New to buying shares, Any advice for me?

sukh38

Hi

im pretty young with no experience in buying shares, i see the market is a perfect time to buy but im a little scared if im honest.


Can any one give me some advice?

what should i look for ?

How do i find the best shares?

How much should i invest for my first purchase?

Should u buy monthly or in one limp sum?

Many Thanks

vacheron

In the very first instance, the standard route dictates that you should start with an index tracking ISA with very low management charges and and buy in monthly to reap the benefits of pound cost averaging.

However if you are after something a bit more exciting by selecting and buying individual shares then I would start by looking at opening a Halifax sharebuilder account. These allow you to share the trading costs with other investors meaning that trades that would normally cost around £11-12 each are only £1.50. These trades are set to occur on certain days and are not instantaneous, however at this stage this shouldn't matter.

I would start off by looking at buying shares in 1 or 2 different companies each month. Buy on a monthly basis so that you can get a feel for the process before committing too much cash and I would say to aim for between £75-£200 per trade to keep the trading cost percentages down. It also gives you a bit of enforced research time between each trade to prevent any snap decisions.

Just focus on investing for now, and if you like a particular share, keep adding to it each month. You want to be thinking only about building up your portfolio and not even considering selling anything just yet as the selling charge fees will be high for small sale amounts. If the price drops, either a) hold them for the long term, b) buy more if you have a good feeling, or c) write them off.

Ideally, you should write off any money you invest in your mind as soon as you buy because of the golden rule of share trading... "only invest what you can afford to lose", and think of any returns as a bonus.

Lokolo

And how young is young?

IronWolf

The first thing you should do is improve your knowledge, reading books and online articles. Some good books Id recommend:

The Intelligent Investor by Ben Graham
Common Stocks and Uncommon profits
The essays of Warren Buffett
The theory of investment value

The biggest risk in investing is not knowing what you're doing

mgarl10024

Some interesting looking books there IronWolf.
As I'm in the same position as the OP, I might have to take a closer look.

sukh38

vacheron wrote: »

In the very first instance, the standard route dictates that you should start with an index tracking ISA with very low management charges and and buy in monthly to reap the benefits of pound cost averaging.

However if you are after something a bit more exciting by selecting and buying individual shares then I would start by looking at opening a Halifax sharebuilder account. These allow you to share the trading costs with other investors meaning that trades that would normally cost around £11-12 each are only £1.50. These trades are set to occur on certain days and are not instantaneous, however at this stage this shouldn't matter.

I would start off by looking at buying shares in 1 or 2 different companies each month. Buy on a monthly basis so that you can get a feel for the process before committing too much cash and I would say to aim for between £75-£200 per trade to keep the trading cost percentages down. It also gives you a bit of enforced research time between each trade to prevent any snap decisions.

Just focus on investing for now, and if you like a particular share, keep adding to it each month. You want to be thinking only about building up your portfolio and not even considering selling anything just yet as the selling charge fees will be high for small sale amounts. If the price drops, either a) hold them for the long term, b) buy more if you have a good feeling, or c) write them off.

Ideally, you should write off any money you invest in your mind as soon as you buy because of the golden rule of share trading... "only invest what you can afford to lose", and think of any returns as a bonus.

Thanks so am i correct in saying that the ISA Index tracker follows the FTSE 100 (or others as in the DOWE) rather than actual stocks?

So as this is part of the ISA would it better to buy into this in the new Tax year ?

Would this be fixed for a certain amount of time?

Porcupine

Yes, a tracker will follow an index like the FTSE100. It will probably do slightly better than the index numbers suggest, as the index just tracks the prices of shares while a tracker will also pay you any dividends returned by those shares.

Whenever you buy a collective investment like a tracker or a managed fund called something like 'Artemis Global Energy' (does what it says on the tin), or an individual share like Tesco, you pay the price for it on that day (plus sometimes some dealing charges). If the investment goes up, you pay more to buy it. If it goes down it's cheaper. You want to buy low and sell high. It's up to you investment skill/guesswork to determine if today will be a better day than tomorrow, next month, next year... nobody knows for sure.

There's limits on how much you can invest in a stocks and shares ISA each year (between about £5340 and £10680 depending on how much you put in a cash ISA). Unlike cash ISAs there's nothing special about when you buy the ISA wrapper within a tax year - returns don't go up nearer the deadline. You can put lots of things inside a S&S ISA - shares, bonds, unit trusts, investment trusts, exchange traded funds, etc etc.

A collective investment has an investment strategy ('we aim to follow the FTSE All Share index', 'we aim to select smaller American companies who have fallen out of favour'), a manager (in the tracker's case, mostly a computer making decisions not a human), and a means it is structured. For a tracker the structure could be a unit trust, an Open Ended Investment Company [OEIC], or an Exchange Traded Fund [ETF]. These structures are different ways that your money is translated into an investment - for example, the price of an investment trust can go up and down irrespective of the prices of what it holds inside it, while an OEIC will always reflect the price of the underlying holdings.

However the timing of when you buy will set how many shares/units you get for your pound, and that timing is one of the more risky things you have to judge. One way around this is 'pound cost averaging' - instead of paying in a £7200 lump sum you could pay £600 a month over the year. If the market falls you get more units for your money, if it rises you get fewer. Buying in 12 lumps takes out some of the risk that you happen to buy on a particularly bad day (or a particularly good one either). Most of the ISA providers are set up to accept monthly savings in this way.

You can keep your ISA for as short or as long time as you like. However there may be restrictions on what you buy inside it - for example a property fund which owns a shopping centre may have to find a buyer before they can return your cash. Most investments are fairly liquid though. However it becomes particularly risky to hold investments for less than 5 years (in case you buy just before the market tanks and you have to wait for it to pick up again)