Newbie share questions

Linton

bigfreddiel wrote: »

Look at IUKD and ukdv

fj

IUKD is a seriously bad idea for a newbie investor in my view. It is highly risky - it dropped more than 60% in the 2007/2008 crash and hasnt recovered yet. Low fees dont correlate with safety.

sparkychris

All 'newbie share questions' threads go like this! Someone (Like me) who knows nothing about shares but fancies the idea of having a tinker asks how to go about buying a small amount of cheap shares, possibly just for the sport, and everyone tells them to put money in a fund or 'do more research'.

OP doesn't want to put money in a fund. It's boring!

My advice, OP, is to splash your 200 on shares and good luck to you. I have the youinvest app and it's a bit of a headbang getting to grips with the terminology but it's fun checking to see how your shares are doing ten times a day!

littly_kitty

Thanks for all the help with my questions! Out of interest, once you buy a share how do you prove you own it if the platform buys the share in your name and your name doesn't appear in the company registry?


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About funds: as I understand, the pros and cons are as follows:

Pro - Money is invested in a wider range of shares lowering risk.
Pro - Good long term investment (e.g. 10 years+)

Con - You are relying on other people to make investment decisions (some may view their experience as a pro)
Con - Charges eat up profits
Con - Less flexibility. For example, if the fund manager decides to let go of a share, but you think it has long term potential you are stuck with their decision.

Is my understanding correct?

Thrugelmir wrote: »

How many shares have you identified that meet this criteria?

Here are stocks that have ever increased their dividends for the last 10 years:

http://www.dividend.com/dividend-stocks/25-year-dividend-increasing-stocks.php

https://www.etfchannel.com/slideshows/safe-dividends/

http://www.thestreet.com/story/13002167/1/16-rock-solid-dividend-stocks-with-50-years-of-increasing-dividends-and-market-beating-performance.html

Not all of them have a yield of 4%. Most are only at 2%, but if you watch them then historically, they will eventually hit 4% every now and then.

I got the strategy from this podcast:
http://www.smartpassiveincome.com/how-to-invest-passive-income-from-business/

grey_gym_sock

littly_kitty wrote: »

Thanks for all the help with my questions! Out of interest, once you buy a share how do you prove you own it if the platform buys the share in your name and your name doesn't appear in the company registry?

well, you don't usually need to prove it. the dividends will be paid to the platform (where they are credited to your cash account on the platform - or perhaps paid out to your bank account). and you can only sell the shares via the platform - unless you first transfer them out to another platform or to a share certificate.

you can keep records in case of any dispute with the platform. some platforms send paper contract notes. others don't, but then you can download PDFs from their websites. they may also let you download statements in various formats, and in any case you can take screenshots.

About funds: as I understand, the pros and cons are as follows:

Pro - Money is invested in a wider range of shares lowering risk.

yes.

Pro - Good long term investment (e.g. 10 years+)

both funds of shares and individual shares should be long-term investments.

Con - You are relying on other people to make investment decisions (some may view their experience as a pro)

or you can use passive funds, in which the manager is basically following rules (e.g. buy all the shares in a given index), so there are fewer decisions to make.

but are active fund managers better than private investors at picking individual shares? depends on the manager and the private investor. though i would imagine that on average the professional managers are better, before you take into account their charges.

Con - Charges eat up profits

keeping costs down is very important in investing. but there are costs for buying shares directly, too. as has been said, the dealing commissions will be significant for small purchases. with funds, passive funds can be a lot cheaper than active.

e.g. buy £200 of an individual share, and you'll pay a dealing commission of (at aj bell's rates) £9.95, with another £9.95 to pay eventually when you sell.

or put £200 in a passive fund, using a platform which doesn't charge for dealing in funds (which many don't - but everybody charges for dealing in shares), and you'll pay (supposing it's a vanguard lifestrategy fund on the charles stanley direct platform) 0.24% per year for the fund + 0.25% for the platform, a total of 0.49%, i.e. 98p per year (though this will grow as the value of the fund grows).

or put £200 in an an active fund, and it might cost 0.75% per year for the fund, + the same 0.25% for the platform, so a total of 1%, so that's £2 per year. though that doesn't include the internal costs which the fund bears when it buys and sells shares. these are not always disclosed properly. to pluck a figure from the air, perhaps we should add another 1% for that, making the total costs 2%, or £4 per year? (this adjustment doesn't need to be made for passive funds, because they hardly ever need to buy and sell.)

with smaller investments, funds will be cheaper, especially if they're passive funds.

Con - Less flexibility. For example, if the fund manager decides to let go of a share, but you think it has long term potential you are stuck with their decision.

well, that's going back to the question of whether professional active fund managers are better than private investors, and begging it in favour of private investors

littly_kitty

Thanks for all the useful advice! I think I will be looking into funds more.

With a fund, what's the minimum you need realistically to invest to get a good return?

I've seen people say that you need to be investing at least £100 a month for 10 years to get a good return. Anything less than this and the investment either wont grow or could even reduce in real terms.

Is this true? I'd love to hear some opinions on this.

SAHD_Jim

littly_kitty wrote: »

Thanks for all the useful advice! I think I will be looking into funds more.

With a fund, what's the minimum you need realistically to invest to get a good return?

I've seen people say that you need to be investing at least £100 a month for 10 years to get a good return. Anything less than this and the investment either wont grow or could even reduce in real terms.

Is this true? I'd love to hear some opinions on this.

Investing per month "benefits" from what is known as "pound cost averaging". If the fund goes down in value then the next month you buy more for your money and so over, say, 12 months instead of one lump sum, you reduce the risk of buying at the top of the market and seeing the price tumble from there. I put benefits in quotes because obviously there is a chance that you miss buying upfront at the bottom of the market and reaping the most reward, but overall risk is reduced.

Aside from pound cost averaging there is no difference in terms of growth potential between investing monthly or lump sums, and if charges are proportionate to investment amount, the amount of investment shouldn't affect your growth either. Eg if AMC is 1%, it doesn't matter whether you invest £100 or £1000, the AMC is 1% and as long as the fund grows by more than the charges, your investment will grow.

A "good return" is a subjective thing but obviously the more you put in, the more you stand to gain.

Also, if you do want to punt on shares rather than funds, some services offer cheap dealing for a regular monthly amount. You buy the shares once a month at a set time and get pound cost averaging just like you would with funds.

masonic

littly_kitty wrote: »

With a fund, what's the minimum you need realistically to invest to get a good return?

I've seen people say that you need to be investing at least £100 a month for 10 years to get a good return. Anything less than this and the investment either wont grow or could even reduce in real terms.

Is this true? I'd love to hear some opinions on this.

You can buy and sell funds on some platforms without incurring any trading fees, so in that case it doesn't matter how much you invest, you'll get the same rate of growth.

On other platforms where a trading fee is charged, you would need to be mindful of this if you are investing small amounts, since the costs could significantly eat into your returns. For example, if you were charged £10 a trade, that's 10% of a £100 investment.

BLB53

Thanks for all the useful advice! I think I will be looking into funds more.

I think you are making a smart move.

Probably the min. would be £50 pm - be sure to choose a platform like CSD where you do not pay any fee to purchase funds. Vanguard Lifestrategy are useful because they auto rebalance which means you set up your monthly DD and then leave on auto.

Good luck!

bigfreddiel

Thrugelmir wrote: »

I'd be making a capital loss on shares bought 10 years ago (IUKD) and the other doesn't have a 10 year history.

Doesn't seem a particularly good approach to screening.

Does that include divi reinvestment?

Linton

bigfreddiel wrote: »

Does that include divi reinvestment?

If you look on Trustnet....

Over 10 years IUKD is up around 45% with dividends reinvested. The average UK Equity Income fund is up 75% on the same basis. So despite IUKD being wildly volatile it's long term performance is pretty poor too - 4th quartile, 9th or 10th decile. Never mind that, its cheap so buy, buy, buy?!?!?!