Investing in shares...(and maybe a fund)?

[ilovereading]

Just that really. I've never done this before, but am intrigued to try this out for the first time, with a little money that has come my way that I don't need for a while. I know there are risks involved, and I've always been cautious, financially... but I have never made any money to speak of just by being cautious and economical.

If there's anyone out there who has a lot more experience and some wisdom in this field, I'd love to hear from you before I perhaps do something silly. Just one or two tips from your own experience, perhaps, to keep me on the straight and narrow?

[purplemurple1]

We have limited experience of funds, we follow the basic rule of only invest what you can afford to loose, spread your money out (so USA, Europe, middle east etc) personally I avoid emerging markets as I prefer something more stable with less potential profit, also don't drive yourself crazy looking at it everyday.
Investing a lump sum I'd take advice as you don't get the benefit of cost averaging.

[ilovereading]

Thanks purple, that all sounds very sensible - it may seem obvious to some, but I need to hear all this!

[DoctorTwo]

Welcome to a new kind of stock market — one that the average investor should refuse to be invested in. If you don't believe the game is rigged read Mitch Feierstein at Planet Ponzi. Most trading nowadays is being done by automated High Frequency Traders who pay to be between you and the trader/broker, taking money from both sides. Instead, put your money in a tangible asset, like the oligarchs are doing. Property, precious metals and crypto-coins are imo the future.

[ilovereading]

Phew, thanks, DoctorTwo - for words of wisdom. I'm pretty cynical anyway, and having just read that NYTimes article, seems like we'd do well to be wary. I feel that I should trust my own gut instinct about particular shares rather than rely on (and pay OTT) traders....

[DoctorTwo]

Watch out buying even the blue riband shares. They're all involved in share buybacks, ie they're all buying their own shares. You might have noticed share prices dropping this past week: this is because of the rule that says a company cannot buy its own shares just before results are revealed. Luckily for the markets, somebody, probably the Fed, stepped in to buy shares and stop a potential slump. Expect a post Xmas slump when shares are sold after dividends etc are paid out.

Honestly, due to current economic policy of austerity for everybody except the rich and the massive corporations another slump is inevitable. That's why the intelligent money is leaving stocks and shares and is going into tangibles. Buy actual gold, not futures, silver, platinum, palladium, titanium and property outside London. The super connected are now ignoring London as a long term investment.

[ilovereading]

This is interesting, DoctorTwo - you seem to have real insight into how all this works; maybe you know this environment... What you say rings true to me. I'm a complete novice at the moment, but have a healthy suspicion of fund managers and the like, who will take hefty fees for perhaps doing no more than I could do on my own, in terms of the buying and selling, etc - but they may lose my money for me which (IMO) would feel a lot worse than if I'd lost it all by myself! Sure, they have the 'experience' which I don't - but how can I be sure that their judgement is really reliable? Seems to me that I could do a fair bit of the background research myself, then just take a punt on what then appears to me to be a good bet - Do they really do any more than that?

I'm really intrigued by your point about going for 'tangibles' - I wonder how/where one would be able to buy actual gold? Presume you don't mean at a jewellers?! (Also thinking about your point re: post-Xmas slump... so, that would be a good time to buy a desired stock, then, wouldn't it? rather than now...) for your comments - all hugely helpful in tuning up my antennae, etc! before I take a plunge.

[Effjay]

I use a Share ISA run by TDdirectinvesting. It's really easy to use and they have a great app so it's to trade shares on the go. Set yourself some boundaries - not knowing when to sell is one of my early learning a. So I've set myself a rule that means I sell as soon as a share hits 30% profit. Also, I try and bail out if it's taking a nose dive. I read the business pages a lot to line up what I think will be my next purchase. Good luck! Good time to start buying I think. Maybe stick to FTSE100 shares to start off with?

[ilovereading]

Great, thanks Effjay. Your strategy sounds realistic and well worth emulating. I've had a look at Hargreave Lansdown's website and app so far, as it seems fairly user-friendly. (I like being able to pick up the phone and talk to a human when I feel befuddled). There's so much jargon to get my head around at present. Such a lot to learn, and I have a sense that the only way I will really learn anything is to move from theory to practice...on a small scale of course. It's scary, of course.....

[DoctorTwo]

Interesting article on the likely effect of stopping QE.

How precious metals prices are manipulated.

The message is buy metals not shares. Bullion by Post is one outlet.

[Rufus200]

Be very careful taking advice about buying shares! I use HL, Equinti and Barclays and much prefer HL out of all of them!

The stock market is posh gambling! No one can predict what will happen and sometimes it makes no sense at all. Like a company will release incredible results and everyone will sell, you would have expected it to increase.

Be wary of stock tips in newspapers etc, the writer normally has an interest! I got burned that way many a time in the beginning.

AIM shares that can now go in ISAs are very unpredictable! You can make huge gains but also huge loses! I have some that are 80% down and some that are 700% up!

The best thing I can advise is a mix of funds and follow my Grandfather's investment strategy, which is:

SHARES

Buy only FTSE 100 shares, until you are comfortable with investing and losses! FTSE 100 aren't hit as badly as other markets.

Set up your account so it automatically reinvests dividends or uses SCRIP or DRIP schemes. Your investment will grow much bigger this way. Be aware you have to pay tax on dividends whether you take them as cash or reinvest them!

Buy only shares that have a high dividend yield, at least 3%

Buy from different fields, don't just buy all one type! Pharmaceuticals, Utilities, Supermarkets, Consumer Goods, Mining and Banking are the big ones.

Don't just buy once you have chosen your shares! Watch the price, look over the last 3 months at least, set up a buy limit, so when the price drops it automatically buys for you at that price.

Keep some money back and wait for a big price fall from a FTSE 100 company, happens at least once a year, wait till bottoms out and then when price just starts to rise again buy. I did this when Aviva had a profit warning, currently 55% up.

Be careful about buying new listing, while Royal Mail soared most don't! quite a few are 25-50% below listing price! I got burned that way several times!

Don't check your shares every day. It will just upset you. They go up and down!

I love this website for dividends yields, will help you choose shares.
//www.topyields.nl/Top-dividend-yields-of-FTSE100.php

FUNDS

Buy accumulation funds, your dividend is automatically reinvested.

I like these 3 funds for a beginner:

HL Multi-Manager Income & Growth Trust - Accumulation
This fund buys into many different funds so it spreads the risk

Legal & General UK Index Class C - Accumulation
This is a tracker fund so has low costs

CF Woodford Equity Income Class Z - Accumulation
Woodford has an amazing track record and has made a lot of people a lot of money, this is his new fund.

[ilovereading]

This is sobering, DoctorTwo; most grateful for sight of these two articles. They make sense, don't they. I suspect that the extent to which markets (and individuals)are being manipulated by governments is much more mind-boggling than most people realise. QE is a pretty dodgy practice, IMO...not too far away from deliberate govt. propaganda, but affecting ordinary individuals very directly - whether we like it or not.

Thank you for sharing your wisdom. I'd always be grateful to hear what you think on these matters!
I'm wondering if you are in the US? - I'm in the UK.

[ilovereading]

Just seen your message Rufus200, very grateful for all your points too . posh gambling made me smile! Strangely enough, I had been thinking already about putting something into the HL Multi Manager Income and Growth Trust, and have also been considering the CF Woodford one! - as his name had rung a few bells over the past few weeks since I've been starting to read the financial pages. So it's reassuring to find that perhaps my judgement may not be quite so far off if someone more experienced is also going for things that have caught my attention so far. - This is why I love Mumsnet - such help freely and willingly given - All I can do is say thank you.

Everything that has been said so far has really made me think, and is helping me focus my thoughts before I risk my money (which TBH I can't really afford to lose, or not much of it anyway).

[DoctorTwo]

The markets are indeed rigged. Buy actual gold and, believe it or not, virtual currencies. Bitcoin, Litecoin and Startcoin are my recommendations. Plus, Startcoin allows you to back your purchase with silver. And gives out free coin every Friday.*.

*Disclaimer. I am in no way involved with either Startcoin or Startjoin other than as a fan.

[ilovereading]

Hi again. I've been looking into gold etc, but am a bit put off by the fact that buyers seem to have to pay a fair bit more for it than the actual price it is 'set' at (and then maybe get less back for it if they ever want to sell it back to the source? - that is, unless the price has rocketed since...which it might do....)

Bitcoins, I have to say, absolutely terrify me in their very concept (which admittedly I haven't really grasped yet (something else to research when I get a minute). Wasn't there something in the press a while back, about how a whole lot of them that disappeared down a black/virtual hole with one company? If a currency is virtual, my worry would be that a smart hacker might get into the system and manipulate the numbers however they pleased. I suppose that could happen in any financial institution, though - I hasten to say, though, that this is all mere speculation on my part, based on zero actual knowledge of this kind of investment.

Another question (for anyone who knows): what exactly is the AIM market (some kind of alternative FTSE?) And how would one go about picking a share in it which had really good potential? Do random guesses ever work, or should I be looking for specific sectors? Rufus you mentioned that you'd had mixed fortunes in that, but it wasn't all bad. Any tips would be most welcome, but it's probably bad form to ask! (Please do feel free to PM me if you felt like it) I need to get a better financial head on me to know how to work out what's a good company and what red flags to look out for too. I wonder how much of it is pure luck/hunches?

[DoctorTwo]

That you have to pay a 'fair bit more' to take delivery of actual gold proves demand is outstripping supply. The spot price of gold is being kept artificially low by the release of gold futures, paper gold, to the amount of 800,000 ounces per month. Even if you have to pay £950 per oz gold is still cheap. The real price should be around £1500, and when the banks crash again it'll go higher.

Mt Gox had around 80,000 Btc stolen through their own fault: their security protocols were not kept up to date and a gang of (probably Russian) hackers got in and slowly transferred them to their own wallets. The underlying protocol behind Bitcoin, the blockchain, is secure and has proved to be so far unhackable. As long as you have a secure wallet your coins cannot be stolen, they're yours until you transfer them to someone else. And you can see where they go as all trades are held in a ledger.

The problem with Bitcoin is that, as a new technology nobody knows exactly how it's to be used. As more retailers become involved (the chippy across the road is considering it, he already holds gold) it might become more mainstream. The Isle of Man is becoming known as the Bitcoin capital, and recently held a conference attended by investors, banks and other interested parties.

Anybody describing Bitcoin as a Ponzi scheme is an idiot: Such a scam requires an ever expanding base, whereas Bitcoin is limited by mathematics to 21 million. The real Ponzi schemes are our national currencies, whose value is being decreased by quantitative easing.

My opinion is that in the near future a workable digital currency will emerge based on the Blockchain. It will, like Btc, be beyond the control of central banks and governments and will therefore be democratic. You won't be able to forge it, and as long as your wallet is secure it can't be stolen. Ecuador is to introduce a digital currency to run alongside the US dollar, unfortunately theirs is not based on the Blockchain protocol.

Now I'm waffling so I'll shut up.

[Taz1212]

The AIM market is like the Wild West of the stock market. It's unlikely that you will be able to get enough information on most companies to make an educated guess as to which ones are about to take off. If you are interested in the AIM market I would look into some of the AIM VCTs instead. They take away the high risk of single share investment and add generous tax advantages.

I bought some Bitcoins back when they were £10 a coin and am still holding them (though have likely missed their high point). I wouldn't touch them with a barge pole right now- it is completely unclear what will happen with their price.

It depends on what you want to do. If you just want to have fun then go do some research and watch the market. I have £20k that I just play with. I don't really care if I lose it but I won't be topping it up if I do- fortunately it hasn't happened yet! The overwhelming majority of my money is in properly managed funds. It's not a bad time to buy just now but if you are new to this you are probably best watching and following the next rise and buying in the NEXT fall. If you want to make money over the long term, there are some kick ass fund managers in the UK- find them and invest with them.

[Rufus200]

AIM is the London Stock Exchange’s international market for smaller growing companies, can also now go in ISAs. With the current drop in the market my AIM shares are all down, some by 80%! It really is gambling in the AIM, there is no rhyme or reason why shares go up or down in it!

I would avoid the AIM but if you really want a go look for some shares in fracking companies. Igas or Egdon are two that have been very high this year but now low so a good price to buy in at. Fracking in the USA has caused the worldwide oil price to drop by 25% in 4 months because the USA does not need to buy middle eastern oil and is now supplying itself.

If I was starting my portfolio this is what I would buy today
J Sainsbury or Morrisons
Friends Life
Centrica or SSE
Glaxosmithkline
Vodafone
BP or Royal Dutch Shell B
HSBC
BAE

Then the 3 accumulation funds mentioned above

[ilovereading]

Hi everyone, thanks so much for all this - I am humbled by all your wisdom and commonsense. Alas my internet has crashed so I can't say much now - in a town cafe, unsecured wifi and DS wriggling next to me. Please keep posting and I'll check back in a day or two. V. Grateful for all this help, you are all stars! x

[DoctorTwo]

US Fed ends QE. Markets are probably going to be volatile for a while. A new round of it will start soon enough because it has to, otherwise the entire pyramid collapses sooner than it would with endless bailouts.

[Parietal]

if you have only a little money, don't get individual shares. get a low-cost tracker fund (e.g. www.nutmeg.com/). put money in and then do nothing for 5 years. either the markets go up or the don't. but your money will do the same as the whole market, so you are not tied to the whims of one company.

[DoctorTwo]

It would appear I got it slightly wrong on the price of gold. According to this article discussed on the Keiser Report the real price of gold without manipulation is $7000 per oz. Also factored in is if central banks were required to back their currency with a tangible asset.

[whitechocolatestars]

You've had some great advice on here, I just wanted to add a couple of points too.

Before anything, I would say make sure you have fulfilled your ISA allocation. You can open an ISA wrapped portfolio through some providers which allow you to move in and out of different funds but not single stocks. This means anything you make is tax efficient.

diversifying your exposure / risk is the best way to ensure that your investments largely move in line with market activity. We all want to outperform the market of course but I think this is where the dangerous game starts if you don't have much experience. It's true that investments can go down as well as up!

Any stock picker will tell you to stick to a market you know. To pick companies yourself and outperform the market takes time, insight and more than a little luck. You'd find it hard to diversify across sectors or geographies and intelligently pick stocks that will even keep in line with the market let alone outperform without significant background knowledge. Even the best fund managers have an area of expertise that they are famous for and build their funds around it.

For that reason I would recommend starting with mutual funds. The three mentioned are great, I also like Artemis. Buying through a platform like HL allows you to invest in a wider range of products than if you were to invest directly because they can pool large amounts of retail investment into a single position.

If you do buy funds, don't forget that if you decide to diversify across geographies, you also have to take into account currency exposure and movements so you need to have a view on the long term currency rate as well as the macro economic climate of the region.

ETFs are a good way of accessing funds that track indices such as the FTSE 100 without the high manager fees, ishares have a huge range that have done very well.

Lastly, my advice would be don't try to be too greedy! Play it cautiously as you get to know the market and don't try anything too risky that you don't really understand. Stick with well established economies and companies and avoid anything that historically has high volatility unless you're absolutely certain.

Good luck!

[PigletJohn]

Opinions differ on gold as an investment.

It has no particular value, and goes up and down according to whim. It brings no income and costs money to store and insure. Over long periods the return has been be less than other forms of investment. Occasionally it goes whizzing up or crashing down. For example if you look at a long-term chart, it is about the same $ as it was 5 years ago, but is about a third lower than it was three years ago. In which time inflation has reduced the value of the $. Over the last five years the FTSE100 went up by more than 20%. Over thirty years it went up by about 600%.

Between 1984 and 2004 gold hardly moved, but again, inflation eroded the value of the $ it was measured in.

When Gordon Brown flogged some, it had been a rotten investment for 30 years.

With the benefit of hindsight, you can see that if you had bought low and sold high, you would have made a tidy profit. Without hindsight, the mug punter usually buys high and sells low.

Nobody knows what will happen when the Chinese banking crash comes.

[DoctorTwo]

The price of gold is low because it is being manipulated by the Fed introducing hundreds of thousands of ounces of futures contracts. As China is the largest buyer, holder and miner of gold their banks are well protected against the crash that is inevitable due to the pyramid system created by the western banking system.

Also, Russia and India are hoarding gold, thus insulating their currencies against the crash. The Fed won't let anybody in to check their gold, and have told Germany their gold cannot be repatriated for seven years, suggesting they don't actually have it in their possession.

[PigletJohn]

The price of gold is actually still fairly high today. It is worth what somebody will pay for it. If somebody tells you it "ought" to be worth 7000 an ounce, or a million, or ten cents, thry are talking rubbish. The price is not connected to any particular value, nor to what you, or somebody who's got some to sell, thinks it "should" be.