Share Dealing - Please Help

guyb1

Hi there, I am thinking of starting share dealing with a relativly small amount of money (Under £500) and would like some help on which share dealing services I should use, below I will put the 2 that look the best for me, please could you give me some information on them if you use them, and if you know of a better service that would be great. I am really only interested in the cost per trade as I will be investing such a low amount of money, so I dont really care too much about extra features, but that being said if there was 2 services offering roughly the same price then I would obviously look at extra features to help me decide.

My shortlist is

X-O Shares - Instant UK Share Dealing - £5.95 Per Trade

Quite Bargain Basement but have been around for years and seem safe, if you use them or if there is a better deal out there that would be great if you could reply and.....

iii shares - Regular Investment on the 23rd of each month, UK Share Dealing - £1.50 per trade (Once a month)

By pooling everybodys orders together and doing all the investments on the 23rd of each month they "pass on the savings to you"

If there are better instant and/or regular share dealing services out there it would be great if you could let me know, if not please tell me what you think of the 2 share dealing serviced I have listed and if you have used them tell me what you think.

Thank You for reading this post:)

coastline

Halifax have a monthly share saver...just like iii...as far as I can remember..
Just because the dealing costs are cheap doesnt mean they are the best...it depends how many market makers they use to obtain the share price...
Some have in house agents so you could be a penny down or so on price...its a swings and roundabouts thing...
I suppose there'll be a survey on the internet with stockbrokers and market makers somewhere..
At the end of the day you've got to make a start somewhere...most people fine tune as they go along..

guyb1

I checked Halifax, thanks for that, theres is slightly more expensive at £2 compared to iii's £1.50, I am not sure frome the Halifax website wether I can invest upto 4 times a month or if I can chose between 4 different dates and invest on one of those dates per month, either way it is more flexible which is good

coastline

Found this...it explains market makers near the bottom..although it does suggest they use several..
Basically the more they use the better price you'll get I'm guesing at....then your broker applies the dealing charge...£5-15...

http://www.77finance.co.uk/online-stock-broker-guide.html

Reaper

guyb1 wrote: »

X-O Shares - Instant UK Share Dealing - £5.95 Per Trade

Quite Bargain Basement but have been around for years and seem safe, if you use them or if there is a better deal out there that would be great if you could reply

I use them simply because they were the cheapest at the time I was looking and am happy with them as a bare bones service, but there are now 2 even cheaper options.
SVS Securities - £1 per trade for the first month, then £5.75
Ring 365 - a new telephone only service for £3.95 per trade. Like XO part of Jarvis.

Bear in mind if you want to use an ISA there are often extra charges. Also be aware cheap execution only brokers tend to let you only trade in share listed on certain markets, and may well be UK only.

Lokolo

Reaper wrote: »

I use them simply because they were the cheapest at the time I was looking and am happy with them as a bare bones service, but there are now 2 even cheaper options.
SVS Securities - £1 per trade for the first month, then £5.75
Ring 365 - a new telephone only service for £3.95 per trade. Like XO part of Jarvis.

Bear in mind if you want to use an ISA there are often extra charges. Also be aware cheap execution only brokers tend to let you only trade in share listed on certain markets, and may well be UK only.

I couldn't find on their website, do they allow international sharedealing (even if its at different prices)?

grey_gym_sock

how much are you planning to invest in each share? because i think the costs are generally excessive if you invest less than perhaps £1000 in 1 share. you can do a calculation to estimate costs.

if you're looking at the cheaper regular dealing services, then note that those rates are only for buying. you have to pay the broker's standard dealing charge when selling. e.g. with iii you can buy for £1.50, but it will cost £10 to sell.

the cheapest service mentioned so far appears to be Ring365, at £3.95 per trade. so you'd pay that both when buying and selling. your other costs are 0.5% stamp duty when buying (for UK companies); and the "spread" - the difference between the buying and selling prices - which should be only about 0.1% for big (FTSE-100) companies, a bit more for medium (FTSE-250) companies, and can be a lot for small companies (e.g. 3%, 10%, ...). (some ppl pointed out that you could get smaller spreads with some brokers than with others, but this effect is miniscule when you're investing smaller amounts.) so, supposing you buy a FTSE-100 company, total costs could be £3.95 + £3.95 + 0.5% + 0.1% = £7.90 + 0.6%.

so if you invest £100 per company, your total percentage costs are £7.90/£100 + 0.6% = 8.5%. the share must rise 8.5% before you make a profit.

if you invest £1000 per company, costs are £7.90/£1000 + 0.6% = 1.39%. the share price must rise that percentage before you make a profit.

then, given the percentage cost (i.e. 8.5% or 1.39% or whatever), consider how long you expect to hold the share before selling it. this can only be an estimate, of course. but the point is that shares can on average only be expected to outperform cash on deposit by perhaps 5% per year - that may be over-optimistic - but anyway, some percentage per year. if you hold a share for only 1 year, supposing shares outperform cash by 5%, then if your costs are 8.5%, you will do 3.5% worse than staying in cash.

if costs are 1.39%, then you will do 3.61% better than cash, but you've given up 27.8% of potential returns in charges (i.e. 1.39% / 5%), which will reduce your returns a lot in the longer term.

if you hold shares for 5 years on average, then 8.5% costs would be 1.7% per year, so on average you might outperform cash by 3.3% per year (but you've lost 34% of outperformance in charges).

holding shares for 5 years, with 1.39% costs, gives you 0.278% costs per year, and theoretical outperformance of 4.722% (with only 5.56% of outperformance lost in charges).

costs per year of 8.5% are ridiculously high. costs of 1.39% or 1.7% per year are too high. 0.278% per year would be reasonable. you should compare this with cheaper index-tracking funds, which have costs of about 0.1%-0.3% per year. or with low-cost investment trusts. if your costs would be too high, you'd be better off investing in index-trackers or investment trusts.

warning: when i talk about shares outperforming cash by 5% (or whatever) per year, that is just on average, and in the very long term. the market can have very very very long periods of over- or underperformance. and the shares you pick could do much better or much worse than average. while you can try to pick better than average times to invest or better than average shares to invest in, i think it's reasonable to keep yours costs down to a level where they will be acceptable if you invest in average-performing shares at averagely-good times. after all, that is not the worst case scenario.

Reaper

Lokolo wrote: »

I couldn't find on their website, do they allow international sharedealing (even if its at different prices)?

In their "Questions and Answers" section XO say:

What stocks can I deal on-line?
Most listed UK equities can be traded on-line though in a fast moving market the quantities that can be dealt may be restricted by the Market Makers. Some stocks simply cannot be traded on-line so you will need to call us to arrange these the system will inform you of this at the time.

I don't know about the others.

srcandas

Grey Gym Sock you have given a bucket load of good advice there.

But I would have liked to see at least some emphasis, not a lot, put on the "cost to return" ratio rather than what seems very common the dominance of the "cost to time" ratio.

So in addition to asking "how long do you expect to hold the share before selling it?" I'd also ask "what percentage profit are you looking for from this share?".

I can relate to this. My brother for years has bought shares, been sitting on a large profit, and then watched it disappear.

I feel he took on board the "don't trade frequently, it increases costs" to an extreme. So much so he forgot the objective. He certainly kept costs low but he still made a loss :mad: If he had considered the cost/profit ratio in addition to other factors he might have done a little better.

I accept that if you are buying a large bucket of shares (25+) and looking for a long term average return then it may not matter but I guess if that was the case you might be looking at other vehicles.

Hope that makes sense
:beer:

Ifts

srcandas wrote: »

I feel he took on board the "don't trade frequently, it increases costs" to an extreme.

Maybe or on the other hand its often even harder to decide when to sell than it is to buy

C_Mababejive

I'd hang on to your £500 if i were you and not bother with shares at that level.

It just isnt enough to play with..