New Share Dealer?!!?

louismeg

Hi all,

I've just been reading the threads and I'm somewhat disheartened. I have friends who have made a lot on cash on shares and they reckon it's there if you want it. Any thoughts?

timesphere

The cash is there, doubling your money in 12 to 18

months can be done, it just requires two things

1 A few hours study each week

2 Not being afraid to take a risk

alared

Yea like Nick Leeson

Pal

It also takes a great deal of luck. The vast majority of people lose money on shares, those who have gained are almost always simply lucky, although they will often try to convince others that they are investment experts.

Remember that people who have been lucky and made money on shares tend to tell others about it, while those who lose money never mention it. This is why many bulletin boards give the impression that there is easy money to be made.

If it were easy, investment management companies would not employ lots of people to invest on behalf of OTHER people. They would simply buy the shares themselves and tell their customers to get lost. The fact that they believe they can make more money from investing other people's money in return for an annual fee should tell you a great deal about how risky investing in shares actually is.

andyyorks

It has been a good time recently to have been trading a few shares.

Read a few good books about it first. Two books that helped me get going were 'The Intelligent Investor' by Benjamin Graham and 'The Zulu Principle' by Jim Slater. The Motley Fool website - fool.co.uk is an excellent free resource with some useful ideas as well (be careful with the advice in the discussion boards as always though!).

Once you have a background knowledge and are happy with an investment approach set up a dummy portfolio for a while and monitor its progress - you learn a lot from doing this.

This all takes a few hours a week as stated above - the more effort you put in, the greater the chance of you being successful. And somehow I don't think you'll be in a Nick Lesson type situation - there are many very careful small investors who do quite well.

cheerfulcat

It also takes a great deal of luck. The vast majority of people lose money on shares, those who have gained are almost always simply lucky, although they will often try to convince others that they are investment experts.

Pal, I'm sorry, this simply isn't true. It was not luck which caused me to become interested in investing in small oil e&p companies a little over a year ago. It was not luck which directed me to invest in high-yielding, under valued shares. It is not pure good fortune that my annual returns have averaged 25%, including dividends reinvested, it's b***dy hard work*. There are plenty of private investors doing very well. I am perfectly happy to admit that I have lost money on individual shares; 75% of my initial investment in one case. But I think that you will find that no experienced investor would risk large amounts of capital in a seriously dodgy stock; for every £1000 of blue chip I might have £100 of blue sky, and overall my portfolio has performed splendidly. I would not call myself an expert; anyone prepared to spend the time on research would get the same or better results.

Speaking of dodgy stocks; I find it interesting that the "professionals" whom you seem to admire piled into a stock ( White Nile ) for which most private investors were employing extra-long bargepoles...

If it were easy, investment management companies would not employ lots of people to invest on behalf of OTHER people. They would simply buy the shares themselves and tell their customers to get lost. The fact that they believe they can make more money from investing other people's money in return for an annual fee should tell you a great deal about how risky investing in shares actually is.

No. It just tells me a great deal about how scare tactics have been employed to frighten people into trusting fund managers with their hard-earned cash. There *are* in fact investment companies which invest in shares, btw; they are called investment trusts.

It really annoys me to see people being deliberately frightened away from handling their own money. Yes, stock markets can be risky and volatile but a well diversified portfolio of shares held alongside other assets will hold its own in almost any investment climate and can be built and maintained by anyone with sufficient time and patience.

Cheerfulcat

* There is no such thing as easy money...

andyyorks

Well said Cheerfulcat.

FangKat

timesphere wrote:

The cash is there, doubling your money in 12 to 18

months can be done, it just requires two things

1 A few hours study each week

2 Not being afraid to take a risk

maybe add a 3.? Keep your nerve esp. when/if a holding suddenly dives in price. Shares can drop for no apparent reason - saw this with one of my holdings yesterday when the price dipped 12 pence and on paper I was 600 quid down. Scoured the rns etc to see why but nothing. Price regained it all today and actually up 2 p as well.

It's good fun playing though.

Jeppo

I have to agree it's great fun buying shares, but don't jump in too quickly! If you do your research carefully and keep your eye out for a bargain you really can make a bit of money. All it requires is a little patience and a lot of learning.

Pal's comments about making money on shares being 'mainly' luck is misleading. It hasn't happened that way for me. It might apply to making short term gains on the market, but in the long run if you invest in good solid businesses which make steady profits you will be fine. You have to accept that markets go down as well as up (even for great companies), but over time investments in the stock exchange pay better returns than cash ISAs or any other investment vehicle.

There has never been an easier time for an ordinary investor to get stuck into the markets. There is a wealth of information out there about all companies listed on the stock exchange and it is very easy to set yourself up with an online execution-only stockbroker (e.g. Hoodless Brennan. First month no charges, then just £7 per trade thereafter + 0.5% stamp duty). On-line communities like the Motley Fool are also invaluable places to pick up good ideas, though you do need to lurk for a while to find people you trust! You soon realise who the dopes are.

Do not be put off by those who say stock dealing is a game of chance, or too complicated. There are plenty of Fund Managers out there who rely on our ignorance to pay their commissions and fees.

If you can't be bothered to do any research about the markets, but would still like to have some exposure to the stock exchange, you could do a lot worse than get yourself an Tracker ISA. These simply track the average returns of the market and are the cheapest funds to buy into, charging less than 1% p.a.

EdInvestor

cheerfulcat wrote:

It really annoys me to see people being deliberately frightened away from handling their own money. Yes, stock markets can be risky and volatile but a well diversified portfolio of shares held alongside other assets will hold its own in almost any investment climate and can be built and maintained by anyone with sufficient time and patience.

Cheerfulcat

Seconded. I too have done it myself, it's not rocket science.

But they won't tell you that, because otherwise how could they charge money for doing it for you?

Everyone who had any money used to buy shares directly themselves 50 years ago. The financial services industry didn't exist in those days.

Maybe this thread should be in the Money Saving Old Style forum

dunstonh

Pal, I'm sorry, this simply isn't true.

I can see where Pal is coming from. I have come across many in the past who have dabbled (some more than others) and have lost money. There are always going to be winners and losers. It is not a one way street.

I have lost count of the number of people who dabbled as the market was high (based on past performance) then pulled out when the market was going down (after making a loss) and swore never to invest on the stockmarket again. The winners were those that continued to invest as the market dropped.

It would be very hard to have made a loss over the last 18-24 months. Returns have been very much on the basis of the more risk you took, the more you made.

Who knows how the next 18-24 months is going to be?