buying '000's of cheap shares in company not on FTSE100

bendix

Good grief. I despair of an investing public that are attracted to the concept of 'cheap shares' because they only cost a few pence each.

mr_fishbulb

britishboy wrote: »

mrfishbulb

you say struggle to shift them, say i bought 100,000 shares at 10p, they done nothing for 6 months and i wanted out, and they were still at 10p, i could just sell them all for 10p, right? (i know i'd pay trading fee and stamp duty on them tho). Or would there be a chance i say sell them all, and not all sell, is that right?

Thanks again

In order to sell your shares you need someone to buy them off you. This will either be another investor buying on the exchange, or a market maker at a bank.

If you want to sell after hearing bad news, you can be sure others will wish to do the same. This will mean there will be less buyers out there to buy the shares off you.

Also market makers have a minimum number of shares they are obliged to buy/sell at their quoted prices. This is usually more than (but can not be less than) the normal market size (NMS). NMS is calculated using the daily average of shares traded for that company. If the average is low then the NMS will be low. Small cap shares will have a lower number of average trades than large cap ones. If you have more shares than the market maker's minimum then you may not be able to sell all of them.

CLAPTON

britishboy wrote: »

mrfishbulb

you say struggle to shift them, say i bought 100,000 shares at 10p, they done nothing for 6 months and i wanted out, and they were still at 10p, i could just sell them all for 10p, right? (i know i'd pay trading fee and stamp duty on them tho). Or would there be a chance i say sell them all, and not all sell, is that right?

Thanks again

probably if you bought then at 10p each you would only be able to sell about around 9p because of the buy-sell spread

sabretoothtigger

p00hsticks wrote: »

Having a low cost per share isn't necessary the same as them being cheap in the sense of them being good value.

I can buy a house with pennies too, just need quite a few of them.
The price of a share doesnt matter if there is billions or trillions of them or you have a share that costs 100,000 pounds each and theres only 5000 of them.
Doesnt matter so much apart from liquidity, you limit your audience in the second example, warren buffet does that because he potentially meets each shareholder personally. Theres usually a reason behind every detail you can think of and the profit is already taken


Anyway main deal newbies might miss is spread. When you buy anything it costs you money. A can of coke isnt worth 1 quid, it just sells that much because retailers include the transport cost in the sale price.
Under the Eiffel tower its a bargain, outside the coke factory its a rip off.

[Time, distance, momentum, volatility, liquidity & hundred more reasons in a price I dont know about
Sometimes the greek alphabet is used to describe share price factors, Im sure theres a book on this or a website I hope as I really need to read this myself]


A house costs 100k and 3k of that goes to lawyers, the estate agent, bank fees & stamp duty maybe. Its worth 97k

You buy a share for 5p, you now own a share worth 3.5p

Theres three prices I think,
Bid
Offer or Ask
Mid

Yahoo shows it. Ask is what you pay, bid is whats its 'worth' mid is the average quoted

http://uk.finance.yahoo.com/q?s=pos&m=L&d=


The space between Bid and Ask is called the spread. Its money you never get back, almost everything sold anywhere has this cost.
The spread varies through the day, the spread percentage is how much the price is made up of cost.

If you buy for 10 and sell for 8 the spread was 20% Most shares its 1% for penny shares its 5 or 10% cost.

To buy £1000 will cost £100 and then the share can go down anyway like normal. Penny shares are expensive, I can buy RBS for 0.01% cost

jimjames

Loughton_Monkey wrote: »

Watch the huge Bid/Offer spreads. They can be as high as 15% or more, and so they have to rise by this amount to get your money back.

Ones I've been looking at are 25% spread. All very well for a 1p rise to be 50% increase but if that is taken by the spread you still lose.

Buy 52p, Sell 41p. As soon as you've bought you need a 25% gain to just cover the spread let alone dealing costs.