What and how much do you need to know when buying individual shares?

krish123

I was just interested in how much information and what exact info you need to be able to successfully invest in single shares?


In the future I may want to do this with small amounts of cash say £500. But before I do so I want to be well informed as to how to pick a good investment.


Im also interested to know the potential risk to reward with buying single shares. For example my £500, how much could I potentially make from this in reality and how quickly?


finally are there any goods sites which help you choose a good investment and help you buy a reliable investment?

DiamondLil

krish123 wrote: »

Im also interested to know the potential risk to reward with buying single shares. For example my £500, how much could I potentially make from this in reality and how quickly?

How long is a piece of string.....?
You might do better to ask how much can you potentially lose from this in reality.
There's lots of reading on here and someone far more knowledgeable than I will be along soon to give more pointers.

masonic

With £500 and an aim of picking "a good investment" in a single share, the best advice would be to buy a fund. Betting on the fortune of a single company is quite a gamble, you should really be spreading your money between a dozen or more. The trading fees you'll pay buying shares will make that prohibitively expensive. Funds are much better suited for small sums.

Linton

Investing in single shares with only a small amount of money is very risky. With small company shares if you were pretty lucky you could get 100% overnight, if not you could lose 100% overnight. So it really is impossible to say. Effectively random variation will be far more significant than any average return.

If you want to increase your wealth rather than just play I suggest you invest in funds where your money is pooled with thousands of other people's and invested in a wide range of shares - far more than you could reasonably hope to buy as a small investor. Then the average return would begin to mean something as any failure would only be a very small % of your investment.

With a sensible choice of funds you could perhaps average 5-10% annually, though with large fluctuations. Some years you might make 20% others lose 20%. So investing is for the long term - dont plan on using the money soon, certainly not less than 5 years time.

Archi_Bald

OP, some basic reading seems to be in order. E.g. https://www.moneyadviceservice.org.uk/en/articles/investing-in-shares

http://magicalpenny.com/five-reasons-not-to-invest-in-single-shares/

https://www.barclaysstockbrokers.co.uk/investments/Stocks-and-Shares/Pages/why-choose.aspx

krish123

thanks for the replies guys.


I already have invested in a fund Vanguard LS 80 Fund.I just wanted to see if I could perhaps select my own shares as an additional investment on the side, however it looks like with a small amount of money there is a lot of risk in doing this.


I am currently drip feeding money into the VG fund so it will be interesting to see how my investment grows (that's if it does grow at all).

badger09

krish123 wrote: »

thanks for the replies guys.


I already have invested in a fund Vanguard LS 80 Fund.I just wanted to see if I could perhaps select my own shares as an additional investment on the side, however it looks like with a small amount of money there is a lot of risk in doing this.


I am currently drip feeding money into the VG fund so it will be interesting to see how my investment grows (that's if it does grow at all).

With small amounts, you are much better investing in a fund/funds.

If you're keen to experiment with individual shares, why don't you open a practice account? Your current platform might provide one. Then pick some shares, and see how they perform. Nothing to lose;)

Of course, you might do spectacularly well. If so, please don't come back and curse us all for dissuading you

Ryan_Futuristics

Seeing as the "average" investor only makes about 2%/annum (and that's probably bumped up considerably by index and fund investors returning 10-12%), you need to know at least what a Piotroski Score and a Graham Number is, know how to value a company, and ideally have run enough backtests to know how markets behave

Most traders will use Screens to help identify good value or growth prospects ... Things like Stockpedia can even show you what stocks Buffett or Graham might pick in the UK today
http://www.stockopedia.com/screens/

Then a common approach in the US is simply to buy "billionaire" stocks - look at Warren Buffett's portfolio (or Neil Woodford, although tbh you probably want to be doing it more with conviction investors who only hold a handful of stocks) and buy one of his holdings ... You'll be following the crowd, and won't get huge growth, but these tend to be companies which can maintain good long-term performance

colsten

Ryan_Futuristics wrote: »

Then a common approach in the US is simply to buy "billionaire" stocks - look at Warren Buffett's portfolio (or Neil Woodford, although tbh you probably want to be doing it more with conviction investors who only hold a handful of stocks) and buy one of his holdings ... You'll be following the crowd, and won't get huge growth, but these tend to be companies which can maintain good long-term performance

except if the company is Tesco....
and other exceptions, such as BP

krish123

badger09 wrote: »

With small amounts, you are much better investing in a fund/funds.

If you're keen to experiment with individual shares, why don't you open a practice account? Your current platform might provide one. Then pick some shares, and see how they perform. Nothing to lose;)

Of course, you might do spectacularly well. If so, please don't come back and curse us all for dissuading you

Good point no harm in setting a practice account and see what happens.

krish123

Ryan_Futuristics wrote: »

Seeing as the "average" investor only makes about 2%/annum (and that's probably bumped up considerably by index and fund investors returning 10-12%), you need to know at least what a Piotroski Score and a Graham Number is, know how to value a company, and ideally have run enough backtests to know how markets behave

Most traders will use Screens to help identify good value or growth prospects ... Things like Stockpedia can even show you what stocks Buffett or Graham might pick in the UK today
http://www.stockopedia.com/screens/

Then a common approach in the US is simply to buy "billionaire" stocks - look at Warren Buffett's portfolio (or Neil Woodford, although tbh you probably want to be doing it more with conviction investors who only hold a handful of stocks) and buy one of his holdings ... You'll be following the crowd, and won't get huge growth, but these tend to be companies which can maintain good long-term performance

Yes my main line of investing will be through funds as they are relatively safe and I have time on my hands.


yes I was wondering whether you could just copy successful investors surely you wouldn't go to far wrong with going down this route?