will pay capital gains tax, if you buy assets that have stamp duty, that's liable, etc. The usual situation is that students don't earn enough to worry about this.

katie1986

Why take out a student loan if you don't actually need one? It's just debt you have to pay back at the end of the day. :rolleyes::o

a7man

I'm alot less risk averse than most people on this site, so if I was in your situation I would invest the money. A student loan is cheap and although the general rule is never borrow to invest, a student loans rules are v different making it an attractive proposition, especially on the low rates today.

It would be worth drip feeding at the moment though as the markets are so volatile, then if they drop to 3500ish again I would make a lump sum investment. However, you have to be willing to leave this money invested for at least 5 years.

a7man

katie1986 wrote: »

Why take out a student loan if you don't actually need one? It's just debt you have to pay back at the end of the day. :rolleyes::o

Student loans are cheap so the interest you pay can be beaten by the interest you can gain in savings, therefore you make money on the loan.

Plus as the rules allow you to pay it back over a long period, its much cheaper to save and use this as capital for a mortgage then take out a mortgage loan on the additional capital.

Dave101t

i made a couple of thousand on good shares, but lost overall as others went bust.
im 26 with a student loan.

most my money is in premium bonds as my interest in winnings works out at 4% with the chance of a big win.

i would invest in shares again, but it takes a bit of research to find the right ones

opinions4u

Dave101t wrote: »

most my money is in premium bonds as my interest in winnings works out at 4% with the chance of a big win.

The current prize pool is 1% pa. With the chance of no win.

adambro

I'd say this is quite a good idea but then again I probably would since I'm doing similar myself. I'm really not concerned about the student loan because the interest rate is so low and the repayment scheme means you won't have to pay it back until you're earning enough to be able to afford to do so. Plus it doesn't effect your ability to get other credit so it isn't a problem. I won't be paying it back any quicker than is required.

I've used Hoodless Brennan a little bit and am happy so far so am likely to begin using it as my primary broker.

Trading shares is inherently more risky than just putting the cash in a savings account but potentiality much more rewarding and an enjoyable challenge. Avoid companies with a small market capitalisation so not less than around £15m since it is often hard to trade them and they will have a large spread (difference between the price you can buy at and that you can sell at) and so you make a reasonably significant loss simply buying them. As you say, companies in the FTSE100 should be generally quite stable but you should also be okay, and potentially get better capital growth, investing in companies in the FTSE250.

Another key rule to avoid losing money and equally, not reducing your profits, is to quickly ditch any companies which share price goes down, say around 10%, whilst holding those that go up. Try to avoid getting emotionally attached to a company. Investing in sectors which you are familiar isn't a bad idea but don't keep holding a share because you like the company and you think it will go up whilst it continues to plummet. This is how you can avoid loosing all your money.

I've not bought any shares listed on foreign exchanges because of the increased complexity and the additional factor of changes in exchange rates.

The other thing I would say is get a copy of The Naked Trader by Robbie Burns. It is an ideal introduction into share trading.

As others have said, we all have to pay stamp duty at 0.5% when we buy shares. You'd only use up your income tax allowance through any dividends you receive but it is unlikely you'd earn enough to exceed it. The other tax concern is capital gains tax which you are shielded from when using an ISA.

Regarding time scales, I could be invested in a company for over a year or so but easily a lot less if it plummets after I buy it.

nzseries1

pjrobertson wrote: »

My logic is that at the moment with the credit crunch, I can make more money investing in shares than sticking it in a ~3% account.

If that were the case, everyone would be doing it!

pjrobertson wrote: »

Does anybody have any advice on getting into shares, and who's good at the moment?

I'm concerned here. First you say "my logic is that I can make more money investing in shares" then you say "what shares are good at the moment". If you have to ask what shares are good at the moment... then what logic are you using to know that you can make more money?

k8r4u

This time last year you could have invested in a good solid (but boring) FTSE100 company with years of history and thousands of customers, at a level that would have earned you over 10% p.a. in dividends alone, never mind the capital gain from a steady increase in the share price.

However right now some people who did just that are currently looking at an 80% loss on their investment in Lloyds and zero dividends.

Still feel the FTSE 100 is a safe haven ?

The old saying "don't invest money you can't afford to write off" isn't a bad one to keep in mind.