Am I being mad and stupid with this idea?

EdInvestor

If I had 500 quid and wanted to learn about investing in the stockmarket, what I would do is open an account at one of the very cheap brokers, like Halifax Sharebuilder, where you pay very low dealing costs and then buy 50 quid's worth of shares in each of 10 diversified big UK companies, household names. Each one would be from a different sector, so as to reduce risk, eg one bank, one oil company, one telecom, one pharmaceutical,one utility etc.

Then I'd sit back and watch what happens.I wouldn't buy or sell any of these shares, just observe, and come on here and ask questions every time something happened I didn't understand.

I guarantee anyone who does this will learn a lot about how the market behaves and about how to invest successfully.It will be interesting, and it will not be a high risk thing to do.

Here are top 30 companies for anyone who wants to try:

HSBC Holdings PLC
BP PLC
Vodafone Group PLC
GlaxoSmithKline PLC
Royal Bank of Scotland Group (The) PLC
Royal Dutch Shell PLC
Barclays PLC
Anglo American PLC
HBOS PLC
AstraZeneca PLC
Rio Tinto PLC
Tesco PLC
British American Tobacco PLC
Lloyds TSB Group PLC
BHP Billiton PLC
Diageo PLC
Xstrata PLC
BT Group PLC
BG Group PLC
Standard Chartered PLC
National Grid PLC
Aviva PLC
Unilever PLC
Reckitt Benckiser PLC
Prudential PLC
SABMiller PLC
Imperial Tobacco Group PLC
BAE SYSTEMS PLC
Cadbury Schweppes PLC



There is no real need to do any further research (it will just confuse at this stage)other than perhaps look up the sector of any unfamiliar companies.Just pick your 10, buy and watch.

EagerLearner

Fantastic idea EdInvestor and I will consider this - hopefully Hargreaves Lansdown aren't too expensive to do this with.

My main concern I suppose would be what if the UK is turning to a quiet or even bad time, with interest rate rises and all... most of the UK funds I have looked at in research seem to be slowing or dipping slightly at the mo. I suppose if you knew the anwer to this you'd be very rich (and maybe you are ). Anyway, it is as you say a low risk way of dipping my toe in...

cheerfulcat

HL's charges would wipe you out if you tried this with them, Eager Learner! You'd need to use a cheapo service like the Halifax Sharebuilder and even then you'd struggle to make money...but if you are willing to see the £500 as an investment in your education, it's not a bad idea.

Carnifex

This sounds like an interesting way to try and learn whats happening with the stock market.

Would it be worth buying the shares within a mini stock and shares ISA?

EdInvestor

Carnifex wrote: »

Would it be worth buying the shares within a mini stock and shares ISA?

Most certainly, though not at this point essential.With a fairly small sum like this, a basic rate taxpayer shouldn't have to pay any tax on income or capital gains from this amount. I am not sure whether the Halifax Sharebuilder offers an ISA.The more important issue is to keep the dealing charges as low as possible.

EagerLearner

cheerfulcat wrote: »

HL's charges would wipe you out if you tried this with them, Eager Learner! You'd need to use a cheapo service like the Halifax Sharebuilder and even then you'd struggle to make money...but if you are willing to see the £500 as an investment in your education, it's not a bad idea.

Yes I had a quick peek last night and realised that - *begginners enthusiasm*

cheerfulcat

EdInvestor wrote: »

I am not sure whether the Halifax Sharebuilder offers an ISA.

It doesn't.

Guapa1

If you don't mind losing £500, then go for it!! Good luck.

Browntrout_2

Carnifex wrote: »

This sounds like an interesting way to try and learn whats happening with the stock market.

Would it be worth buying the shares within a mini stock and shares ISA?

Sounds like a complete nonsense way of learning to me.

Why not learn from others instaed of learning the hard way.

Run a virtual portfolio and buy some books on the subject.

Buying a £50 share is pointless, £10 dealing to buy and £10 to sell again.

If you want individual company shares you need to build a portfolio of these minimum £500 to £1,000 each, and about 10 to 16 of them. Much better to invest in portfolios that are already built, i.e Investment Trusts or Unit Trusts.

EdInvestor

Browntrout wrote: »

Buying a £50 share is pointless, £10 dealing to buy and £10 to sell again.

You make my point very well Browntrout

High dealing costs are the reason why anyone with 500 pounds to invest should use a very low cost broker like Halifax,where you pay 1.50 to buy a share, and avoid selling.

This is known as the "long term buy and hold" (LTBH) way of investing: it is the opposite of the "day trading" approach, where much of your profits disappears into the pockets of the brokers via dealing fees.

http://www.halifax.co.uk/sharedealing/sharebuilder.asp