Deciding What Shares To Buy

[Kurt Barlow]

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?

I have a £3200 of shares in 3 windfarm schemes through a provident society type set up which at the time I could claim tax back on. They pay a reasonable dividend each year and the carbon savings offset my somewhat above average air travel

[Kurt Barlow]

Surely you want capital appreciation and not dividends?

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

I think the two go hand in hand. I tend to invest conservatively in defensive stock at opportune moments and hold (remember last August?). On the year Im 16% up with a net dividen flow of around 4%.

[porca misèria]

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.

Doesn't Marstons still have one of the highest debts outside the highly-regulated pseudo-public-sector?

Not a showstopper, but it leaves a risk hanging over you.

[porca misèria]

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?

I think a lot of people (not, of course, everyone) start out with great intentions. When you start a new business, you intend to do the right thing by everyone: treat your customers well, treat your employees well, act in a socially responsible manner, etc. Crunch time comes when reality overtakes your dreams, and different people react differently.

Shareholders are further removed from the actions (good or bad) of the business, so that effect is weaker. Even more so when they invest through a fund, whose manager's mandate is to secure market-beating returns for investors. But many investors still draw ethical lines. There are several sectors I refuse to invest in, and others I make a positive choice to support with a proportion of my investments.

[porca misèria]

I have a £3200 of shares in 3 windfarm schemes through a provident society type set up which at the time I could claim tax back on. They pay a reasonable dividend each year and the carbon savings offset my somewhat above average air travel

I have rather more than that in renewable energy investments. Mostly, but not exclusively, those that qualify for interesting tax breaks. It offsets the fact that I don't have solar panels on my own (rented) roof.

[Democorruptcy]

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?

What do you think about sterling?

If you were negative... in such as a TD Direct Investing ISA you can buy actual foreign shares. Some FTSE firms have overseas earnings but you get paid in sterling.

You have to pay an extra 1%-2% currency swap charge both buying and selling and of course if sterling appreciates you could lose money even if the share price did well. However if sterling didn't do well and the shares did you win more.

Disclaimer. I am not tipping sterling to do poorly. Past performance is no guarantee of future failure

[19 year mortgage 8itch]

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.?

I bought Ben Graham's "Intelligent Investor" six months ago and not read it yet which means I've lost nothing on the markets. That's a good return to me.

I did have some shares years ago. I had no idea what i was doing but a rising tide lifts all boats so to speak and I got out at the last time RBS shares were worth £6.50, not 25p. I'm in no rush to get back in.

[bearwithasorehead]

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?

Depends how old you are and when you are likely to need the money.

If you are in your 30s/40s then the whole point of investing in shares is that you are willing to put up with some volatility and risk/

Try googling PYAD Stephen Bland. He advocates a 'value' investment strategy rather than capital growth - but this does require some work.

In my opinion capital growth plays are the most similar to 'gambling' in terms of share investment investment.

If you are happy for a 5-10 year lock away of your money investing in high dividend payers in an ISA is, in my view a strategy as good as any in terms of wealth protection.

Your dad's strategy may look something like this:

Companies like Glaxo, Vodaphone, Diageo, British American Tobacco, Aviva, Shell, all pay large dividends. None of them are likely to die in the next ten years. In fact if you reinvest the divis they will pay you back your investment, possibly with capital appreciation (the bonus, not the aim) in 12 years (assuming 6% divis) .

Pick two sectors, put 5k in one blue chip share in each sector. DO NOT check the share prices until a year later.

I am not an IFA!!

[porca misèria]

Depends how old you are and when you are likely to need the money.

If you are in your 30s/40s then the whole point of investing in shares is that you are willing to put up with some volatility and risk/

Try googling PYAD Stephen Bland. He advocates a 'value' investment strategy rather than capital growth - but this does require some work.

Price/Yield/Assets/Debt?

Some of what he writes makes sense. But his so-called value portfolio is a sick joke. And over its three years of life it's substantially underperformed all the FTSE indexes.

In my opinion capital growth plays are the most similar to 'gambling' in terms of share investment investment.

Not if there are good reasons to expect substantial growth. The best place to look for growth shares is in lines of business with which you are the most familiar, as it's there you're most likely to have insights that the market has yet to factor in to a share price.

If you are happy for a 5-10 year lock away of your money investing in high dividend payers in an ISA is, in my view a strategy as good as any in terms of wealth protection.

Up to a point. But bear in mind that that strategy would've had your portfolio very heavily into financials, and especially banks, in the run-up to 2008. Lloyds was my highest-yielding share right up to when it swallowed the poisonous HBOS, since when it's never paid a dividend.

Oh, and high yield is not the same as value investing. Bland's value portfolio includes zero-yield RBS, because he thinks (rightly or wrongly, time will tell) it's undervalued and will improve.

Companies like Glaxo, Vodaphone, Diageo, British American Tobacco, Aviva, Shell, all pay large dividends. None of them are likely to die in the next ten years. In fact if you reinvest the divis they will pay you back your investment, possibly with capital appreciation (the bonus, not the aim) in 12 years (assuming 6% divis) .

Any of those companies could hit a disaster that would knock its share price and dividend on the head. A couple of years ago you'd've tossed a coin between Shell and BP, then one of those had a disaster. Aviva is vulnerable to any further Euro trouble. Glaxo could suffer a big hit if a medicine goes wrong. Etcetera.