First time investor

Nick9967

Hi all I have an 18 year old who starts an Economics Bsc in September and has an interest in investing etc. Any advice on the best way for him to learn with a couple of hundred  quid that can be lost without issue. Clearly he won’t want to wait months or years to see how things move and work? Any pointers would be gratefully received! 

eskbanker

Nick9967 said:

Clearly he won’t want to wait months or years to see how things move and work?

The whole point of investing is that it's a long term activity, so fundamentally it's all about researching, deciding and waiting, rather than experimenting - playing about with a couple of hundred quid for a few weeks won't really illustrate the concepts behind investing, which are far more important than the actual buying and selling....

barnstar2077

As eskbanker says, investing is done over many years, preferably for at least a decade.  There are lots of ads and apps trying to convince people to buy shares in individual companies or crypto currencies, but they are not diversified enough to be right for most investors.

A globally diversified fund inside an ISA or pension held for decades is boring, but compounding growth has been proven to work.  The same way that debt can snowball if it isn't paid off fully can see fantastic gains made after many years in the right investment.

I would suggest they hold off making any decisions until they have finished their economics course and they have a better understanding of the subject and their goals etc.

Aylesbury_Duck

If it's all about learning, why not just "shadow invest", i.e. pick £200 worth of stocks and shares and track their performance?  Your son can see how things move and work without putting any capital at risk.  

OldMusicGuy

What eskbanker said. You don't learn about "investing" by throwing a little bit of money around. The first thing he needs to do is to learn the difference between investing and speculating. If he's going to speculate then he needs to learn how to value companies and understand things like P/E ratios. He should make sure he takes an accounting module as part of his course so that he learns how to understand a set of financial statements so he can do his own research on company valuations. There's quite a lot of books available on company valuation but if he doesn't have some accounting knowledge already it might be tough going. 

If he's interested in investing, he needs to understand the difference between active and passive investing, and how investment vehicles like ETFs and OEICs work, and why diversification is highly recommended by most rather than stock picking. They don't teach you any of this on an economics course (well they didn't in my day....!). But he does also need to know about how the stock market values companies, which ties into my comments above.  

Also, there might be an investment club at his Uni. I know in my day there were competitions where groups of people built "pretend" portfolios and competed against other clubs. Of course they were playing at speculating rather than investing but they might be a good way of meeting other people interested in this kind of thing. 

Adyinvestment

As long as its money that isn't an issue to be lost I don't think it is a bad idea, I am all for the getting stuck in approach

I would use a platform like eToro where you don't pay a trade fee so making lots of small trades is not an issue, it is also very slick and easy on the eye with individual stock research and news easy to find. I would show them the basics (encourage using Google) and then let them get on with it answering questions as you can, probably will lose but the experience may teach a few valuable lessons that could be invaluable later down the line.

Lastonestanding

Just buy £100 worth of shares in two companies that he is interest in, it will make him watch those shares rising and falling and perhaps paying a dividend.
Something like Facebook, Amazon or Google?

Adyinvestment

Just to add to my above post with my sensible head on, eToro also has a large Crypto section so maybe not the right platform if you want to keep them away from that.

Nick9967

Adyinvestment said:

As long as its money that isn't an issue to be lost I don't think it is a bad idea, I am all for the getting stuck in approach

I would use a platform like eToro where you don't pay a trade fee so making lots of small trades is not an issue, it is also very slick and easy on the eye with individual stock research and news easy to find. I would show them the basics (encourage using Google) and then let them get on with it answering questions as you can, probably will lose but the experience may teach a few valuable lessons that could be invaluable later down the line.

That’s my view as well, the money is his, he has worked for it and is interested in the whole subject, what better way to learn I think, he has today put 25 quid on shorting GM on etorro because he's read up on it! We'll see tomorrow what happens, he is learning already and your post confirms my own thoughts so thanks a lot! You know what he if makes a tenner he'll be hooked, if he looses at tenner it won’t break his heart, he’s a clever lad and will make it one way or another! Thanks for your replies! 

barnstar2077

Nick9967 said:

Adyinvestment said:

As long as its money that isn't an issue to be lost I don't think it is a bad idea, I am all for the getting stuck in approach

I would use a platform like eToro where you don't pay a trade fee so making lots of small trades is not an issue, it is also very slick and easy on the eye with individual stock research and news easy to find. I would show them the basics (encourage using Google) and then let them get on with it answering questions as you can, probably will lose but the experience may teach a few valuable lessons that could be invaluable later down the line.

That’s my view as well, the money is his, he has worked for it and is interested in the whole subject, what better way to learn I think, he has today put 25 quid on shorting GM on etorro because he's read up on it! We'll see tomorrow what happens, he is learning already and your post confirms my own thoughts so thanks a lot! You know what he if makes a tenner he'll be hooked, if he looses at tenner it won’t break his heart, he’s a clever lad and will make it one way or another! Thanks for your replies! 

I hope he is doing his homework and it is an educational experience.  I do worry though that for some apps like etorro are a troubling rabbit hole into gambling.

LHW99

Setting up one or more virtual portfolios alongside any real money could also make sense. One could be a global index tracker, one a basket of big tech, one of small company direct shares. Each one could have a virtual £10,000 and he could monitor the volatility, gain / loss over the length of the course.

ii offers this for free: https://research.ii.co.uk/ as does the stock exchange

https://www.londonstockexchange.com/personal-investing/tools/virtual-portfolio-and-watchlist