Advice for a total beginner in stock investing

System

It does not take me to a pay wall!! Try this one:
https://www.cnbc.com/2019/06/27/britains-funds-face-scrutiny-as-bank-of-england-blasts-liquidity-lie.html

eskbanker

IanManc wrote: »

Economic wrote: »

And the Bank of England Governor is not a fan of funds:
https://www.ft.com/content/e6d5bf04-980b-11e9-8cfb-30c211dcd229

That link takes you to a paywall.

Economic wrote: »

It does not take me to a pay wall!!

FT content is paywalled but perhaps you have a subscription of some sort (I think they used to offer limited free ones)?

Anyway, it's easily worked round, simply copy/paste the article title (i.e. "BoE governor Mark Carney calls for change to investment regulation" in this case) into Google, and the ft.com link provided allows access, presumably by virtue of some sort of affiliation arrangement with Google (the URL itself appears identical).

seacaitch

steevan16 wrote: »

Due to lack of sufficient knowledge in this field ...

You need to hold onto that thought - lack of sufficient knowledge - and remedy it somewhat, by following some of the excellent pointers suggested above, before taking any action.

It's commonplace for people's first forays into investing to be disastrous because they do reckless, risky things that more experienced people wouldn't entertain. For example, it's not unusual for someone to put more research into their next toaster purchase than they do into some asset they sink thousands or tens of thousands into in the hope of it going up in price.

Disastrous early experiences in investing can put people off for life (I personally know plenty of people this has happened to), which leads to further disastrous consequences for their ability to make adequate provision for themselves later in life...

Consequently, starting off on the right foot could make a very large difference to your life ahead, so putting some effort in to learn some basics now will be very much worth your while.

DrSyn

Economic wrote: »

And the Bank of England Governor is not a fan of funds:
https://www.ft.com/content/e6d5bf04-980b-11e9-8cfb-30c211dcd229

1. From the Guardian:-

Investment funds of the sort run by Neil Woodford need closer scrutiny to lessen the risk that fire sales of assets trigger a market-disrupting feedback loop, the governor of the Bank of England has said.

https://www.theguardian.com/business/2019/jun/06/investment-funds-closer-bank-of-england-scrutiny-mark-carney


2. From the CNBC website it is clear that its about:-

Funds that hold significant proportions of illiquid assets which can be difficult to sell in the event of increased demand for redemption's.

3. I am not a fan of these myself. We do not know what he thinks of the Global Multi-Asset Funds suggested to the OP, for the simple reason they are not of the type of fund he was talking about.

Bravepants

Time to deploy my ever evolving set of beginner bullet points based upon my own experience and non-expert findings (comments/adjustments always welcome)...

Start with bullet point number 1 and then choose other bullets as appropriate, or consider them in order:

• Pay off any non-mortgage debt first, then

• Start with 3, 6 or 12 months outgoings (maybe even swap the word "outgoings" for "salary") as an emergency fund in some sort of (or several) instant access account. Find out about current accounts, regular savers etc. and the interest rates they provide. With all savings and investments use the principle of "pay yourself first", that is, put money aside when you get paid, not at the end of the month saving what's left over - because there probably won't be!

• Make sure you have any cash needed for expenditure in the short term, such as house purchase deposit, replacement car, wedding (don't overspend on this) etc., and

• Figure out how your work pension works, and how much extra your company contributes for any additional contribution you make, pensions (work, private or SIPPS) are particularly good if you are a higher rate tax payer. On the subject of pensions…

• Be very aware of pension transfer scams! Even the ones that mention bone fide financial companies. Anyone promising you "guaranteed" returns is likely a scam artist, especially if the returns they are promising are double figure percentages, i.e. 10% or more! Remember you cannot, and nor can anyone on your behalf, legally take money out of a pension before pension age!

• Buy or borrow a copy of Tim Hale's "Smarter Investing", and once you have point 2 and point 3 in place:

• Check out www.monevator.com, particularly the passive investing section, and,

• Read up about the tax advantages of Stocks and Shares ISAs and SIPPS, and

• If considering retiring early check out www.mrmoneymustache.com and https://theescapeartist.me for inspiration, then

• Stash as much as you can, monthly (taking advantage of "pound cost averaging"), in a global index tracking fund , or a multi-asset index fund (or fund of funds - read up online about these). As you get older switch to funds that contain a lower percentage of equities and higher percentage of bonds (read up online about these, but Tim Hale talks about it too) depending on your tolerance for risk. Keep it simple and stick to one or two funds until you have £100k or so.

• Whatever fund(s) you plan to invest in make sure you don't pay too much in annual fees; a good passive index fund should be around 0.5% or so, including platform charge, active funds (those managed by humans) are around 1% to 1.5% but try to keep close to 1%. In no way pay 2% in annual fees for any of your investments!

• If having considered the above you are unsure about making your own investment decisions then seek the advice of an IFA (Independent Financial Advisor) - the word "Independent" is very important here, avoid Financial Advisors who want to sell you a product owned by the company for whom they work!

• Learn about the concept of a "phased" retirement, using certain pots of money to carry you through periods before work pensions or SIPPS become payable at Normal Retirement Age (often referred to as "bridging the gap") and/or think about actuarial reduction if appropriate.

• Learn to use Microsoft Excel (other spreadsheet software is available) and write yourself a retirement planning spreadsheet, and finally…

jaybeetoo

DrSyn wrote: »

4. Beginners should avoid Investment Trusts......

What utter tosh!

steevan16

Thanks everyone for your sage advice. Let me do some research and get back to this thread.

Hypothetically speaking, if I were to invest in CNDX (not very big amount to begin with, instead an amount I am mentally prepared to lose), as a UK resident and taxpayer, what would be my next step? As i said, I will not be trading regularly, instead just invest and forget about it for a few years come what may.

To be entirely honest, 10 years ago, on someone's advice I invested £1200 in Northern Rock when it was going through turmoil and eventually lost all of it and then stayed away from investing in the last 10 years, but now I thought, money is not earning much in banks (in fact it's earning nothing at the moment) so thought why not invest in funds/stocks with due diligence. hence I am here.

Thanks.

Steve D'Souza

Malthusian

Economic wrote: »

What a foolish suggestion! I bet many beginners who invested in Woodford funds wish they had bought investment trusts instead.

That's like saying that you bet a guy who crashed their car wished they bought a motorbike instead.

Other things equal, investment trusts are more complicated, higher risk and require more research than OEICs, so it is perfectly correct to suggest a beginner should stick to unit trusts and OEICs until they have more knowledge. Beginners are less likely to understand how the discount/premium mechanism could cause the markets to go up but their fund to go down, or spot that their investment trust is geared and/or split-cap and in a downturn could lose all their money.

JohnRo

jaybeetoo wrote: »

What utter tosh!

I don't entirely disagree but it's not that simple, they are potentially if not actually a higher risk structure than open ended structures.
Closed ended trusts are suited to illiquid assets in particular but also to more liquid stocks.

Someone investing as a total beginner is unlikely to understand even the most basic concepts of investing much less the various benefits and additional risks generally and specifically to a particular IT structure.

Expecting things like gearing ratios, borrowing costs, premiums & discounts to NAV and how rising and falling markets compound those elements to amplify valuation gains and losses; not to mention revenue reserves etc; to make any sense to a new invester is a bit of a stretch. It's a lot to take in at first.

A lot of additional moving parts to get to grips with over and above understanding what the underlying assets are and why they're worth holding.

Expecting a genuinely new investor who may not even be financially switched on or particularly interested, to get to grips with and have an understanding of all that is a tall order.

While it may not be off limits and certainly isn't rocket science, IT investing does require some additional understanding of the various mechanics at play and their inherent risks.

Malthusian

steevan16 wrote: »

Thanks everyone for your sage advice. Let me do some research and get back to this thread.

Hypothetically speaking, if I were to invest in CNDX (not very big amount to begin with, instead an amount I am mentally prepared to lose), as a UK resident and taxpayer, what would be my next step?

CNDX as in the NASDAQ 100 ETF? Why not a global tracker?

To be entirely honest, 10 years ago, on someone's advice I invested £1200 in Northern Rock when it was going through turmoil and eventually lost all of it

Losing all your money is normal and expected when you invest in individual shares, especially ones that have plummeted in value recently because of the risk of them going bust.

Over the past ten years you tried an ultra-ultra-high-risk investment and lost a lot of money, then oscillated to minimum risk and spent ten years losing a lot of money, and are now oscillating again to extra-high-risk by considering an investment in the top 100 companies in NASDAQ.

You are likely to save money and a lot of stress if you skip further oscillation and consider a medium-risk multi-asset global tracker fund rather than gambling on a particular ETF.