Beginner Investor - advice please

gh05

I'm looking at putting around £2000 on RBS shares. Supposedly risky I know, but i've bee watching them fluctuate for around a year between 20p and 30p (or 200p and 300p since they were recently consolidated).

They are currently at 200p so what I am interested in doing is buying at 200p and selling at around 250p (presuming they get to this amount again). This would be a 25% increase or about a £500 profit.

But I know you hgave to pay certain fees when selling. My question is - how much would i have to pay when selling for this example and how much would i have to anything when buying? I already bank with RBS - would I be able to do this online?

Also...seeing as they constantly seem to fluctuate by up to 5p every week/fortnight...what is to stop me from constantly buying and selling and hopefully making £500 profit per time?

Many Thanks.

jimjames

If this is your only investment then it is more like gambling than investing. You are above the minimum level judged to be economic for charges (below £1000 buying and selling charges will eat into your investment) but it is still a very risky gamble.

Remember that you will pay 0.5% stamp duty to buy so need the price to rise by that plus the charges to start to make any money. The shares have only recently been consolidated so any long term pattern in the price isn't really visible yet and there have been so many external factors anyway.

If it was as easy as buying then a few weeks later getting 25% increase do you think the city fund managers would already be doing it?

BLB53

You may be better putting it on the 3.30 at Haydock!

Seriously, if you want to take a short term gamble on one share, you may find it more cost efficient to look at spread betting but be aware that less that 1 in 20 punters make money from this.

gh05

jimjames wrote: »

If this is your only investment then it is more like gambling than investing. You are above the minimum level judged to be economic for charges (below £1000 buying and selling charges will eat into your investment) but it is still a very risky gamble.

Remember that you will pay 0.5% stamp duty to buy so need the price to rise by that plus the charges to start to make any money. The shares have only recently been consolidated so any long term pattern in the price isn't really visible yet and there have been so many external factors anyway.

If it was as easy as buying then a few weeks later getting 25% increase do you think the city fund managers would already be doing it?

Do you think that the consolidation is likely to make a big difference to the long term pattern.

The way I see it is that it is a gamble, but I don't see myself losing this £2000 (partly because rbs is government owned and they almost cant afford them to go bust)...so maybe i might be unlucky and they could drop to 12p a share - the risk then would be I'd lose £800. I'm prepared for this because this 2k is money I'd set aside to buy/sell shares.

But having looked at the pattern over the last year - it is very much a case of 20p-24p over the course of a month, sometimes up to 30p and rarely lower than 19p. So, yes I know things could go wrong with the instability of banks but the stamp duty is only £10 and the fees to buy and sell are only £15 each.

It seems like at least an educated gamble.

Interested in your thoughts.

Thanks.

FCRangers

• in a couple of days/weels/months/years what you say happens and you sell and make £500
• you need to money so take out at a loss
• RBS go bust and you lose 2k
• A massive crash and the share goes from 200 to 20 and you have a massive crash - or wait x amount of year for it to go back to 200.

unless the compaines goes bust you'll still have some capital left. thats how I see it.

I've only been doing this about 6 months so don't take my word or anybody elses for it, just me understanding

grey_gym_sock

shares can trade in a range for a while. it is sort of predictable - until it breaks down. then there tends to be a much bigger move in the share price - which could be up or down.

if you buy and set a target price to sell, which appears realistic given the trading range, then the odds be may in favour of your target being reached. however, if the price drops out of its range, your loss is likely to be larger than your target profit. so it may be a larger chance of a smaller profit vs a smaller chance of a bigger loss. it's not easy money.

this is just an example, but if you'd been looking at RBS in june last year, you'd have said it was trading in a range of about 40-50, so perhaps it was worth buying in at close to 40. and then it fell to 20.

MrMalkin

gh05 wrote: »

But having looked at the pattern over the last year - it is very much a case of 20p-24p over the course of a month, sometimes up to 30p and rarely lower than 19p.

Past performance has absolutely no bearing on future returns.

If you're serious about investing in a company you need to look at the underlying performance of the company - profitability, earnings per share, dividend growth, and loads more, before deciding whether it's a good idea to invest or not. What you are doing is looking at a chart of RBS' share price and trying to extract meaning from it, when there is none to be found there. It's the stupidest way to invest.

Also, why RBS? Speaking from personal experience they are a joke of a company and their internal management and procedures are woeful. Why not another of the thousands of companies out there?

gh05

MrMalkin wrote: »

Past performance has absolutely no bearing on future returns.

If you're serious about investing in a company you need to look at the underlying performance of the company - profitability, earnings per share, dividend growth, and loads more, before deciding whether it's a good idea to invest or not. What you are doing is looking at a chart of RBS' share price and trying to extract meaning from it, when there is none to be found there. It's the stupidest way to invest.

Also, why RBS? Speaking from personal experience they are a joke of a company and their internal management and procedures are woeful. Why not another of the thousands of companies out there?

Thanks, I appreciate your advice.

In answer to your question about why - Purely because this is what I've been following (someone Iknow has shares with them updates me) AND because they are partially government owned - it seems less likely that they will go bust.

Lansdowne

Here is my attempt to answer the actual question asked, others may correct my incomplete understanding.
Assume shares in My Target Company are quoted at exactly 200p. Assume you have exactly £2000 to invest.
Then you can buy 988 shares:
988 x £2.00 = £1976.00, plus stamp duty 0.5%=£9.88, plus trading fee (example) £12.50 you have spent £1998.38.

Assume you take any dividends as income, and there are no restucturings etc in the period you hold the stock.

After x years the share price is now exactly 250p and you sell, you will receive:
988 x £2.50 = £2470.00 less trading fee (example) £12.50 = £2457.50.
So a theoretical £500 profit is an actual £459 profit.

Jegersmart

FWIW I have purchased a tranche of RBS today at 201pence, I have a total of 6 tranches earmarked for this position but that may change. From a TA perspective the share price looks like it could be basing, however do not use any funds that would hurt to lose entirely.

GL

J

jimjames

gh05 wrote: »

Do you think that the consolidation is likely to make a big difference to the long term pattern.

The way I see it is that it is a gamble, but I don't see myself losing this £2000 (partly because rbs is government owned and they almost cant afford them to go bust)...so maybe i might be unlucky and they could drop to 12p a share - the risk then would be I'd lose £800. I'm prepared for this because this 2k is money I'd set aside to buy/sell shares.
.

Not sure where you are getting your numbers from. By my reckoning if they drop to 12p per share you'd have lost 95% of your money so would only have around £100 left not £800.

The consolidation was meant to make the price less volatile as they are no longer a penny share. Whether it works is another matter!