new to stocks

Eco_Miser

hksoftware wrote: »

Stocks and shares are practically gambling.
Some people may disagree with that, but unless you've got a LOT of experience investing in stocks and shares, you may as well put your money on the horses.

Nothing like, unless you do day trading.

When gambling on horses, you put up some money, the bookie puts up some money, and after the race one of you walks away with the lot. Zero sum game, and rigged against you.

When investing, you buy a tiny piece of a business (or lots of businesses if you buy a fund). The business makes a profit, and you get your share of that profit, either as a dividend or as an increase in the value of the shares. Positive sum game.

lozzy1965

jimjames wrote: »

I'm afraid I disagree. £500 is fine to be investing in funds and charges are percent so amount doesn't matter if £50 or £50000 so dealing costs are not an issue.

I agree £500 is too small for individual shares but I think £2000 is as well. For a decently diversified portfolio I think you really need £20,000.

I thought it cost at least £25 to even open, or run each year, the dealing account, so 5% of the £500. But I might be wrong. There may be cost free start up/ running cost options?

MikeTX

It very much depends on your time horizon. If you have only a few, say up to 10 years you can buy bonds. Buy 5 year bonds and after they mature, cash face value, coupons and move on.
For long term investments (20, 30+), I would recommend stocks. As a newbie, you can buy low cost index fund, insted of picking individual stocks into your portfolio.

jimjames

lozzy1965 wrote: »

I thought it cost at least £25 to even open, or run each year, the dealing account, so 5% of the £500. But I might be wrong. There may be cost free start up/ running cost options?

Which s&s isa do you have that costs that?

Fund supermarket has no fixed annual fee just a percentage of your balance such as 0.25% so it is perfectly viable for small amounts.

lozzy1965

jimjames wrote: »

Which s&s isa do you have that costs that?

Fund supermarket has no fixed annual fee just a percentage of your balance such as 0.25% so it is perfectly viable for small amounts.

Hi Jim, It's the platform cost I'm talking about. I am in Selftrade - circa £50 a year, dropped if you trade each quarter. iWeb is £25 sign up fee, no ongoing cost. I thought most platforms had an ongoing cost? Maybe some don't for funds? Or one doesn't need a platform?

bigadaj

lozzy1965 wrote: »

Hi Jim, It's the platform cost I'm talking about. I am in Selftrade - circa £50 a year, dropped if you trade each quarter. iWeb is £25 sign up fee, no ongoing cost. I thought most platforms had an ongoing cost? Maybe some don't for funds? Or one doesn't need a platform?

If you have large sums then the fixed fee platforms make sense. If you just have lower value through funds then other platforms are better, I use charles stanley direct at 0.25% charge. No costs for buying and selling but there are the fund costs on top don't forget, so total of 0.5% to 1% for most funds.

JohnRo

lozzy1965 wrote: »

Hi Jim, It's the platform cost I'm talking about. I am in Selftrade - circa £50 a year, dropped if you trade each quarter. iWeb is £25 sign up fee, no ongoing cost. I thought most platforms had an ongoing cost? Maybe some don't for funds? Or one doesn't need a platform?

There's far more to the equation than just purely the cost, didn't we have this conversation before?

A fund might invest in tens, hundreds, or thousands of individual stocks. The costs of obtaining that sort of coverage and risk reduction through individual stock purchase would be truly astronomical if it were even possible at all for a retail customer.

Picking one or two lines of stock and then saying it's better to invest in stocks because they're cheaper, compared to holding a tracker or managed fund charging an admin fee is missing a very important aspect of investment and that is risk.

As already discussed you'd need to purchase several lines of carefully selected and understood individual stocks to have a reasonably diversified and risk adjusted portfolio and that's something that doesn't come easily or cheaply to the typical retail investor with smaller initial amounts and/or regular investing requirements.

gadgetmind

There are two massive mistakes that lose novice (and not so novice!) investors money.

1) Lack of diversity. Holding just a few stocks is very high risk, so you need to use collectives, either funds, ITs or ETFs.
2) Not understanding volatility. Prices go up, prices go down, sometimes they do the latter very quickly with everyone predicting doom and gloom. If you don't understand this, and will panic and sell at a loss, then don't start investings.

There is also an area where these two mistakes intersect, which is lack of diversity between asset classes. If you get this right, you can both reduce volatility (easier on the stomach!) and improve your long term return.

I always recommend "Smarter Investing" by Tim Hale as a good introductory book, but others have their own favourites.

Until you understand volatility (and how to make it work for you rather than against) and the fundamentals of asset allocation and diversity, you might be better off with premium bonds!

C_Mababejive

OP, my view is that with a small amount such as £500 you should not buy shares directly. Its just not enough and i fear it will come to a painful end.

My best advice would be to buy an investment trust such as Perpetual income and growth OR buy via a fund supermarket a good quality well regarded bond fund or shares/bond fund.

lozzy1965

JohnRo wrote: »

There's far more to the equation than just purely the cost, didn't we have this conversation before?

A fund might invest in tens, hundreds, or thousands of individual stocks. The costs of obtaining that sort of coverage and risk reduction through individual stock purchase would be truly astronomical if it were even possible at all for a retail customer.

Picking one or two lines of stock and then saying it's better to invest in stocks because they're cheaper, compared to holding a tracker or managed fund charging an admin fee is missing a very important aspect of investment and that is risk.

As already discussed you'd need to purchase several lines of carefully selected and understood individual stocks to have a reasonably diversified and risk adjusted portfolio and that's something that doesn't come easily or cheaply to the typical retail investor with smaller initial amounts and/or regular investing requirements.

Where did that come from? I'm not suggesting the individual stock route, nor the fund route, though - as before - I would recommend the fund route for small amounts. I have merely been commenting on the costs of investing £500 in the stock market - whether that be funds or individual shares!