Shares for the beginner

[Martin_M]

Hi everyone,

Having read a good view threads on here regarding stocks and shares, there are clearly some very experienced people in this field on here.

Personally, I know very little about shares but wouldn't mind investing small (say a few hundred pounds) and then building this up as time goes on.

I'll need to do a lot more research before buying any but I was just wondering if there really is any point if I'm starting at such a low level? I'm not looking to make a quick buck and would be prepared to build up the number of shares over a number of years.

My second question is with regard to what company to invest in. I realise people could make suggestions all day long so I was wondering if there is a good website to refer to in particular?

You may laugh at me here, and this may show my complete inexperience, but could buying some shares in the likes of Rangers Football Club at a time when things are very uncertain at the club, be a shrewd move if the situation drastically improves and the club returns to its former glory or would only an idiot take such a chance?

Any advice appreciated - as I say, I'm a complete novice with an interest in this.

Cheers

Martin

[NicD]

Wait till the market retraces a bit, as its near a high.

[Martin_M]

Stupid questions but the share price for Rangers seems to be £30.50 but when you look at the following site they are charging £125 for one:

http://www.buyrangers.org/

Am I missing something?

[Lynch91]

If you don't know what you are doing then you're probably best investing in a fund rather than in individual shares. Although the minimum investment is usually £500 in a fund, have a look at hargreaves lansdown wealth 150 funds and you should be pretty safe

[Condi]

Martin_M said:

Am I missing something?

Yes. Publicaly traded shares in Rangers FC might be £30, but the website is a supporters club allowing you to pay £125 in support of the supporters clubs attempt to take over Rangers FC. If that makes sense.


I would suggest you do lots of research of look at funds, although they still need research too. HL, as mentioned, highlight certain funds in the Wealth 150 thing, but I dont have much time for them. The performance of the 150 funds are no better than other funds, and some are very poor.

[megaphone]

Unfortunately a few hundred pounds is not really enough to really make buying individual shares worth while. There are charges involved, for instance Hargreaves Lansdown charge £11.95 for a 'trade'. There are cheaper alternatives but they often depend on volume of trades, HL goes down to £5.95 but only after 10 trades IIRC.

Then there is always a 'spread' on the buy and sell price, e.g. you but a share for 120p, it's sell price is 118p. So already your down on the trade before the share has moved in value.

There is also Stamp Duty to pay on trades, usually 0.5%, but only on trades over £1000 in value.

Ideally you need a 'portfolio' of shares, so all your eggs are not in one basket, so charges can soon add up.

Edited by megaphone on Monday 10th March 09:24

[walm]

megaphone said:

...lots of sensible stuff...

Buy a FTSE tracker in an ISA and forget about it.
"Doing loads of research" into a few stocks won't make you Warren Buffett, unfortunately.

Unless you are simply looking for a hobby.
In which case, work out how much money you are happy to spend on a hobby and then invest that and watch it all disappear into fees and bad investment decisions/poor market timing...

[iphonedyou]

walm said:

Buy a FTSE tracker in an ISA and forget about it.
"Doing loads of research" into a few stocks won't make you Warren Buffett, unfortunately.

Unless you are simply looking for a hobby.
In which case, work out how much money you are happy to spend on a hobby and then invest that and watch it all disappear into fees and bad investment decisions/poor market timing...

You're advocating buying a FTSE tracker at this point in time?

Probably says it all, really.

[pteron]

iphonedyou said:

walm said:

Buy a FTSE tracker in an ISA and forget about it.
"Doing loads of research" into a few stocks won't make you Warren Buffett, unfortunately.

Unless you are simply looking for a hobby.
In which case, work out how much money you are happy to spend on a hobby and then invest that and watch it all disappear into fees and bad investment decisions/poor market timing...

You're advocating buying a FTSE tracker at this point in time?

Probably says it all, really.

What would you buy instead?

[walm]

iphonedyou said:

walm said:

Buy a FTSE tracker in an ISA and forget about it.
"Doing loads of research" into a few stocks won't make you Warren Buffett, unfortunately.

Unless you are simply looking for a hobby.
In which case, work out how much money you are happy to spend on a hobby and then invest that and watch it all disappear into fees and bad investment decisions/poor market timing...

You're advocating buying a FTSE tracker at this point in time?

Probably says it all, really.

Not sure what "all" is in this case.

My mistake though - obviously he should be investing 100% into a micro-cap football club about to go into administration.

I am not trying to make a comment on market timing - I was merely suggesting that picking stocks is for mugs who just want to enrich Hargreaves Lansdown.

The discipline from regular saving into a very cheap tracker can save you a LOT of money.
Firstly on trading costs and secondly by definition you will outperform more than 50% of the fund managers - what is not to like.
Sure you may have to average down but get something going NOW - the earlier you start saving the better.

Out of interest did you sell out of the FTSE when it hit an all time high in '95 at 3,500?
That would have been a GREAT decision!

[iphonedyou]

walm said:

Not sure what "all" is in this case.

My mistake though - obviously he should be investing 100% into a micro-cap football club about to go into administration.

I am not trying to make a comment on market timing - I was merely suggesting that picking stocks is for mugs who just want to enrich Hargreaves Lansdown.

The discipline from regular saving into a very cheap tracker can save you a LOT of money.
Firstly on trading costs and secondly by definition you will outperform more than 50% of the fund managers - what is not to like.
Sure you may have to average down but get something going NOW - the earlier you start saving the better.

Out of interest did you sell out of the FTSE when it hit an all time high in '95 at 3,500?
That would have been a GREAT decision!

Yes, because the only alternative to investing in a FTSE tracker is investing in a micro-cap football club about to go into administration. If ever there was a situation for a rolls eyes smiley, eh? If you genuinely believe those are the two alternatives, then you've explained how you've arrived at the erroneous, and massively sweeping generalisation that 'picking stocks is for mugs'.

I don't, and never have, invested in a FTSE tracker. Definitely not in 1995, I was only 9 years old! Given where it's at currently, I'm really not sure I see a convincing play there, particularly at the level of capital OP is talking about.

I do agree that earlier is better, though! Longer time frame obviously minimises variance.

Edited by iphonedyou on Monday 10th March 15:38

[BoRED S2upid]

If your serious spend 6 months with a virtual trading account and see how you do with virtual money before you risk your own. If you just want to experiment I would say don't spend more than you can afford to loose and buy something you know. It's easier to follow the progress of something like Tesco or British Gas than an obscure South African copper mine!

If you want to gamble go for penny shares I own several thousand shares in a company called fortune oil not that I'm recommending them but it's fun to say you own thousand of shares in something rather than 10 shares in something bigger.

[walm]

iphonedyou said:

If you genuinely believe those are the two alternatives, then you've explained how you've arrived at the erroneous, and massively sweeping generalisation that 'picking stocks is for mugs'.

I have arrived at the generalisation that "picking stocks is for mugs" through ten years as a professional stock picker, initially as a Global TMT sector specialist and for the last six years as a European generalist.

Perhaps the most obvious and salient lesson I have learned in 10 years: IT IS NOT EASY!

What experience have you got that suggests that picking stocks is NOT for mugs.

More specifically to the OP - what information do you have that blowing up to 10% of your AUM on trading fees will help outperform?

Or given your vast swathes of investing experience, perhaps you should make an original suggestion, rather than rubbishing everyone else's without offering an alternative.

[iphonedyou]

walm said:

I have arrived at the generalisation that "picking stocks is for mugs" through ten years as a professional stock picker, initially as a Global TMT sector specialist and for the last six years as a European generalist.

Perhaps the most obvious and salient lesson I have learned in 10 years: IT IS NOT EASY!

What experience have you got that suggests that picking stocks is NOT for mugs.

More specifically to the OP - what information do you have that blowing up to 10% of your AUM on trading fees will help outperform?

Or given your vast swathes of investing experience, perhaps you should make an original suggestion, rather than rubbishing everyone else's without offering an alternative.

I don't really know what to make of your opening gambit. Are you saying that after ten years you weren't able to pick good stocks? Surprisingly frank, and a commendable admission.

You're quite right that picking stocks isn't easy - but then, I know of not a single person in this thread that intimated otherwise, let alone said so explictly. So I'm not sure who you're addressing with that point, and will thus leave it at that.

As for evidence that picking stocks isn't a mugs game - you're obviously not suggesting that sustained returns are solely the product of luck, so can I ask what you do ascribe the profit to? If, as you suggest, every one of the people making decisions on what to pick - including, presumably, the technically driven side of the business - are mugs?

That's a genuine question.

[pteron]

Can anyone really pick stocks reliably?

I recall reading (I think it was last year) that there was a bit of a hoo-ha in the city because a survey found that a significant proportion of the active fund managers had their own money in trackers.

[Condi]

pteron said:

Can anyone really pick stocks reliably?

Very very few. Even the best will accept that a significant proportion will fail and most would define success as having more winners than losers.



Advocating that someone with a few hundred quid can make a profitable, economic return by investing in selected shares is silly advise. Funds are a good option, and a simple FTSE tracker will outperform most picked funds over the long term, as well as being a cheap way of investing in many companies.

[Hungrymc]

Be very cautious of looking for and taking advice. There is no formula or model that 'works'. A great deal of judgment involved and I'm much more comfortable knowing my reasons for investing or trading as opposed to following internet chatter.

You really need to be open to the possibility of losing lots (if you're chasing big wins) and losing some (if you're playing in apparently safer territory). You also have to factor in the fees / duty / tax etc as well.

I enjoy trying to interpret the general news and company news and looking for opportunities. I'm not making huge gains at it but I enjoy it and am learning lots. I think the virtual portfolio idea is a good one (although I wasn't patient enough and jumped in)

Best of Luck !

[-Pete-]

If you follow some of the advise on here you may loose some money

A few hundred pounds is probably not enough, it might be better to stick that into a pension or regular saver account. If you do want to invest, then a stocks & shares ISA gives you tax free growth, that's 20-40% better than investing without one. Personally I prefer funds, cheaper to trade than shares, and it spreads the risk. I chose TD Waterhouse, but they're all quite similar.

What really eats into your investment is the costs, and these are mainly paid when you buy or sell. So try not to buy/sell too often, think mid-long term. The second thing to remember with share tips is that everyone runs in the same direction and it becomes self-fulfilling, right until the bubble bursts and you lose your money. Sheep mentality... you need to make your own decisions.

The best advice so far is to play at buying shares or funds for 6 months, whilst sticking your real money into an instant access savings account. Keep a spreadsheet showing what you bought and sold, at what price, and include the trading costs. Also look at the FTSE100 index at the start and end of the period. After 6 months, see if you've outperformed the FTSE100, or even made a profit at all.

[Sideways Rich]

walm said:

I have arrived at the generalisation that "picking stocks is for mugs" through ten years as a professional stock picker, initially as a Global TMT sector specialist and for the last six years as a European generalist.

Perhaps the most obvious and salient lesson I have learned in 10 years: IT IS NOT EASY!

What experience have you got that suggests that picking stocks is NOT for mugs.

More specifically to the OP - what information do you have that blowing up to 10% of your AUM on trading fees will help outperform?

Or given your vast swathes of investing experience, perhaps you should make an original suggestion, rather than rubbishing everyone else's without offering an alternative.

Apologies for slight thread hijack,

Walm, agree with your sentiment that contributing to an index tracker over a long period something like one of the Vanguard ones with charges of 0.25% is a good plan. With the FTSE currently near all time highs how would you physically do this, ie better to go for a monthly contribution vs a lump sum upfront to benefit from pound cost averaging?

[walm]

iphonedyou said:

I don't really know what to make of your opening gambit. Are you saying that after ten years you weren't able to pick good stocks? Surprisingly frank, and a commendable admission.

As I said, I have been doing this for 10 years. That includes only one major down-cycle.
The real mark of a stellar stock-picker is the ability to make money in both down and up markets.
It is probably too early to tell whether I can do that.
I have certainly generated alpha up and down but how much of that is luck vs. skill is a very very difficult call to make.

iphonedyou said:

You're quite right that picking stocks isn't easy - but then, I know of not a single person in this thread that intimated otherwise, let alone said so explictly.

You clearly implied that investing in a FTSE tracker was a bad idea.
Obviously, there are plenty of alternatives.
You weren't explicit but from your tone I inferred that you were suggesting the OP would be better served picking individual stocks, with no experience and with a roughly 10% headwind to performance owing to trading costs relative to sums invested. (Since that is what he suggested doing in the OP and you did nothing to discourage him, merely rubbished my suggestion. Call it tacit agreement with his plan, as I read it.)

If picking stocks was easy and say a 20% sustainable return realistically achievable for the amateur then that advice would make sense and the OP's original plan a good one.

Clearly I must have mis-interpreted your "advice" but since you just made unfounded snide remarks it was difficult to read between the lines.

iphonedyou said:

As for evidence that picking stocks isn't a mugs game - you're obviously not suggesting that sustained returns are solely the product of luck, so can I ask what you do ascribe the profit to? If, as you suggest, every one of the people making decisions on what to pick - including, presumably, the technically driven side of the business - are mugs?

That's a genuine question.

Other than Buffett and a handful of fundamental stock pickers (Graham, Lynch, Soros, Icahn, Einhorn, Loeb, PTJ, Robertson, Paulson etc...) I really don't see much of these alleged "sustained returns".
Paulson is a good example - he called the credit crunch and made and unfathomably large amount of money with that one bet. Since then his record has been patchy at best (think Sino-Forest and gold miners!). I think it remains to be seen whether he is a genuine great.

I think the quants can probably generate alpha on a semi-sustainable basis.
I think technical trading may also have an edge.
But these last two are obviously far beyond the scope of what is possible for the retail investor. And frankly, they take advantage of the slower reactions from retail to make their money, so a belief in their efficacy is by definition a belief in the structural disadvantage of the retail investor.