How do you select your Shares/Funds?

andyb_sv

Hi all,

I've been lurking on this section for a while now and have been reading various websites/blogs that have been suggested for those new to investing in shares/funds.

I'm just wondering how you hear about shares or funds that you then begin to research and possibly buy into? So far I've just been looking at the suggestions on various websites and on the threads on here?

I also recently read a thread that suggested that 2k isn't really enough to get a suitably diverse portfolio, does everyone really save up 10k or so minimum before they start investing? I'd only invest money that I can afford to lose/don't mind losing (too much) and I'm looking to invest for a minimum of 15 years probably starting with 2k or so then investing about £200 a month with an extra £500ish from my bonus money every quarter.

Oh my emergency fund/pension etc is sorted, this would just be purely a top up as it interests me.

Thanks,

kidmugsy

"How do you select your Shares/Funds?"

I aim at double top.

Linton

My approach is that you start off by deciding what investment types/geographies/industries/company sizes and in what approximate proportions one wants to invest and then find a set of funds that together achieve the objective. The decision on allocation I believe is far more important than what particular funds you happen to choose.

At £2K I suggest you start off with a general global fund. This should provide a reasonable starting point covering a wide range of investments. For this purpose I am happy with the Vanguard Life Strategy funds, though there are plenty of other options. https://www.trustnet.com is a good source of data on funds and what they invest in. One factor to look at is the cost of investing in your chosen fund with your chosen online broker.

Once you portfolio has grown beyond say £5K-£10K you can then begin to look at choosing more focused funds to give you a coverage that meets your needs in terms of risk/volatility, timescale and personal preferences and interests.

Note that I am purely talking about funds. Because of the higher chances of any one company failing, to invest safely in individual shares requires a much larger sum of money - perhaps £30K to get £2K each of 15 shares. In my view individual shares are more appropriate for an experienced investor to meet specific needs.

evening2005

andyb_sv wrote: »

Hi all,

I've been lurking on this section for a while now and have been reading various websites/blogs that have been suggested for those new to investing in shares/funds.

I'm just wondering how you hear about shares or funds that you then begin to research and possibly buy into? So far I've just been looking at the suggestions on various websites and on the threads on here?

I also recently read a thread that suggested that 2k isn't really enough to get a suitably diverse portfolio, does everyone really save up 10k or so minimum before they start investing? I'd only invest money that I can afford to lose/don't mind losing (too much) and I'm looking to invest for a minimum of 15 years probably starting with 2k or so then investing about £200 a month with an extra £500ish from my bonus money every quarter.

Oh my emergency fund/pension etc is sorted, this would just be purely a top up as it interests me.

Thanks,

I'm not a financial advisor, so take this with a pinch of salt!

I would look at the Monevator blog, which is a *very* clearly written site that focuses on UK investments. That site has two authors (plus guests occasionally). One author ("The Accumulator") focuses on passive investing. I would recommend that you read as much as possible about passive investing on the site and start from there. It's particularly worth reading the series on their passive portfolio to see how they are going about it. The other author ("The Investor", who originated the site I believe) often talks about the fact that he likes active investing, although he advises people to follow The Accumulator's (passive) example. The comments on the articles are usually very informative too.

I highly recommend having a look at the site for the quality of writing, which is strikingly good in my opinion.

IronWolf

I start with a long list of 100+ companies, usually from a screen for basic things like low debt, high ROI.

I then go down the list one by one and research them.

Ifts

I usually go with my gut feeling when choosing shares to invest in, mainly from what you see going on in the economy and when you are out and about.

Good to have a watchlist of shares and then when the shares are at a value when you feel comfortable buying at go for it (usually when shares take a general hit due to bad economical news) as they have been marked down for the wider bad news rather than anything affecting the company that you have been watching (usually a good time to get in).

You have to have conviction in why you believe in a certain share and then sit back and be patient (SP may even go down before rising).
Two examples from my portfolio are WH Smith and Sports Direct. IIRC back in 2008 I went to my local WH Smith store and saw the Post Office that had shut in my town had been located at the back of my local Smiths store (they started with 6 WH Smiths stores and then rolled it out across more stores), I thought that people using the Post Office would have to walk through the WH Smiths store and possibly spend money in the Smiths store too which would be a good thing for WH Smiths SP so I bought in.
Sports Direct was mainly due to their 'stack them high and sell cheap policy', which in the recession was a winner for me as more and more people would be tightening their belts and moving away from the likes of JJB sports and JD Sports (the former Sports direct took over many of their stores when they entered administration) I bought some SPD in 2010. Also like how Sport Directs buys out sports brands and then is able to make a better profit on these brand items selling them through their existing stores and internet presence.

I get pointers from newspaper/internet articles and ideas from other forum users (Motley fool is a good site) inc here on MSE, also Monevator blog is good and easy reading, then if I think I would like to invest in that company I dig deeper into their business workings and numbers.

Shares in the FTSE 250 that are doing well and are likely to be promoted to the FTSE 100 are also ones I like going for (SPD & EZJ were two that I was holding that moved into the FTSE100 recently).

I don't do funds myself only shares, but the consensus on these investment forums is if you only have little to invest you are better off with funds to spread the risk, which if I was starting off investing today I would do myself.

ChesterDog

Contrary to received wisdom, I started with individual shares.

I built up a portfolio of more than 30 UK 'Steady Eddies' - successful, big companies that paid good dividends consistently and were big enough to take hits and bounce back.

Then I researched funds and fund managers. I chose good performing funds from successful managers in a diverse range of sectors. Almost all of my funds (around ten) have been first quartile performers in the last 5, 3 and 1 years.

Then I broadened the scope by filling in some sector/geographical gaps with a handful on investment trusts and finally padded the whole thing out with some cheap Vanguard ETFs.

All of that portfolio was built up in the reverse order to the norm. That's partly because I learnt and discovered as I went along, but also because I am very bad at taking advice from anyone. :-)

The most important aspect - every single purchase has been one I intended to keep for a very long time. The exception to this is a handful of IPOs that I started dabbling with recently for fun. Tinkering costs money. Choose carefully, buy well and keep it, is my mantra. Plus, diversify, diversify, diversify, but not into high-risk stuff.

Edit: I think I am also unusual in holding a large reserve in cash (more that I have invested). I also invest away from the stockmarket - property, peer-to-peer and so on. Excluding pension funds (which the company manages for me, but on which I keep a close eye), I always have more in cash than invested. But that's just me... :-)

andyb_sv

Thanks for all of the advice, I'm definitely in it for the long haul so if things take a turn for the worse I'm quite happy to ride it out. I've got a couple of books on my Christmas list to add to my reading material.

I'll start off with a fund but I've got a feeling I'll put some small amounts in individual shares as I like the research and wouldn't want to be a completely passive investor.

IronWolf wrote: »

I start with a long list of 100+ companies, usually from a screen for basic things like low debt, high ROI.

I then go down the list one by one and research them.

If you don't mind me asking, how do you compile the list in the first place?

Thrugelmir

I built my portfolio primarily on investment trusts. Now it's reached a size. Where I can hold sufficient value in any one share to make it worthwhile. So I'm diversifying. There's little point in paying a fund manager to manage holdings in companies such HSBC, Standard Chartered etc.

IronWolf

andyb_sv wrote: »

Thanks for all of the advice, I'm definitely in it for the long haul so if things take a turn for the worse I'm quite happy to ride it out. I've got a couple of books on my Christmas list to add to my reading material.

I'll start off with a fund but I've got a feeling I'll put some small amounts in individual shares as I like the research and wouldn't want to be a completely passive investor.



If you don't mind me asking, how do you compile the list in the first place?

I use a stock screener like https://www.screener.co or https://www.portfolio123.com

I run a variety of screens, some are looking for companies selling below their tangible book value, others are looking for strong companies with high return on equity. I almost always limit debt to 2x EBITDA and try to focus on small caps as they are less followed by institutions.

Ologhai

Or, you could choose stocks at random:

http://monkeywithapin.com/.

Don't assume I'm joking.