Minimum amount for investing in shares?

kendun

Hello everyone,
As the subject says I am interested in finding out what you would normally recommend as the minimum for investing in shares directly.I have invested in a couple of funds recently and would like to step into shares as well.I do not want to invest more than £2000 at a time since that's pretty much the maximum I can invest in one go.Investing in funds would expose to me to shares from various companies,but I would like to slowly build up a portfolio of shares if I can eg starting with banking sector etc.I met an experienced investor at the local library who said that investing anything less than £5000 would not be ideal.I am trying to get into shares for the long term rather than a few years,so I wasn't sure as to whether to stick to funds itself since that I could invest in two funds of £1000 each.I probably would be able to save £2000 over a period of 4-5 months and then invest.It must be a small amount for most people on this board,but then that's what I can afford.Would value your views/opinions.Thank you for reading through my post.

gt94sss2

If you are buying shares in an individual company as a 'one off' I would suggest that a minimum of £1,000 would be sensible. £2,000 would be better but there is no need to go as high as £5,000 a trade - most private investors who trade shares will be investing less than £5,000/trade

The key to deciding what you believe would be a sensible figure is to realise that the costs of buying and selling an individual shareholding is likely to be in the region of £25-30 in total from an online stockbroker.

The means if you buy shares worth £1,000, they only need to go up by around 3% before you cover your dealing costs - if you trade using a smaller amount the % needed to cover your costs jumps and in reverse, if you invest more/trade the % to cover your costs drops..

The above is the traditional advice anyway

These days, there is one other option - and that is if you want to invest smaller amounts in shares more regularly.. - there are now 'cut price' services which limit the days on which you can trade and unlike the 'full price' offerings you don't know exactly what price you will get in advance - however, they only charge £1.50/trade to buy shares and its still the normal price of £10-15 to sell shares whenever you wish though. An example of this type of service is the TMF Sharebuilder account (which is actually run by the Halifax)

Buying shares for only £1.50/trade or so enables you to deal in much smaller amounts without the % of the sum invested becoming to great.

There are some reasonable guides to shares/terms etc at:

Digital Look
Incademy
Motley Fool

The Motley Fool also has some very useful discussion boards that I suggest you look at.

Regards
Sunil

Aegis

kendun wrote: »

Hello everyone,
As the subject says I am interested in finding out what you would normally recommend as the minimum for investing in shares directly.I have invested in a couple of funds recently and would like to step into shares as well.I do not want to invest more than £2000 at a time since that's pretty much the maximum I can invest in one go.Investing in funds would expose to me to shares from various companies,but I would like to slowly build up a portfolio of shares if I can eg starting with banking sector etc.I met an experienced investor at the local library who said that investing anything less than £5000 would not be ideal.I am trying to get into shares for the long term rather than a few years,so I wasn't sure as to whether to stick to funds itself since that I could invest in two funds of £1000 each.I probably would be able to save £2000 over a period of 4-5 months and then invest.It must be a small amount for most people on this board,but then that's what I can afford.Would value your views/opinions.Thank you for reading through my post.

If this is likely to be your entire portfolio and you aren't determined to invest in specific companies then sticking with funds for the moment might be a better option for you. That way you can diversify as much as you need to even with the fairly small portfolio you're talking about. Investing in funds through Hargreaves Lansdown would be effectively free for the most part (i.e. initial charges invariable rebated and ongoing charges usually included in the performance levels of the funds partly rebated) and by using a slightly sneaky little trick you can avoid the £1000 minimum investment in funds requirement and can diversify as you see fit.

takoo

Hi Kendun

Horses for courses or vice versa. I try to keep to about £500 a shot but went up to £1000 on an investment trust once (!). It went down from £1 to 28p. Its now 75p. Fortunately my long term view is correct (I dipped in again at 5000 for 28p). I'm 'hoping' it will be £3 in 5 years.

Firstly: Don't worry about how little. Watch for trends and the future - really long term 10 to 25 years is my perspective. I make errors, eg liquidating most of my oil shares before the boom. India and the Far East (not Japan) were in my sights 10 years ago - with good results.

Secondly: If I had not traded I would now have a lot (sadly not) but overall the enjoyment of researching and making decisions made it worthwhile.

Thirdly some say keep to 10 shares others say more. I am a 'morer' but the effort to monitor is higher than I could cope with at crucial times!!

Illness made me realise it does not matter anyway. So I am more relaxed and getting towards being a 'tenner'.

One important tip (which I paid no heed to) If a share doubles (or whatever higher - recoup your investment. If I had done so I would not have suffered investment losses - merely gains losses.

If you can follow the twaddle you mwy percieve some hard learned lessons!

Good luck

Takoo

kendun

Thank you Sunil,Aegis,Takoo for the detailed replies.I probably would look at buying shares of ftse 100 companies with good dividends eg lloyds or shares which have potential to increase in price eg tesco to cover the dealing cost.I have bought high risk funds like JPM nat resources and alliance bric,so want to buy low risk shares to balance the risk.I am thinking about 5 to 10 years atleast for investing so am considering high risk funds(emerging markets) and low risk shares.Have been reading about P/E ratio,dividends etc and getting to grips with the details of shares.I dont think this is a technical investing plan,but reckon it might spread the risk.Looking at overall returns of low risk funds and low risk shares,the returns on the shares seem to be higher despite the dealing charge and hence I am thinking about investing in low risk shares.Hope I'll get good returns on the high risk funds in the long term.
Thank you once again for answering my query

Aegis

kendun wrote: »

Thank you Sunil,Aegis,Takoo for the detailed replies.I probably would look at buying shares of ftse 100 companies with good dividends eg lloyds

LLOY dividends aren't much above the level you might receive if you went for a high-interest savings account, and are worse than a good cash ISA at the moment. I had Lloyds shares until recently and decided to get rid of them because they had failed to grow significantly compared with the parent index in about 2 years and the total returns were a lot worse than I could get elsewhere with lower total risk.

Please don't take this to mean that I think they're a bad buy or anything, I just don't rate them as a good option for "safe" investing simple because I think that financials are unlikely to do well any time soon in the current environment, and I don't think the dividend is good enough to offset the low growth potential.

Still, if you believe that these are a good buy, then go for it and best of luck!

or shares which have potential to increase in price eg tesco to cover the dealing cost.

Don't know much about Tesco, so no comment.

However, as a slightly tongue in cheek commentary on the safety of FTSE100 companies, I feel it's important to bring up this graph:

http://uk.finance.yahoo.com/q/bc?s=NRK.L&t=6m&l=on&z=m&q=l&c=

Unfair perhaps, but still something you have to be wary of when investing in even seemingly safe companies.

I have bought high risk funds like JPM nat resources and alliance bric,so want to buy low risk shares to balance the risk.I am thinking about 5 to 10 years atleast for investing so am considering high risk funds(emerging markets) and low risk shares.

The problem with shares is that they are much higher risk than unit trusts, investment trusts or OEICs in the same sector, simply because if anything happens to that one company, you bear the full brunt of it rather than only a fraction of any decline in value.

Have been reading about P/E ratio,dividends etc and getting to grips with the details of shares.I dont think this is a technical investing plan,but reckon it might spread the risk.Looking at overall returns of low risk funds and low risk shares,the returns on the shares seem to be higher despite the dealing charge and hence I am thinking about investing in low risk shares.

The low risk shares are higher risk than the low-risk funds for the reasons I explained above.

Hope I'll get good returns on the high risk funds in the long term.

I'm hoping the same

Good luck to both of us!

kendun

Hi Aegis,
You have clarified all my queries and potential questions,thank you very much.
Lets hope the high risk funds do well in the future and good luck to both of us.:)