Stocks and Shares

bigmaddaz

Hi All,

Quite new to this forum although have been reading it for some time. Im a student going into my second year of university and have just under £1000 to put into stocks and shares. Can some one give me some pointers of what to look out for? Any good advice? and maybe things to steer clear from.

Thanks,

Darren

cheerfulcat

Hi, Darren,

Assuming that this really is "spare" money ( in which case, well done! There aren't many students in your position ) my main advice would be - don't put it all in one place. Also, use a cheap online broker like Squaregain

http://www.squaregain.co.uk/

or the Halifax Sharebuilder

http://www.halifax.co.uk/sharedealing/sharebuilder.shtml

to minimise the effect of costs on your investment.

As for choosing the shares themselves; you need to do some reading before you start, but as a general rule, stay away from penny shares ( the ones that cost less than 50p ) and be wary of internet bulletin boards favourites until you know a bit more. It might be best to avoid AIM shares as well, for now. The safest shares to start with are in the FTSE 100.

Have a look here -

http://www.fool.co.uk/lrninvnov.htm?ref=jump_page

and here -

http://incademy.com/pages/home.htm?ginPtrCode=10002

and "How to Invest £1000" -

http://www.fool.co.uk/news/Comment/2004/c040603a.htm?ref=monthly

HTH

Cheerfulcat

Edit: You will see that the last article seems to take a different stance from mine, encouraging AIM and small cap investment. I would agree with the idea of investing in riskier assets when you know a bit more.

masonic

bigmaddaz wrote:

...Im a student going into my second year of university and have just under £1000 to put into stocks and shares....

Are you sure you can lock this money away for 5+ years? I was in a similar position and decided that there was no way I could tie my money up in the stockmarket until I had a regular salary coming in and was reasonably financially secure.

bigmaddaz

Thanks very much for the help, yes it just happens to be just under £1k that I can tie away for a few years.

cheerfulcat thanks for all the info that is very helpful, ill spend some time reading over those websites and taking in everything you said.

Thanks again!

jamesp_3

Hi bigmaddaz.

I was in the same position as you about 6 months ago. I had £1500 sitting in a savings account that i fancied playing with. However, by nature if i do something i like to do it properly so i spent a while researching different site and information to decide what the best route to go down was.

The problem i found was that £1500 wasn't a lot of money to play with on the Stock Market. Interactive Investor - http://www.iii.co.uk/ - have a really neat feature which you can use when you set up a virtual portfolio (which is free when you register). Its called 'Profit Point' and it lets you enter the number of shares you could buy and the price you will pay and it lets you know at what price you will start making a profit on the shares. It takes all commissions and stamp duty into consideration which a lot of people forget to include when working out their share profits.

Now, if you follow the general rule and purchase a FTSE 100 share (i will pick BSKYB as an example). With £1000 i can buy 172 shares (current price 567.50). The profit point calculation then works out that taking everything into consideration, the price must go up to 581.97 (+2.64%) before you even break even. To make a £22 profit the price must go up to 595.25 and to make a £120 profit the price must go up to 651.75. You then have to look at trends and the state of the company to decide wether its worth the risk over 3-5 years. However, if you play with £10,000 the profit point is lower (price need only go up to 571.50 to break even). Alternatively, you can try to play with a lower value share or not one in the FTSE 100. However, bear in mind that if you purchase share in more than one company the above is even worse as you pay a commission on each sale, if i was to buy £500 worth of BSKYB the price must go up to 593.06 (+4.6%) to break even!

One of the best things i did was to play a virtual share dealing game. The one i used was https://www.bullbearings.co.uk. They give £100,000 virtual pounds to play with and you can trade in any company using real time data. Its a real hoot to play with friends/work colleges. However, it really illustrates how hard it is to make a profit. I only traded with £1500 to see if i could make a profit. In 6 months my portfolio is down to £1200. Thank god its not real money but theres nothing to say that in 9 months that won't go up to £2000.

My overall conclusion was to keep the money in a savings account with the view of moving it to a cash isa at some point! In the future i may dable but it will only be with money i wouldn't mind loosing.

Jim

bigmaddaz

thanks for the help everyone! This has really helped me look at this in a better light

allanhamer

Dont overlook the "old" Unit Trusts!! they automatically spread your investment for you within investment and borrowing powers regulations laid down by the FSA. Obviously there are many different fund types. Make sure you go via a supermarket or other broker who can get you a large discount on the initial charge. Above all do your research or have a word with a reputable IFA. You are of course affected by charges and each type of UT will have its own risks dependent on the type you go for. Smaller Co's will be higher risk than a bond fund for example. The charges are what you pay for having a good fund manager look after the fund on your behalf Of course if you go straight for stock market investment you may not be able to spread your risk as much with having only £1000 to put in, but the potential short term gains MAY be better than with a unit trust providing you pick the right stocks of course!! hehe. Either way make sure you weigh up all the risks and do some research, plenty of magazines are available or online info showing the best Unit Trusts in each sector over 1 3 and 5 years or more usually.

Hope that helps
Allan