Share dealing for dummies?!

adnan1234

hey everyone I (like many) want to jump on the stock market ladder however I need a bit of a push.

I have been reseaching about the stock market for a while now and have just registered with iii as they seem to have a good rep.

I am planning to spend £500 (money that I can afford to lose) on 'low risk' stock just to get a feel of how things work. I was looking at shares such coca cola, mcDonalds etc...

I have a few general queries:

- Tax- I beleive that I have to pay capital gains tax on any money made over a certain amount, is this true?

- Can I use iii to purchase shares from international markets and not just the ftse?

Any advice would be greatly appreciated

lisyloo

Yes your profits are subject to CGT but the allowance is quite high e.g about £10K per year. This is profit and not total, so nothing to worry about jsut yet :-)
You also have an ISA allowance you can use.

If you want to play around then why not use a portfolio tool and jsut pretend you have the shares and see how much you make?

I buy US shares with iii so it certainly can be done, however you will probably find the charges are different.
Also bear in mind you need to remeber about currency changes.
e.g. Let's suppose you buy a $1 share and you pay £1 (as the exchange rate is £1 to $1).
Let's suppose the dollar strengthens and the exchange rate is no £1 to $2 (extreme yes). You $1 share is not worth 50p so you've experienced a 50% loss.
That's an extreme exchange and teh exchange rate doesn't usually half/double, however I have seen it gone from $1.40 to $2.10 in the last few years.
So what I am saying is that you can lose money without trading any shares, so you have to factor in this currency exchange rate. The £ is weak at the moment, so it's not a good time to buy as you need lots of £s to buy foreign stuff.
It can of course work both ways, but it's an extra risk to be aware of (and there are usually higher costs).

adnan1234

wow, the currency change could potentially have a huge affect on your stock. Thanks!!

I joined virtual trader however they only show the ftse 100, as of current I have bought only bought shares from 2 different companies and havent sold them as their prices are low!

What would you consider 'low risk stock' from the ftse? This ? is for anyone!

fullstop

adnan1234 wrote: »

wow, the currency change could potentially have a huge affect on your stock. Thanks!!

I joined virtual trader however they only show the ftse 100, as of current I have bought only bought shares from 2 different companies and havent sold them as their prices are low!

What would you consider 'low risk stock' from the ftse? This ? is for anyone!

A couple of what I consider "low risk" NG and Tesco., others may disagree.

sabretoothtigger

Sounds good

Low risk would be shown by the beta number

1 beta means it moves with the ftse I think 10 beta would mean its all over the place

Tesco is 0.38

e.g. Let's suppose you buy a $1 share and you pay £1 (as the exchange rate is £1 to $1).
Let's suppose the dollar strengthens and the exchange rate is no £1 to $2 (extreme yes). You $1 share is not worth 50p so you've experienced a 50% loss.

dollar strengthens - if you have money abroad already then you benefit from our weak currency when valuing those assets


So its the opposite, you will double your money assuming the share price in dollars stays the same. A strong currency can put pressure on prices or vice versa

cepheus

Any advice would be greatly appreciated

Form a strategy and test it before committing money, don't dabble.

Bear in mind that the price is determined by a balance of buyers and sellers, so
there is no such thing as a 'good value' stock unless you know something the experts don't.

Trading is a zero sum game, in fact negative after transactions, unless you are lucky or trading with some advantage not available to the majority.

To make money you need to leave stocks invested, and is dependent that the market will continue to rise long term

Allow for transaction costs, stamp duty on sales (0.5%) and spread

Does £500 mean a lot to you, if it does you may react differently than you think.

Collective funds/index trackers are generally lower risk than individual stock, and can be bought cheaply though some brokers avoiding stamp duty (eg unit trusts and ETFs)

Nosht

It depends on your attitude to risk.
Have a trading philosophy & stick to it. Are you looking for growth, income (dividends), long term buy & hold or sell when price moves?
Use stop losses for volatile shares.

Regards,

N.

adnan1234

Thanks cepheus for those golden rules!

Nosht since I have no MAJOR responsibilities and new part time job I am willing to take risk. I am also planning to invest long term.

BP recently has taken my interest as you know about their current situation.

Just wanted to get a few more tips.

When you are looking at a share whats the first thing (besides the price!) that catches your eye? p/e ratio, yield?

I look at the companies historical prices before anything else. Just wanted your 2 pence

Just_landed

Tax- I beleive that I have to pay capital gains tax on any money made over a certain amount, is this true? >>>>

I found on the internet this book

http://taxcafe.co.uk/stock-market.html

its fairly easy to help work out CGT and more.

For those who think this is an advert for above ITS NOT as such, just trying to help the OP.