Questions on Invesnting

[simon]

Hello,

I am very new to the whole investing sector. I have been researching and reading a lot.

However i personally find it easier to talk to people via a forum to help me understand things in further detail.

my first uncertainty is this:

I have read that a "yield" is the rate of return on an investment. Now when i look at the stock exchange web sites the "yields" i see are no more than 9% on an investment.

for example one of the highest i have seen is this:

8.27% of £263.50 which would give me a rate of return of like £21 a year ??

even if i invested 10.000 at 8.27% i would get a return of £827.00...

I hope i am doing something wrong here because i don't see how anyone can become well off with such small returns.

I was expecting to be able to invest 10.000 and make at least 3 / 4 grand back on top of my investment !

jimjames

Some investments may have very high yields but little chance of getting all your money back or yield based on history so future yield is not as much. Even 9% is a very high amount and normally yield would be nearer 3-5%.

Imagine your £10k giving 9% yield but the capital drops to £5k so you've lost £5k on investment although you've got your 9% income.

Yield is only part of the return being the dividend income that the share pays out, the rest is capital gain from rising value of the investment. I fear you are being unrealistic expecting 40% returns over the short term, you may get that but equally you may get a 50% drop. That's the nature of investments, they can fall as well as rise.

Lokolo

[simon] wrote: »

Hello,

I am very new to the whole investing sector. I have been researching and reading a lot.

However i personally find it easier to talk to people via a forum to help me understand things in further detail.

my first uncertainty is this:

I have read that a "yield" is the rate of return on an investment. Now when i look at the stock exchange web sites the "yields" i see are no more than 9% on an investment.

for example one of the highest i have seen is this:

8.27% of £263.50 which would give me a rate of return of like £21 a year ??

even if i invested 10.000 at 8.27% i would get a return of £827.00...

I hope i am doing something wrong here because i don't see how anyone can become well off with such small returns.

I was expecting to be able to invest 10.000 and make at least 3 / 4 grand back on top of my investment !

You expect to have 30-40% return over 1 year just like that?

Yield is just part of the equation and I have no idea what you are looking at when you say 8.27%. But if you had bet on Lloyds over the past year you would have had a nice return.

https://www.google.co.uk/finance?chdnp=1&chdd=1&chds=1&chdv=1&chvs=maximized&chdeh=0&chfdeh=0&chdet=1367249400000&chddm=128772&chls=IntervalBasedLine&q=LON:LLOY&ntsp=0&ei=wFZ-UcD5FuKnwAOuqQE

Nicholas-bloody-Parsons

[simon] wrote: »

for example one of the highest i have seen is this:

8.27% of £263.50 which would give me a rate of return of like £21 a year ?? the "yields" i see are no more than 9% on an investment.

Thats quite high. Infact its very high for uk shares, so its probably wrong. The average "yield" of the FTSE-100 is about 3.5%. What "share" are you looking at exactly ?

[simon] wrote: »

I hope i am doing something wrong here because i don't see how anyone can become well off with such small returns.
I was expecting to be able to invest 10.000 and make at least 3 / 4 grand back on top of my investment !

I dont think that is a very realistic in these austere times...

jimjames

[simon] wrote: »

I hope i am doing something wrong here because i don't see how anyone can become well off with such small returns.

I was expecting to be able to invest 10.000 and make at least 3 / 4 grand back on top of my investment !

It is entirely possible to make good returns but you either have to be very lucky buying a share that jumps massively or wait.

Good returns generally come over time, say 5 to 10 years. If your timeframe is one year then savings would be a better option.

fergual2

Hi Simon - Income investing based on yields is just one style of investing. The ideal scenario is get a good yielding share which is stable or rising in share price over time. You then re-invest the yield back into the same or other income stocks for a compounding effect over several years.
So it is really a long distance run versus a sprint of growth stocks which are likely to be more volatile but potentially higher rewards.
A balanced portfolio would be good Income, Value and Growth if you have the capital to spread your funds around.

Linton

[simon] wrote: »

Hello,

...
my first uncertainty is this:

I have read that a "yield" is the rate of return on an investment. Now when i look at the stock exchange web sites the "yields" i see are no more than 9% on an investment.

....

No - "yield" is the dividend rate which is normally paid annually as cash expressed as the annual dividend per share as a percentage of the current share price. It does not include any increase in share price.

In general share Yields are in the range of say 0-6%. I would be careful about anything much higher as it could indicate that the share is considered highly risky and so has an unnaturally low share price as opposed to a generous dividend.

Many investors focus on % gains from increase in share price. This can be anything from -lots to + lots. For example my records show that Thomas Cook shares have increased by 470% in the past 12 months. However they dropped by 84% in the previous year. (An increase in value by about 600% is required to undo a fall of 84%). You need to be very aware of share price fluctuations but admittedly this one is unusually severe.

Hominu

[simon] wrote: »

I hope i am doing something wrong here because i don't see how anyone can become well off with such small returns.

Its possible to get good returns from investments but you have to remember that with higher returns generally comes higher risk.

For example, I made 15% on an investment last year, but this January I noticed the stock price had dropped by 30%. Glad I sold the stock before that happened. Of course, after seeing the drop, I took a chance it was a blip and invested again. My investment has since increased in value by £33, but of course by next month I could be making a loss. Its the way investments go.

Less risky investments I've only got between 2 - 5% gain on.

AlwaysLearnin

[simon] wrote: »

I was expecting to be able to invest 10.000 and make at least 3 / 4 grand back on top of my investment !

You can, but it'll take a few years (unless you happen to be lucky enough to stumble in on a 2009 like bounce back)!

I suggest you need to read quite a bit more before you make any decisions. You may have seen that Tim Hales 'Smarter Investing' is widely recommended here, as is the monevator site.