First time investor

clandestin8

Hi, im looking for a bit of advice. Im looking to invest around £300 into shares. Hoodlessbrennan seems to be the best thing to do this on. I was wondering if anyone could guide me in the best way to use the money, should i buy a lot of shares in one company or split it up between a few? also is it best to just keep the shares for a bit or to keep buying and selling on a regular basis? As this is the first time im doing this should i be looking for cheap shares at first, what price would be a good starting point and how many?

Look forward to your advice

gt94sss2

clandestin8 wrote: »

Hi, im looking for a bit of advice. Im looking to invest around £300 into shares. Hoodlessbrennan seems to be the best thing to do this on. I was wondering if anyone could guide me in the best way to use the money, should i buy a lot of shares in one company or split it up between a few? also is it best to just keep the shares for a bit or to keep buying and selling on a regular basis? As this is the first time im doing this should i be looking for cheap shares at first, what price would be a good starting point and how many?

1. £300 is really too small an amount to invest in shares - with sums that small a lot of money will get taken up in taxes and commission and its not worth it. For instance, if it costs £15 to buy/sell shares on £300, you would need a share price change of 5% just to cover your costs - on investing a bigger sum, the % needed to make a profit falls. £500 or even a £1000 is a much more sensible figure. Also, if you keep trading, a lot of money will go in costs.. so you want to think carefully before you do this.

2. There is no such thing as 'cheap' shares if you mean the share price is 1p or 5p - these 'penny' shares tend to be much riskier than other shares and the chances of a companies share price going from 10p to 20p are the same as from £1 to £2. When you do start investing, stick to FTSE 100 companies that you recognise, BP, Shell, HSBC, Vodafone etc - your money will be a lot safer! Its a classic mistake to think because a share price is a couple of pence its low - thats not the case.

3. Hoodless brennan are not a good choice for investors with small sums of money or who wont trade frequently - if you must trade with smallish amounts, try the Motley Fool Sharebuilder account

4. Before trading, read some of the articles on the Motley Fool and Incademy

Regards
Sunil

Conrad

Clan when I first started out in investing I tried share trading - big mistake. What I should have done is pick big safe companies whos price had dropped - say like M & S or BA, and just held longterm.

I thought I could read a few books and become a share trader - it does'nt work like that. Think about it; Professional Fund Managers all the time produce bad performances, sometimes for year after year, and they have armies of researchers at thier disposal.

In other words you will not do well at trading unless you are an exceptional person with masses of inside info (stuff you read in the paper is always after the event - traders will already have profited from events printed in newspapers).

With that sum of money I would have chosen to stick it in a cash ISA instead.

Good luck.

clandestin8

Thanks guys, some very helpuful info and points to think about. I actually have around £600 but thought id try half first to see how it went but doesnt really look like that will get me too far either. By cheap shares i was thinking around £2-£5. So do you think i should do something else with the money (£600) like a cash ISA like conrad mentioned or would it be worth just investing in shares long term rather than trading?

Thanks again

jon3001

http://forums.moneysavingexpert.com/showpost.html?p=6502756&postcount=11

clandestin8

Thanks Jon, I see they advise around 5 years for these, do you have a rough idea what i could expect in return for £500 if everything went ok?

Thanks

jon3001

That's a tough one! Long term equity returns have been around 10%/yr. But then there is something called volatility which means in any given year it's likely to be in the range of -10% to +30%. Returns are less volatile over time though - which is why at least 5 yrs is usually recommended.

So - hopefully you'd average 10%/yr. In the short term you may do better. In the worst case you'd probably be at least break-even after 5 yrs.

There is some uncertainty in the market right now so you might be better off using the £50/month option rather than putting it all in at once and buying at a bad price. L&G will even let you do £10 x 5 eaach month over the 5 funds I mentioned to spread your risk further.

clandestin8

Thanks Jon, i know its hard to predict things like that but at least you have give me a rough idea of what to expect. Would you say this was the best thing to do with the amount of money im looking to invest? im willing to take a risk or two as well, not sure if thats a good thing or not haha.

jon3001

I think given the amount of funds you have it's a good place to start.

As others have said - direct share investing is going to eat up too much of your funds in charges. And most people are poor stock pickers anyway. Yes - you could pick a junior gold mining company in Kazakhstan and watch its value quadruple quickly. In which case the charges wouldn't matter much and you'll feel like a genius. But such a stock could equally easily go to zero.

There are 'riskier' funds out there which will concentrate or more speculative sectors such as mining/resource companies or China. Usually they would form a smaller part of a balanced portfolio. Again you could invest all your money there but charges can again be an issue. If you go direct to the fund managers they'll probably want 5% before you even invest your money. Funds supermarkets such as Hargreaves Lansdown would invest your money without upfront charges but they probably want a higher investment to take on your business.