the_duke_of_hazzard

Deciding What Shares To Buy

35 posts in this topic

I've run out of places to put my cash so have been forced to use an ISA to invest in shares.

I only know about one industry, but want to spread the risk around, and was wondering how people here decide what to invest in.

There's so many books on the subject and I can't evaluate which ones to look at for practical advice.

My dad basically goes on "does it seem low based on the graphs", reads a few broker reports, looks at the dividends, and plunges for 5 years.

Anyone got any advice for me?

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[quote name='the_duke_of_hazzard' timestamp='1332958630' post='909002026']
I've run out of places to put my cash so have been forced to use an ISA to invest in shares.

I only know about one industry, but want to spread the risk around, and was wondering how people here decide what to invest in.

There's so many books on the subject and I can't evaluate which ones to look at for practical advice.

My dad basically goes on "does it seem low based on the graphs", reads a few broker reports, looks at the dividends, and plunges for 5 years.

[b]Anyone got any advice for me?[/b]
[/quote]
dont listen to your Dad, at least not from that scant evidence

but more seriously, if you only know a specific sector and with your industry knowledge you dont feel it offers value for whatever reason, (maturity,over capacity, badly managed players) then if sure equities are the place to be the safest way is to buy an index tracker, personally i wouldnt touch UK equities at this level with yours but each to their own Edited by Georgia O'Keeffe

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[quote name='the_duke_of_hazzard' timestamp='1332958630' post='909002026']
I've run out of places to put my cash so have been forced to use an ISA to invest in shares.

I only know about one industry, but want to spread the risk around, and was wondering how people here decide what to invest in.

There's so many books on the subject and I can't evaluate which ones to look at for practical advice.

My dad basically goes on "does it seem low based on the graphs", reads a few broker reports, looks at the dividends, and plunges for 5 years.

Anyone got any advice for me?
[/quote]
Rare stamps and coinage Duke.
Of course, you could always buy a bit of forest for fun.

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Your dad is right if you want to get a good range, I lean heavily towards a decent and sustained dividend yield as a sign of a company with good financial discipline.

My only other tip is if you personally find a company to be superb and their financials look good then buy. I wish I'd done this in the early days of J D Wetherspoon when I thought what a great idea those pubs were.

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[quote name='Frank Hovis' timestamp='1332962644' post='909002086']

My only other tip is if you personally find a company to be superb and their financials look good then buy. I wish I'd done this in the early days of J D Wetherspoon when I thought what a great idea those pubs were.
[/quote]


Me too Frank! I could have got out more than I have "put in" over the years! Hic! :blink:
How long will their magic last ?

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[quote name='MrPin' timestamp='1332963205' post='909002096']
Me too Frank! I could have got out more than I have "put in" over the years! Hic! :blink:
How long will their magic last ?
[/quote]

Like Tesco I think they've peaked Mr Pin. Decent enough defensive stock but no big gains to be had any more.

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[quote name='Frank Hovis' timestamp='1332963341' post='909002098']
Like Tesco I think they've peaked Mr Pin. Decent enough defensive stock but no big gains to be had any more.
[/quote]


Think so! Richer Sounds (God bless them, as they never sold me a dud) have done very well too!

I'm glad I spent all my money at Richer Sounds and Wetherspoons, otherwise I could have bough bank shares!
Actually I sold all my windfall bank shares in 2003! And bought some guitars, for which I have a use! :blink: :huh:

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[quote name='Durch' timestamp='1332963683' post='909002101']
I remember having ten grand in the early eighties, and considering buying Microsoft shares. But then I thought - no everybody knows that they've outsmarted IBM by making the software rather than the hardware - it's already priced in.

What a fool I was. This graph doesn't even go back far enough to cover the really large gains...

[/quote]

Surely we all have prophecy, er, in hindsight, and we all have done it! :blink:

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[quote name='Durch' timestamp='1332964182' post='909002115']
I was reading the other day about a woman who was offered a big stake in Starbucks when it was just one shop.

She thought: "Coffee shops; no way is that going anywhere."
[/quote]

Ha! Reminds me of Forrest Gump, with those Apple shares! :huh:

Of all the people I know ,and I must have literally millions of "facebook friends", or maybe not! But I have known only two to be really "lucky"! :huh:

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Can we make the following presumptions? :

1) You are looking for shares to buy and hold, not "day trading"
2) You don't really know what you want (hence the question)
3) You don't want anything high risk

I'm not an IFA etc etc..

When I started trading I bought investment trusts. They are funds who buy lots of different stocks and then you buy a share of them. They are usually listed as standard shares on the FTSE, and by buying a fund that spreads the risk you are not putting all of your eggs in one basket.

I used this page when choosing investment trusts [url="http://www.theaic.co.uk/Search-for-an-investment-company/"]The AIC[/url]

Since I only had a very small pot to start with this seemed the easiest way to spread my risk and minimise my buy/sell costs.

Since then I grew bolder and put smallish stakes in companies that I thought incredibly undervalued at the time despite the risk.. and so far those have given me by far the best return, but, it's a high risk strategy.

If you don't know what you want, perhaps stick to trusts or managed funds as others have suggested. For me, personally, I look for "value" in domestic stocks or growth potential in emerging market stocks.

If you have a particular market sector or geographical area in mind.. a trust or fund is probably a good way to go.

My parting shot would be that these days the macro picture is probably more important than individual stock choices.. if you're happy to jump in the majority of shares will probably be much of a muchness, so the most important thing is probably just spreading your risk around.


Good luck in whatever you choose.. as 2007 proved most people (even experts) don't really have a clue so you're in good company :) Edited by libspero

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If you don't want to spend too much time agonising over it, delegate the work to a fund manager. That is to say, find a unit trust or investment trust (or several) whose long-term track records inspire confidence in their management, and invest there.

And invest based on your own judgement in good companies in your own industry, or those you're familiar with. That's where your insider knowledge has value that may not already be factored in to share prices. Example: I invested in a FTSE 100 company for whom I had worked as a contractor, and whose management had impressed me. That experience with them was 'insider' knowledge telling me it's a good company. That investment doubled in 3/4 years, and still pays a good dividend. Not my biggest gain, but excellent for a big, mature company that remained stable (didn't crash and burn) in 2008/9.

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Decide whether you want to invest in companies or commodities, and whether you want to realise gains via dividends from the company or capital growth from it.
And do you trust a fund manager to decide what the good prospects are, or would you rather select a few yourself?

I've had money in funds and it's done very little - at worst it was 10% down, i sold out when it was even. I decided that commodities should retain value better than cash in the current economy, and i found a lot of companies unattractive due to the amount of debt they hold. Don't trust myself to hold physical gold (couldn't tell if it was real or fake, would be worried about getting mugged/ripped off), so i decided to invest in oil exploration companies. I've had some fairly decent returns, some pretty shocking falls too. It's definitely not for the faint hearted - some days it could move 40% in either direction. If you're young it's memorable though!

Timing is everything - hindsight is a *******, it's easy to look at a chart of a stock you own and think 'i could have doubled my money if i'd sold there and bought back here. It's never that easy to tell at the time though - either decide you're going to hold no matter what, or set yourself solid rules on when you'll buy, sell or hold.

FWIW most of my money is in GKP, and most of the rest is in RRL - wouldn't be comfortable recommending either, they're both high risk but potential high gain.

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All good advice. Buy into what you know and DYOR.

Averaging up or down over the long term is possibly the best suggestion.

I have been dabbling mostly AIM listed shares since November last year and at one point I was up 50% now a more modest 30% which is still fantastic.

Recently ploughed all my profit into 10,000 SLP shares, risky yes but they owe me nada. Edited by 30k

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I first bought shares in 2010 when the BP Gulf of Mexico disaster happened and BP shares hit an all time low. Bit of a no brainer, came out of it well up and carried on from there.

I mainly go for mining, which is volatile, but I do my own research, and think about what is going to be in high demand in the future. I have my money spread over 4 companies at the mo and have been around 30%-70% up this year.

There's a lot I don't understand about the stock market and sometimes I think too much knowledge is a drawback. You can overlook the blindingly obvious. For example I was brought up with horseracing and can read a form card inside out and back to front, but I'm less likely to pick a winner by overthinking than someone that knows nothing and goes for the one that looks nice.

Don't invest more than you can afford to lose.

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[quote name='Frank Hovis' timestamp='1332963341' post='909002098']
Like Tesco I think they've peaked Mr Pin. Decent enough defensive stock but no big gains to be had any more.
[/quote]


Greene King and Marstons a better bet in that sector and pay a better divi too.

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[quote name='Kurt Barlow' timestamp='1333084423' post='909003078']
Greene King and Marstons a better bet in that sector and pay a better divi too.
[/quote]

I had a look at Marstons balance sheet earlier this year and considered them a 'buy' too. Forgot to add them to my portfolio but will do now. Thanks for the reminder.

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Shareholders: are there any shareholders out there with a conscience and invest in ethical only products? Or are shareholders mostly governed by greed and a willingness to shaft anything/anyone on the grounds that they need a 'return' on their investment. Would they buy shares in property developers or other housing related industries which have a vested interest in securing maximum profits?

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My advice is:

1) Watch out for people trying to sell you specific shares, always ask why they are being offloaded - so avoid firms like City Equities

2) Look for defensives in the current market, so ideallly internationally diverse blue chips and particularly ones with a good set of ratios, EV / EBITDA is useful as is PE.

3) Make sure you spread the risk a bit through diversifying into a number of shares, but not so much that you incur excessive dealing charges. If you have £10k for example, buying £2k in 5 different firms isn't a bad start.

4) Give consideration to trickle feeding money in (you'll need a regular investor/sharebuilder type scheme to do this as it keeps the commissions down) - this approach will lead to a pound cost averaged purchase price over time, and this can help partially eliminate the risk of buying in too high if the market is up when you start, though it might also flatten some gains,

5) Watch out for anyone giving specific share tips.

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[quote name='The Dude' timestamp='1333088102' post='909003084']
Shareholders: are there any shareholders out there with a conscience and invest in ethical only products? Or are shareholders mostly governed by greed and a willingness to shaft anything/anyone on the grounds that they need a 'return' on their investment. Would they buy shares in property developers or other housing related industries which have a vested interest in securing maximum profits?
[/quote]

I wouldn't buy shares in a vivisectionist like Huntingdon Life Sciences (my personal opinion, not trying to start a debate about it) but other than that I just go for what looks to be the best investment. It's no more greed than trying to get 3.5% on your cash deposit rather than 3.2%.

I don't see property developers or other housing related industries as bad anyway. The villains are Gordon Brown and his cronies in the BoE for providing an encouraging a credit boom and Krusty and various other media types for promoting the idea that property is a surefire riskfree way to make money.

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[quote name='30k' timestamp='1333087529' post='909003082']
I had a look at Marstons balance sheet earlier this year and considered them a 'buy' too. Forgot to add them to my portfolio but will do now. Thanks for the reminder.
[/quote]

Yes, back to trading shortly (just putting the cash in place) so ta for the tip.

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[quote name='Frank Hovis' timestamp='1333089491' post='909003091']
Yes, back to trading shortly (just putting the cash in place) so ta for the tip.
[/quote]

I've just purchased a thousand shares as a start. Not expecting them to rise or fall by much though. More interested in compounding up with scrip dividends over the long term and adding occasionally on the dips (highly likely they'll trough at some point to 90p).

My first share that's paying a dividend.

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[quote name='bulltraderpt' timestamp='1333094005' post='909003127']
Surely you want capital appreciation and not dividends?

Dividends rarely, if ever, make up for the capital fall of a company's shares.
[/quote]

You are correct. Capital appreciation via company growth (often weighted against higher risk) or reinvestment of dividends all the same to me, the latter is easier on my heart ;)

I have a mixed bag of around a dozen shares now and will top up across all of these as and when I deem appropriate... i'm no swinging d**k trader with a maximum of £375 a month to invest (only got money to burn as I sold my motorbike yesterday*). I have also upped my repayment mortgage payment from £720 to £1000, I'll be trying to stay ahead of falling prices.

*re. money to burn I have £2k left and am considering dropping it into a ZOPA account - anyone got experience of this and can explain the real life pitfalls to me (or do I just bite the bullet and put it against my mortgage (5.09%)). Edited by 30k

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Thanks for all your replies. I don't think much of my dad's approach to be honest, but he's done surprisingly well. Guess it shows what a crap shoot it all is.

Anyway, can anyone recommend a good book on the dull basics of reading a balance sheet and working out P/E ratios etc.?

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