Investing In The Stock Market For Total Beginners

[HawkHybrid]

self select stocks and shares isa's allows you to have

gains that are tax free. gains under normal trading

accounts will count towards your yearly cgt allowance.

maxing out the isa is better for investments that is

allowed within it. they have relaxed the rules so that

a lot more things can be bought within the isa, many

much riskier such as aims shares.

try first to set up a system to try and evaluate how much

a company is worth. as an example, work out why lse:hoc

hochschild rose today whilst lse:fres fresnillo fell?

 

HH

[watchesandwhisky]

LOL KDave, I do hope over the next years it will move into the green! But you are right a book would not go amiss, I have a couple of hundred more on the account I have not done anything with yet so will try and learn a bit more before I do, Thanks for the recommendation:)

Thanks for clearing that up for me HH, I wont be touching the funds an shares account till the ISA is maxed now i think:) 

[shemyaza]

S&P500, does that help?

[shemyaza]

Hopefully it did

[vand]

If you are serious about buying stocks then you have to keep your per transaction costs as low as possible. Considering it's £12 per buy, £12 per sell, 0.5% stamp duty plus the bid/ask spread, that is 5% on a single £1000 transaction, or 10% on a £500 transaction. Don't forget that that's after you've already paid anything up to 60% marginal tax on your income, and then you'll be taxed on the profits if you somehow manage to become a genius stockpicker and manage to turn a fortune.

Also consider that MOST STOCKS UNDERPERFORM THE MARKET. That's just simple truth of using a cap-weighted index as a proxy for stocks - a few large stocks grow and come to dominate the indexes. The chances of you picking the next AAPL or NFLX and beating the market as an individual stock picker are heavily against you - that's why most active fund managers underperform the market.

If you consider your venture into shares as a speculative gamble then my own vehicle of choice would be spreadbetting - the costs are MUCH lower. So long as you understand the risks of using margin then it makes much more sense than buying common stocks in most cases. 

[HawkHybrid]

I would have reservations at bringing up speculative gambling

via spreadbetting on a thread titled investing...for beginners.

I'm still of the opinion that trading is gambling and conceal

much higher risk than investing which ultimately is hoping

for projects to succeed to provide returns(even if the road

travelled can be rocky at times)

 

HH

[vand]

Sorry, yes, I do agree that Spreadbetting or any form of leverage or derivatives is venturing into the "speculation" area where total 100% loss of capital is a real possibility, for that is the nature of leverage, but is it really much worse than what a lot of people do when then jump into stocks, for Madstacks is making all the classic mistakes of the casual stockpicker - jumping into the market at the end of a bull market, ignoring costs, chasing high beta stocks, and adopting an all or bust attitude - quote: "these are outright gambles".

Treat the stock market like a casino, then don't expect to leave with much but the coat on your back (and a few good stories). If you are just buying a hundred quid's worth of a FTSE 100 company then you have no business doing it via a traditional broker where your buy/sell cost is 25% anyway. If that's the case you might just as well spreadbet and keep your cost to 1%.

[KDave]

To someone completely new, the best way to invest would be spend a few months researching the market, its history, where it is now, where people think its going, working out a strategy, coming up with a plan, then executing it. Even then you are not guaranteed success.

You need to start somewhere and spending a large amount on fees to figure out how the market works and get a feel for things (including exposure to the emotional aspects of investing) was money well spent for me personally. I got very lucky that I did not lose more, but if I had not jumped in and learned from making mistakes I would probably not be investing today in anything, just sat on cash because I had no reason to learn about the market beyond the complete basics until I was invested. So little did I know (still don't know much). 2014 I did the exact same thing with precious metal investing, I had no idea, I just wanted some 'Diversification'. I bought 3 gold Britannias and 40 silver ones from BBP - VAT and all on the silver. I knew no better, but I would probably never have found this forum or the STG VAT free action if I had not bought from BBP and started out. 

For me, making the mistakes, losing money on the fees, the VAT on the silver, all of it, was the price I paid to gain experience, which has paid dividends so to speak. There are better ways to do it of course 

[watchesandwhisky]

As Expected I am well down on my investments, but I have the same thoughts as KDave, I see this as paying to learn, and I am learning quite a lot. I now know how to do all the basics, and with money invested in certain stocks it gives me the motivation to study the price and try and predict whats going to happen. Sure everything I have done I could have done for free on a practice account but its not quite the same for me. 

All my small company picks are just buy and hold, all are well down, maybe I will hit on one of them.

I put the majority of my money into BRWM Black Rock World Mining Trust at first, the dividends looked real tasty at just under 10%, Bought in at 226p per share, with the idea for it to be another buy and hold. After the EX Divided date the shares plummeted to 208p per share and I sold at 211p. With the dividend payout 14p per share I am losing only really my trade costs and 1p per share. Why did i sell? not because I became spooked by the price drop..But because I have come to realize the Dividend of 10% Is massively unsustainable when the trust was paying the same dividends when the share price was 800p per share and that was in a stronger market.  It will be cut, probably this year, and Im hoping share price hits new lows, Then I will re-buy in and hold. 

So Yes Im losing money - and yes this is not the best way of doing things. But it really is a good learning curve for me, once I have invested if the share prices rises or falls I have a genuine interest, and I'm having fun doing it. I will look into spreadbetting though because I am open to all options.

[HawkHybrid]

does brwm have a record date for when you need to hold

on to before you qualify for dividends?

 

HH

[watchesandwhisky]

Yep it was trade open on the 24th 

[HawkHybrid]

normally to qualify for dividends you need to have held

the shares from the ex dividend through to the record

date. brwm went ex dividend on the 24th mar. when is

the record date?

 

HH 

[watchesandwhisky]

I hope not! this is what it says on the Hargreaves Lansdown Page. 

"To qualify for the most recently declared dividend you must have bought a stock before the ex-dividend date and still hold the stock at market open on the ex-dividend date, if you buy a stock "ex-dividend" you will not be entitled to the most recently declared dividend and will need to wait until the next declared dividend."

I read that as long as you had bought before the 24th and held on market open on the 24th you would be entitled to the dividend. Have I got something wrong here? the share price dropped 10% on the market open of the 24th.

[HawkHybrid]

for example pan african(paf) went ex dividend lse on 10th dec 15.

then record date 11th dec 15. so you need to have bought on or

before 9th dec and held at least until 12th dec to qualify(it may be

11th dec, I forget which one it is). I'm not sure how it works for trusts.

 

HH

[watchesandwhisky]

I guess I find out on the 6th of may! That would cost me about £45 quid if I got it wrong so no biggie more of an annoyance. But Hopefully I read it right. 

I am sure the Dividends will be slashed in a big way or stopped altogether until things pick up, so I am hoping to buy back in much lower at a later date, Its one I will follow closely now.

[Pipers]

Investing in your area of expertise can be a good idea.  

The other one is don't try to beat, well the sector just buy when the time is right, that means cheap!  

  

[SilverPirate]

I own no shares, and have had these LLoyds bank share adverts turn up while watching youtube .I have spent a little while tonight researching share isa's and have been surprised at the cost involved at holding shares,for a small time investor like i would be i don't think this is a viable investment.I thought i could buy some shares get some certificates throw them in a drawer.

Can you not do this? or is share dealing all charges to the hilt? Can't i just buy it ,keep it,sell it and that's it?

[HawkHybrid]

you need a broker to buy shares. there will always be fees

associated with this. there's also the spread. holding shares

as a certificate should incur a one off extra charge. long term

holds can be done via certificates and there should be no

maintenance fee for certificates. some companies charge an

annual fee for stocks and shares isas. there is also stamp

duty payable each time you buy(some shares may be exempt).

(gains on certificates may or may not be tax free, I've never

held one before). each trade needs to be £1k+ to keep %

costs down to an acceptable level(3% not including spread).

 

HH

 

[SilverPirate]

The volume i would buy would be to small to make it financially viable, due to charges. That's saying the shares made a profit also.I think i will stay out the share game.

[oliversw5]

@ SilverPirate, I think you are potentially missing the point? Not trying to be a pedant, all in all its your money and how you wish to spend it is none of my concern but..

You can buy shares from as minimal of 5 quid plus 0.5% stamp duty, with a spread as low as 0.1%. So even with a purchase of 500 pound you are spending 8 quid on charges or 1.6%, you can recoup that from your first dividend (if you opt for those type of shares).

On 250 quid you are looking 5 quid plus 0.5% and 0.1% which is 2.6%. These numbers are lower than bullion in most cases and you have the added bonus of benefitting from both a dividend and price swings (it works both ways). 

As for holding a certificate, I think they are phasing them out, you certainly don't need one

As for your question of buying holding and selling...yes you can check out x-o.co.uk. They have a no thrills account that is a fiver, I have used them for the best part of a decade and they are also listed under the stockmarket with the ticker symbol 'JIM'

Personally I like to buy a grands worth when I do purchase shares (its been a while mind you) but your costs would be 5 quid plus 5 quid plus 50p which is just over 1%.

Please bear in mind that the less liquid the company is the more you will pay for the spread.

I hope this helps 

Shaun

[HighlandTiger]

The stock market is nothing more than a rich man's betting shop. It should be treated as such when thinking about putting any money in it.

For every person making a profit someone will have lost money. That's the way it works.

Sent from my SM-G901F using Tapatalk

[watchesandwhisky]

Update, have lost quite a bit of money so far in my first exploration into shares..But thoroughly enjoying it still!   mostly taking small punts on AIM stocks rather than big company's , so losses are going to be more often but the potential for massive gains is also there. 

The only big company i have a few shares in is barclays bank and strangely enough thats the one Im in profit on.

It is all a big gamble really, but i always saw it as that from the start. I definitely think stocks should make part of a diversified portfolio though.  

 

[vand]

General equities have been the premier benefactor of the fiat money system and the systematic lowering of long term bond yields, but every cycle peaks eventually and goes through long periods of correction.

There is no generally accepted valuing measure that says equities are cheap at the moment. The Warren Buffett indicator says that stocks are approaching 1999-2000 valuations.

 

Good luck trying to find "value" in this market:

[vand]

The Buffett Indicator chart looks in a very similar place to where it was in 1998 pre-LTCM. A mini crisis, followed by a blow-off top to coincide with an election, and a huge bear market afterwards. History rhymes, and even if we are heading for a bubble phase as looks quite likely now, I will steer well clear. That will be it, and stocks will be done for another decade.

[BaldyBob]

12 hours ago, vand said:

The Buffett Indicator chart looks in a very similar place to where it was in 1998 pre-LTCM. A mini crisis, followed by a blow-off top to coincide with an election, and a huge bear market afterwards. History rhymes, and even if we are heading for a bubble phase as looks quite likely now, I will steer well clear. That will be it, and stocks will be done for another decade.

Fair point, but that is the S&P 500, which at present is massively overvalued. The FTSE, as an example being more relevant to us Brits, is currently relatively cheap when using the CAPE valuation. Apples and pears.