Stocks and Shares ISA potential loss

AnotherJoe

jober wrote: »

I was aware on the first point, yes, so all good on that front. I'm not using a managed account to disperse my shares, but rather doing lots manually, so effectively the same thing, just me doing it.
Cheers for your reply.

It's not the same thing at all as your costs will be orders of magnitude higher and therefore your returns correspondingly lower, especially if buying manually each time rather than on a regular deal where at least you get a discount on buying costs.

ValiantSon

Ray_Singh-Blue wrote: »

You can definitely lose more than you put in.

Imagine you buy shares in a company for £50. The company doubles in value, so your shares are worth £100. Then the company goes bust, so your shares are worth nothing.

You lost £100.

No, in that scenario you would have lost £50, as that is the capital sum.

Ray_Singh-Blue

Q) I have a dozen eggs. Someone steals them to make an omlette. How many eggs have I lost?
A) 12

Q) I bought a single fertilised egg, and the chick that hatched grew into the hen that laid the dozen eggs, that someone stole to make an omlette. How many eggs have I lost?
A) 12

mollycat

Ray_Singh-Blue wrote: »

Q) I have a dozen eggs. Someone steals them to make an omlette. How many eggs have I lost?
A) 12

Q) I bought a single fertilised egg, and the chick that hatched grew into the hen that laid the dozen eggs, that someone stole to make an omlette. How many eggs have I lost?
A) 12

What kind of omlette is it Ray?

Freecall

bowlhead99 wrote: »

I do agree of course that if you get your £50 up to £100 then it is best to think you have £100 and invest that £100 wisely rather than thinking it's only £50 of yours and a load of 'free money' - that mindset can lead to some higher risk judgements

But in the above scenario, did you really lose £100 of cold hard cash? You lost the ability to be able to sell the shares for £100 (less costs of sale), but you haven't lost more cash than you gave them - your gain was all theoretical until you actually tried to sell it, so you're only out of pocket by £50 even though you could have replaced the £50 and had money left over, if you'd got out while the going was good.

If I go to a casino and buy £50 of coloured chips, and get some more chips due to good results, but then make some bad choices, I might walk away having just lost a £100 hand of cards but I haven't really 'lost' £100. I'm back at my start point less £50. If I had taken £1000 of casino credit and lost that too, then I could have lost £1050. Presumably OP''s concern is that he could lose more than he put in and be on the hook for losses beyond the capital he put up (i.e. owe another £1000 on top of it). That only happens if you're using leverage / borrowing or spreadbetting, contracts for difference etc to buy more shares than the value of your account suggests.

MSE is at it's best when threads get into the philosophical rather than simply the financial.


Your point (which is in itself a valid one) fails to consider time.

Put in £50, rises to £100, falls back to £50..... nothing lost.

Now, I have been investing since the 1970's. Investments bought for a few pounds are now in the thousands and funding my retirement.

Try telling me that if they reduce back to just a few pounds I will be no worse off in what you call 'cold hard cash' terms.

:eek:

Ray_Singh-Blue

mollycat wrote: »

What kind of omlette is it Ray?

A free omlette

IanManc

Ray_Singh-Blue wrote: »

A free omlette

You didn't have to feed the hen then?

Is it a magic hen?

:rotfl::rotfl::rotfl::rotfl:

Ray_Singh-Blue

It was free to the person who ate it.

However I think your point is tangential to the argument.
Q) I have a normal hen that lays 12 eggs that get stolen. I have a magic hen that lays 12 eggs that get stolen. How many eggs are stolen in each case?



This could get silly so I better stop

bowlhead99

Freecall wrote: »

Try telling me that if they reduce back to just a few pounds I will be no worse off in what you call 'cold hard cash' terms.

:eek:

Sure, but that's not exactly the context in which OP is working.

OP: "Hey, I just put £50 into the stock market to have a bit of a flutter. I don't really know what I am doing. Can I just check, is there a risk I'll lose more than the £50 I'm willing to put in?"

MSE reply: "If you make good/ lucky investment decisions you might turn that £50 into £1000 over the years. And then if you make bad decisions or have bad luck thereafter, you might lose all the £1000 because investing carries risk. So, yeah it's quite possible that you'll lose more than £50. In the scenario I'm envisaging, you could lose 20x your original stake"

OP: "Oh crap, I didn't want an investment product that exposed me to risk beyond the £50 I can afford to gamble on stockpicking, I certainly can't lose £1000. I'd better close the account and accept whatever losses I get.!"

Introducing that train of thought is not useful to the OP as it deliberately misinterprets what he is trying to do, to teach a lesson about not investing recklessly with hard won gains, which was not what he was looking for.

Technically you can lose more than you put in. Because you can lose what you put in *and* any gains you make that you don't cash out. But as you can't end up worse off than losing your entire stake (other than the time value of money eroding your uninvested capital), I think the OP is quite safe to play with a £50 stake that he can afford to lose.

IanManc

Ray_Singh-Blue wrote: »

It was free to the person who ate it.

However I think your point is tangential to the argument.
Q) I have a normal hen that lays 12 eggs that get stolen. I have a magic hen that lays 12 eggs that get stolen. How many eggs are stolen in each case?



This could get silly so I better stop

You can't make a magic omelette without breaking magic eggs - as no one's granny used to say, ever.

:beer: