Fidelity

masonic

barmeysmb1 said:

For arguments-sake - putting aside all the 'no guarantees' etc - what are the gotchas here ?
ie - is it hard to sell that many shares ?
      - my assumption is that £20 is the total cost to buy / sell the shares (£10 buy all 10,000 / £10 sell all 10,000)

It depends on the share. I've sold >£20k of a popular Vanguard ETF without any trouble at all. Whereas if you were trying to sell £20k of an obscure small company share, you may struggle. You may also have stamp duty to pay when you buy, depending on the share.

Needless to say, if you are planning to invest £10k per share, and you have a newly opened S&S ISA, it might take you a few years to build up a portfolio that isn't horribly unbalanced.

barmeysmb1

Thanks Masonic  - as an example, TUI AG looks appealing, given that airlines usually recover well from events such as those of recent.

tropic_of_Username011

barmeysmb1 said:

I buy £10k worth, of one share type only, at £1 per share, so £10,000 shares - yes totally against advice.
For buying that, Fidelity will charge £10 (Fundsmith charge)
And that share price doubles in price 10 days later (just for example) - so i then decide to sell.
For selling that, Fidelity will charge £10 (Fundsmith charge)

So at this point,  now - i've got £20k, less the £20 charge = £19,980

Presumably you meant "dealing commission" when you said "Fundsmith charge"??

For most UK shares, you also pay 0.5% stamp duty (a tax) when buying (but not when selling). So that's another £50.

Buy and sell orders are sent to a market maker, who has higher prices for buying than for selling, because they are in it to make a profit. For a very big company, the difference would usually be less than 0.1%; for medium companies, it could be as much as 1% or 2%; for tiny companies, it could even be 10% or more. This difference is called the bid-offer spread.

If stamp duty is the biggest cost, then you're dealing in a big enough size. Apart from the size of purchases and sales, the other thing you need to do to keep dealing costs under control is not to deal too frequently.

Because although shares can double in 10 days (or go bust ), the average return from shares is more like 5% to 10% a year. If your total costs to buy and sell again are a bit under 1% (including 0.5% stamp duty), that will eat into your returns a lot if you sell after only a week (since the average return in a week is perhaps 0.1% to 0.2% before costs — i.e. less than your costs to buy and sell again). But if you hold for many years, the buying and selling costs will be a small part of your likely total returns.

So buying individual shares is feasible if you both have £100,000+ to invest and hold each share for many years. You can of course do it without meeting those conditions — but it's gambling, not investing, if your expected costs are higher than your expected returns before costs; or if you don't diversify properly (e.g. just buy 1 share). Some gamblers win, some lose; but the essence of gambling, as opposed to investing, is that the odds are against you.

tropic_of_Username011

barmeysmb1 said:

Thanks Masonic  - as an example, TUI AG looks appealing, given that airlines usually recover well from events such as those of recent.

What do you know about TUI's finances? It's never sensible to buy a share without checking its financial postion. Because even if the business will recover eventually, if it has too much debt then the shares could be wiped out first, and the company's creditors could end up owning the business.

barmeysmb1

Thank you tropic_of_Username_011 - i know the business reasonably well

Stamp duty is an interesting point - how can i see this ahead of buying shares via Fidelity as i have not seen any SD related costs in any illustrations so far ?

masonic

barmeysmb1 said:

Thank you tropic_of_Username_011 - i know the business reasonably well

Stamp duty is an interesting point - how can i see this ahead of buying shares via Fidelity as i have not seen any SD related costs in any illustrations so far ?

TUI is in the FTSE main market, so stamp duty at a rate of 0.5% will be payable on your purchase. Shares that trade on the FTSE AIM market, and ETFs, are exempt from stamp duty. Most brokers will display relevant charges as well as the share price when you get a market quote.

I sincerely hope you aren't intending take a punt on TUI with your first £10k of investment money.

barmeysmb1

Thanks masonic, the thought had crossed my mind - but more of a 'what if' question, in a sense to better educate myself with the wisdom from experienced members here.

i know this sort of trade goes against all advice - i'm really fascinated by the whole shares investment and realise some of these things aren't as clear to the less experienced (such as myself) so more of to understand the ins and outs of it all.

For example - the general expectation is that longer term shares will rise, so taking TUI for example, which historically have traded shares at a much higher value, buying now whilst low, logically speaking, to the un-experienced, would appear a "bargain"

Of course, like Thomas Cook (and others) - they could go bust, which is quite feasible - and that's the risk i see.

To be perfectly honest - a decision such as this would probably be killed off by analysis-paralysis on my part - but i'd like to understand if there are other factors i should take into account or is it purely just the gamble i mentioned ?

I supposed this is the other factor, as mentioned by another poster in this thread

"Because even if the business will recover eventually, if it has too much debt then the shares could be wiped out first, and the company's creditors could end up owning the business."

Alexland

It seems travel firms will be in a fight for survival. Don't underestimate the impact of bookings going negative (as more customers try to unbook than place new orders) while still having the normal costs to pay each month. Siimilar to the banks a decade ago many will need cash bailouts and in return the existing shareholders will be diluted and end up owning a smaller proportion of a less valuable asset. Markets go up eventually because they are diversified but individual companies and sectors can become persistent dogs.

tropic_of_Username011

barmeysmb1 said:

For example - the general expectation is that longer term shares will rise, so taking TUI for example, which historically have traded shares at a much higher value, buying now whilst low, logically speaking, to the un-experienced, would appear a "bargain"

The major flaw in this is that there is no general reason for shares to go back to a higher price they used to trade at. If we generally expect shares to rise by roughly 5% or 10% a year, that means from the current price, whatever it may be.

It may be the case that the recent falls of stock markets have increased the expected returns, starting from the now lower prices, for shares generally. This would be the case if the falls are greater than would be justified by the economic effects of coronavirus alone. It's plausible that this is the case; though bear in mind that there's never any definite figure for expected returns — various people try to estimate it in various ways, but even when they approximately agree, they can still end up a long way out from the actual returns that transpire.

However, even if shares generally are indeed better value (i.e. have higher expected returns) now, it very much does not follow that the shares which have fallen the most are the best value. It's pretty obvious that travel companies, for instance, will be hit harder than the average business by the effects of the virus (including behaviour changes due to it). So hardly surprising that they've fallen further than shares generally.

barmeysmb1

Thank you - very interesting insights given on this thread from posters, really appreciated
Still a lot i'm trying to wrap my head around - learning a bit more each day !