What to look for in shares

watson91

Hi, Im a student and have looked at many books on shares and im still not totally sure on what to look for / how to know this shares could be good, so im asking what do you look for also does anyone find it easier spread betting with shares.

Thanks For anyone for info

Reaper

Too big a subject. If you have read books on it then I don't know what I can add. Provided of course they were proper investment books not the "I made a million - buy my book and I'll share my secret" rubbish.

So I'll just say in general terms
1) Be objective - check the fundamentals (P/E ratios etc)
2) Be subjective - read up on it and get a feel for the company. I try to look for ones the market might have over looked or over reacted to.

P.S. I don't know your financial situation but if you are a student you may not be the type of person who should be dabbling in shares. Buying individual shares is risky and should not be done if you don't have money you can afford to lose. Even if you are well off you might prefer to start off buying funds which take a lot less knowledge and allow even small sums to be well diversified.

MacsReturns

It all depends on your investing strategy, which in turn depends on many factors individual to yourself. Ask yourself why you want to invest in shares, what is your plan? Long term capital growth? Amazing overnight riches? Steady income stream? What is your attitude to risk - can you watch your portfolio lose 50% overnight without panicking? Can you afford your portfolio to lose 50% overnight?

You must decide on a strategy before you can choose your first share with any confidence - are you a value investor, a growth investor, an income investor, or a day trader? Only you know what will work best for you.

To be honest, if you don't feel confident about 'regular' investing, I'd stay well clear of spread betting, which (as it says on the tin) is gambling not investing. As it's leveraged, if you bet wrong (and 80% of spread bets do get it wrong) then you can lose a multiple of your stake.

A few useful sites for you: https://www.iii.co.uk, https://www.fool.co.uk, https://www.digitallook.com - I've found them very informative.

Good luck with whatever you decide :beer:

cashbackproblems

I started off like your with my first few paycheques after uni going into risky shares (which im still holding 3yrs on after they plumeted) as initially i made 100% profits over night just as i was lucky to pick a few good oil companies, but after that i lost alot more. Since then i started researching the companies alot more and only invest in a certain sector and now have majority ftse 100 shares as im willing to hold for long term on these. Overal i have clawed back those losses thanks to buying into the banks at the right time in 08/09.

I would recommend reading The Naked Trader, starts with the basics and give you the main essentials you need to analyse companies and how to spot trends.

watson91

hi thanks for your replys it is savings /inheritance that i can afford to lose but wouldnt want to, but im looking to invest in for maybe 3/4 years keep adding through that period.
I have taken all our advice on board and will stay away from spread betting.
Thanks Dan

Reaper

In that case I would suggest a mixture of savings and investment funds (via a Discount Broker) rather than individual shares, or just stick to savings as 3 or 4 years is on the short side for an investment term.

watson91

Is there any shares at the moment anyone would think of buying and why so i could and see the reasons why, i struggle to spot trends.
Thanks

MacsReturns

watson91 wrote: »

Is there any shares at the moment anyone would think of buying and why so i could and see the reasons why, i struggle to spot trends.
Thanks

Well, I can't tell you what you should do, but I'm happy to share what I'm doing. Just as an illustration, not a recommendation, you understand

Starting from strategy, what appealed to me was the idea of a high-yield portfolio (lots of details on this idea on Motley Fool if you want further reading). The idea is to focus on shares with good dividend yields, preferably blue chips as these tend to be more stable (though remember past performance is no guarantee of future performance etc etc etc).

I started by using the screener on DigitalLook to narrow down my selection, filtering for good yield and high market cap. This gave me a list of 50 or so shares (will vary on your exact criteria, of course). For diversification it helps to divide up the sectors so you spread across different areas of the economy. Then you need to narrow down tighter and tighter until you have a list of 10-20 shares you like. Read up the investor chat, download any company reports, factor in what you know about the companies etc. Then do more research. Then a bit more

Maybe also take a look at https://www.monevator.com - there is a good run-through of the ideas there, as well.

If you can, try to buy the shares when the price looks good or seize any opportunites as they arise. I've taken on BP now:eek:, as I believe the price will recover and when divis come back on line, the return against the looow price I paid will be worthwhile. For now it's a bit of a rocky ride, but over a 3-4 year timescale I'm sufficiently confident to hold on to my hat. Vodafone was another early buy, and so was HMV - I admit this breaks the 'blue-chip' rule, but the divi is phenomenal, and I like the way they are looking now, but the share price is volatile. Bit of a gamble compared to VOD, but I like what they're doing.

Others I have 'on watch' are utilities like National Grid, United Utilities, Severn Trent, electricity generator Southern Electric, a couple of big pharma, some non-life insurers etc. I have more ideas than cash right now, so I'm trying to be choosy as to which I will buy next. I aim to settle on 10-15 individual companies to spread risk.

As you've probably gathered, the emphasis is on generating dividend income, although capital growth may also be possible - divi payers tend to be 'mature' companies with lesser prospects for growth, which is why cash gets churned back to shareholders.

So, that's my style - it may or may not suit you. :beer:

sabretoothtigger

Owning shares is usually best long term, so 5 years say. spreadbetting is best done minute by minute, if you made a car that could go from zero to 60 in 1 second it would very good but also more likely to crash. If you changed your mind every minute you might prefer to bet then invest

What do you want a share of, a share of profits is what you want. So most companies are priced according to their profit making ability.
You want to find a company that will grow its profits. So basically you are estimating the future of the company and the world

Mutual funds are cheapest and least risky I think. Index trackers are most used just decide what you want to track and its the same question who will make a profit, why and will it increase


http://en.wikipedia.org/wiki/Mutual_fund#Index_funds_versus_active_management

watson91

Thanks for replys
Shares is where i want to put my money i have about 7500 to invest but i have been reading and looking for months and am still no clearer where or what to invest in really long term about 5 years

malik999

watson91 wrote: »

Thanks for replys
Shares is where i want to put my money i have about 7500 to invest but i have been reading and looking for months and am still no clearer where or what to invest in really long term about 5 years

My advice to new share investors is stick with what you know and like. It may be boring but it works. I invested my main funds in companies like Coca Cola, Wells Fargo, Costco, United Utilities etc.
For £7500 I would recommend you chose 4 or 5 companies in different sectors i.e. make sure you're diversified.
Dividend stocks dont get talked about much hear but in the current market have proved invaluable to my portfolio and i recommend you look for these. United Utilities and Coca Cola both have good dividends.