Investing in Stock [First Attempt - Low £]

cloud_dog

Spadez wrote: »

I have played about with fantasy trading accounts for a while, but unfortunatly this doesnt teach me about the process of investing real money.

Spadez, sorry but I'm not clear what you are trying to do.

If you are trying to imerse yourself in the world of investments then fantasy trading is as good as it gets to learn how to investigate a stock, identify entry and exit points, find useful websites, etc, etc, etc. I would be tempted to say if you don't think fantaasy trading is teaching you anything then possibly psycologically you are not treating it as thought it is your money.

With such small amounts I would suggest putting the lump sum in to a fund, monitoring the fund, identify what causes your fund to go up / down etc, etc.

Someone mentioned spreadbetting - do not do this. But, by way of comparison, I dable with spreadbetting but before I started using real money I psudeo traded, i.e. identified my entry point and my exit, I recorded all my transactions in Excel, including all costs, did not 'lie' to myself, and ran this for almost 12 months. I did this so as to prove to myself I could achieve a level of certainty (confidence in my assumptions).

Investing is all about psycology; you need to understand yourself before you can introduce the markets in to the equation. (wow, heavy man....)

cashbackproblems

I was in your position 6 months ago and started off the the Naked Trader, it wont make you a successful trader over night but teaches the basics to look out for and ways you can decide whether a company could grow along with the sp.

If your choosing a broker and paying £10 per transaction its a no brainer you should just buy into one company. NOTE iii.co.uk are currently offering a deal where you can buy shares for FREE until next yr if you select a day in advance and as long as you arent day trading and willing to hold anything from months to 1yr (or even longer) this is fine.

Personally i have found its not worth investing less than £1000 per share, as with a ftse company on average you will get 10-15% increases per yr if your lucky then as mentioned above you have fees/stamp duty.

I would stick the £500 on an AIM company (maybe oil exploration) as its higher risk but much higher reward, the kinds of companies attracting interest at the moment at sxx, char, fml, sunkar (sp), etc. Dont forget with these companies they cant be analysed by what they have done i.e. past earnings, but what they will do, as they dont make money until they find oil/diamonds etc. One example is GKP which went from 15p to over £1 in a v short space of time, so £500 in tht company would have given you 6/7 times your original stake in a matter of weeks!

Hatone

I can understand why most average investors discourage the use of financial spreadbetting.

However, I'd like to make a point.

You are likely to make money quicker (and lose money quicker) by placing bets on market or stock movements than actually owning the shares outright, even with a mere £500. £500 worth of stock is hard to make a profit from, but £500 available to spread bet with is enough to make a decent profit.

The key thing is being able to trade on margin (and to more experienced investors, leveraging). This allows me to place different bets on different companies without being committed to paying the full price of the stock upfront. Nor do you I have to pay broker's commission, stamp duty and any profits are exempt from CGT. The cost of paying the broker's spread is considerably less than the process of buying shares.Yes, I cannot vote @ AGMs or be entitled to a full dividend payout.

I have a few shares in different companies. Generally speaking, if one of my stock falls below than what I initially paid for it, I go short through spreadbetting to recoup my losses, by placing £3 or £4 a point. Spreadbetting is a brilliant hedging tool.

I say to OP, research and understand the stock market first before making any decisions - if you aren't keen on investing more than £500 in shares, I would say have a go at spreadbetting.

cashbackproblems

I agree with the above, spreadbetting is great but you need to know what your doing, im currently reading a few books/articles on how it works and in the mean time just looking at stocks to buy.

Blah99

To the people above recommending spread betting to someone who doesn't yet understand how the stock market and normal long positions work, you're leading the guy down a road to ruin. Sure, you can make money with £500 capital in spread betting, if you want to take enormous risks. You shouldn't be open to risk more than 2 - 4% of your spread betting capital for each position opened.

If you're interested in spread betting, buy a book called "The Spread Betting Handbook" by Malcolm Pryor.