Stockmarket newbie

kayfaz

I have tried to research a lot on the stock market and the more I research the less I know!

So I figured the only way to get a good feel of the stockmarket and understand it better is to buy some shares. I understand the risks involved and ready to take the gamble with £500.


I'm in IT so was looking to buy some shares in the technology sector.

What's the best way to start this up?

After talking to a few friends, they suggested I look into Hargreaves and Landsdowne and Barclays Stockbrokers. Are there any better alternatives for a newbie with relatively low fees for smaller transactions?

jimjames

If you've never invested before then buying small amounts of single company shares is a very risky plan and, in my view, a bad idea.

Unless you can invest £50,000 in a mix of shares then you're better off using funds. You can get technology funds so you could get them if it's an area you're interested in. But having just that sector would again be high risk especially if you're employed in it too, any downturn may affect employment as well as your investment.

I guess overall it depends if you want to build an investment portfolio to grow long term or are just looking to gamble where the risk of losing your money is high.

gkerr4

good stuff - go for it! I think if you have the inclination and the curiosity then its a great thing to do.

it is the only way to learn - ignore the ones who say you'll lose your shirt (even if you do) and certainly ignore anything that says you need to start with £50k - thats ridiculous!

read some more though and beware that at £500 your costs (spread, dealing costs and stamp duty) will be a high % of any gains (or magnify any losses) you make. With that in mind, you need the cheapest execution-only broker you can find - i think theres one who does it for £5 per trade X-O or something. I use iii. and shareprice.co.uk The latter charges £9 if you use a mobile device. Its unlikely that Barclays will provide the lowest cost service, but i could be wrong.

do read more - the book "the naked trader" by robbie burns is a great starting place i think> i read it a couple of years back - even though i'd been trading / investing for some time then. He has a very good way of explaining and logically setting out the homework you should do on each stock that you consider. its also very easy to read (or listen to - i got the audiobook for the car)

pathtofreedom

I have started to learn passive investing with funds which is different to what you're doing. From what I understand though you have to think about what you want out of it. So are you picking a company with a good record of high dividends so it doesn't matter if you lose some of the 500 if their share price drops as the dividend income helps balance it out. Or are you picking someone with lower dividends and betting they are the new big thing and their share price will go up. If it is the latter how long are you thinking of holding the investment for, as if it is a year or two or three and that doesnt happen, and the dividends don't even cover the fees how long will you hang on, or keep adding more shares to it before you cut your losses. Do you know if it drops to a certain price, or rises to a certain price that will be when you sell. Are you a hrt payer and are you doing this within an isa as the tax might also take a chunk of your profit from the dividends too.

jimjames

gkerr4 wrote: »

good stuff - go for it! I think if you have the inclination and the curiosity then its a great thing to do.

it is the only way to learn - ignore the ones who say you'll lose your shirt (even if you do) and certainly ignore anything that says you need to start with £50k - thats ridiculous!

Glad you're so gung-ho about it all.

When you have a mix of people on here who think stock market is too risky and others who claim to have "had their fingers burnt", then to me it seems only right to actually explain the risks involved so anyone understands what they are getting in to.

Buying shares in a single company exposes you to the risk of 100% loss. Buying funds in say the FTSE 100 does not and could cost as little as 0.06% rather than the much higher percent for trading. Is it not reasonable to highlight that?

enthusiasticsaver

I would have to agree with jimjames in that I think individual shares is risky to invest in if you are totally inexperienced unless you would be ok with losing the lot if the technology sector takes a big hit in the next few years. I am not sure what you would learn from that other than taking that approach is just like gambling and you may as well stick it on a horse. I would also think that buying individual shares is expensive and if you do not buy them within an isa you are going to have to keep tax records.




I am new to investing as well and agree that the best way to learn is to take the plunge with investing as there is such a wealth of written information out there and it does seem the more you research the more you understand that there is no one size fits all in terms of investment strategy and it becomes a bit overwhelming. To that end I am starting with dipping my toe in the water first by investing in a multi asset global fund which is low cost, very easy to set up and does not involve massive risk (although of course there is some).

Happytravelling

I know the feeling- the more answers you find, the more questions arise too.

I have dipped my toe into the world of investing this year, but have gone for a couple of funds to spread the risk plus this doesn't seem to swallow up as much in charges.

I've gone with TD Direct, there's a 0.3% platform fee on the ISA (plus £30 annually if you don't meet one of their other conditions, but I've set up a regular payment to avoid this). To be honest though, I just really liked the fund selector tool. Its easy to narrow down what options are in the field that you want to invest in. I don't know how this compares to the (seemingly) million other providers but it felt like I could have spent my life reading and never making an investment!

gkerr4

jimjames wrote: »

Glad you're so gung-ho about it all.

When you have a mix of people on here who think stock market is too risky and others who claim to have "had their fingers burnt", then to me it seems only right to actually explain the risks involved so anyone understands what they are getting in to.

Buying shares in a single company exposes you to the risk of 100% loss. Buying funds in say the FTSE 100 does not and could cost as little as 0.06% rather than the much higher percent for trading. Is it not reasonable to highlight that?

its not gung-ho - its about being mildly adventurous - he/she (the OP) has expressed an interest in share trading - i say go for it. Ive done very well over the past 17 years on individual shares. I started with a £500 investment - me and a mate went £500 each and bought a £1000 holding. I'll admit i can't remember how it went, but we good profits over the years before "going it alone".

Its only in the last few years, now my portfolio is of a significant size, that I've bought a "fund" for one of my ISA accounts so that it requires less watching and maintenance. and even then its only an ETF! (actually two - a dividend payer and a tracker).

Ive never had a 100% loss - there are ways to investigate debt that allow you to manage the risk of a total, sudden loss - it still happens, and maybe I've been 'lucky' - but to me there s too much negativity on individual shares. i don't think its "that" difficult - i think people who are interested can learn to make money on the markets. Not every time, not every share you pick will 'win', but overall, its possible to make good gains on individual shares.

ChesterDog

It all depends, OP, whether you are interested in the stock market for trading/speculating/excitement/fun, or for investment.

Linton

Buying a small number of individual shares is highly risky, but the only way to really understand investing is to do it. To feel rather than just watch the highs and lows as the market moves. I guess most of us started in that way and learnt the lessons. So I think that with £500 it could be a good educational experience. Research the shares, choose the ones you like and see what happens. It may cost you a bit but the education could well be worth it. Then go back to the books with a better understanding and start your investing again.

moneyfoolish

gkerr4 wrote: »

its not gung-ho - its about being mildly adventurous - he/she (the OP) has expressed an interest in share trading - i say go for it. Ive done very well over the past 17 years on individual shares. I started with a £500 investment - me and a mate went £500 each and bought a £1000 holding. I'll admit i can't remember how it went, but we good profits over the years before "going it alone".

Its only in the last few years, now my portfolio is of a significant size, that I've bought a "fund" for one of my ISA accounts so that it requires less watching and maintenance. and even then its only an ETF! (actually two - a dividend payer and a tracker).

Ive never had a 100% loss - there are ways to investigate debt that allow you to manage the risk of a total, sudden loss - it still happens, and maybe I've been 'lucky' - but to me there s too much negativity on individual shares. i don't think its "that" difficult - i think people who are interested can learn to make money on the markets. Not every time, not every share you pick will 'win', but overall, its possible to make good gains on individual shares.

I don't disagree with you if you're wanting some excitement with a relatively small amount of money but the other advice given is equally valid as it's true investment advice. I well remember buying my first stock back in about 1978 when a friend and I each put in £500 (which was a not inconsiderable amount in those days) and bought a stock purely on a newspaper recommendation. It was a well known toy maker called Mettoy and went into receivership in less than a month after we bought it if my memory is correct! We were less than happy!