Lloyds TSB Share dealing- any good?

Ifts wrote: »

Don't rush into things. Read up and learn as much as you can before you part with any money.

This is sound advice, and there's plenty of decent information in the rest of that post.

But I wouldn't necessarily go along with the advice to read the Naked Trader, and set up a 'play' account to practice. Trikidy is looking to invest in shares, but I assume not looking to give up the day job and make a living buying and selling shares several times a week. While it might be quite fun to hear about why Robbie Burns thought a particular share was good at 1.80 and how he could sell it a month later for 2.20 - most on here will tell you that if you don't have a lot of experience of the markets, buying shares in a company is an investment to be considered over the medium term, and other than perhaps setting a 'stop loss' price, you should be able to ignore daily price movements.

Therefore, while it can be fun to see how a theoretical basket of shares performed over the last week, month or three, and it can be quite educational to see how much even the 'safer, big company' shares can move up and down on a very short timescale, it's not a particularly useful guide to how they will perform over the 6 months after you actually buy them for real.

Markets are quite volatile at the moment and may still be after a year. If your preferred share goes up 10% in two months while in your pretend account, perhaps this validates your investment choice, although you actually just missed out on 10% growth and maybe a dividend and it's now a less attractive proposition. If it went down 10%, well you saved some losses; are you going to wait until every share you like hits rock bottom, and how will you know when they get there?

I would try to get some education first (the Ben Graham book was written 60 years ago but still has sound advice), research the companies you're considering (read all their news announcements, financial results and press) and then take a punt for a small investment on your two or three favourite companies using a low cost broker, without investing thousands in those companies. Watch them, follow their news and after a year or so, you can look back, re-research the companies and try and understand how the prices moved like they did. But you will at least have been invested for a year and it's not just a fantasy share portfolio, so you actually care.

For most people, the eggs in one basket approach of picking individual companies is only done once you already have cash savings, and investments in less risky holdings of investment funds and bonds. By all means, try some shares, but if you want to invest say £3000 this year and you have never bought individual shares before, you could buy 2 companies x £500, and 2 funds x £1000.

The shares could of course be 2x £250, but as you saw, the dealing costs can really add up for small trades. If you buy £250 of shares and pay £1.25 stamp duty and £10 broker fee, that's 261.25. Then sell the same day for £248 (there's always a spread between buy and sell prices), and pay £10 to sell - you get £238. On your 261.25, you've lost 9% even with the share price standing still. Of course the share price might go up by 50% in a year which is perfectly possible with some companies, but those are the ones where it might also go down by 50% or more.

Good luck!