Hello

I have been becoming more and more interested in shares, financial markets and investments over the last couple of years. This year I have decided I want to start actually saving and investing.

What is a good way to start learning about shares, commodities, markets etc? Can anyone recommend any good websites or books that are good for beginners? I have got the time to spend researching, so I dont mind spending a lot of my time following movements, researching companies/markets etc. Or even better are there any regular magazines that talk about investment in general?

A bit about me-

26 y/o
No savings
No debts (Just finished paying off debts)
£10,000 'Stoozed' from credit cards into accounts (£3000 ISA, £7000 another account)

I am planning to save/invest £1000 per month. I currently rent a property, I would like to own somewhere, but my personal opinion is that the market will bottom out 3-4 years time so im in no rush. I am not averse to risk, I find the prospect of putting all £1000 away in cash a bit boring

Thanks
Christian

Hi,

A good plce to start is www.fool.co.uk Lots of info and message boards where you can ask around.

Are you a taxpayer (i.e. you are employed)? If so, I would get started by opening a self-select maxi ISA with one of the online brokers. That way you can start paying in your £1000 a month up to the limit of £7000 per tax year, I trade with Comdirect. But have a look around. Comdirect don't pay that much interest on cash balances, so if you intend to keep a lot of it in cash at first whilst you make your investment decisions, you should look out for a broker that pays more interest. Cash interest is taxed at 20% within a maxi ISA, so it's not a long term option.

Stay clear of unit trusts etc. They all charge 1% or more management fees, and that's just going to eat into your returns.

Remember to only invest in shares what you can afford to loose.

Thanks BubblePricker.

Yes, I am a higher rate taxpayer.

I had considered investing say half of my money in cash, and the other half somewhere else. My first thought was to get a spread of Unit Trusts, but you think thats a bad idea?

I will check out www.fool.co.uk and comdirect.

Thanks!

Anyone else?

Oops forgot to mention, I have already put £3000 into a cash Mini ISA this year, so I can only get a mini stocks ISA.

well, I'm still new to investing after less than a year's experience, but I don't think I've ever learnt so much in such a short space of time. Once you start investing and seeing the returns start rolling in above what measly interest a bank would pay you, you'll become hooked - I know I am

There's a million different ways to invest - some safe, others not so safe. I would always suggest learning fundamentals first. A couple of books really are essential, so you know how to evaluate a company, and then perhaps a subscription to Investor's Chronicle or Shares magazine to familiarize yourself with many UK securities. Avoid the temptation to overtrade on hot stocks, at least until you know what you're doing. ADVFN & Fool are great investing sites where you can learn a lot.

You WILL make mistakes when you begin - I can almost guarantee it - and lose a bit of money from time to time. The key is minimizing risk while maximizing potential upside. Investing is a life-long learning experience. I expect to be a better investor in a year's time than I currently am, and then a better investor than that in 5 years' time, and again in 10 years' time.

IMO, only after a while when you hard-earned moolah is on the line do you actually find out what sort of an investor you'll become; and this depends on many things, such as how much time you're willing to devote to research on stock selections, the level of risk you are willing to take, and your timescale, and what you would expect as a decent % return.

This is probably the best tip that I can give: When you make a mistake, scrutinze every detail to learn from that mistake, to eliminate the possibility of ever repeating it. Remember what it was that made you buy the share, and why that turned out wrong. Don't just sell and sweep it under the carpet, but understand why you lost money on it - not enough due diligence, or did you buy into a wave of hype, or did you simply become impatient and sell only to see the shareprice rise shortly afterwards?

Good luck!

Reminiscences of a Stock Operator - Lefevre
How to trade in stocks - Jesse Livermore
How to make money in bull and bear markets - Weinstein
How I made $2m in the stock market - Darvas
Wall Street the other Las Vegas - Darvas
William O'Neil's book
Ted Warren's book

Avoid Elliott waves, Gann.

All of these approaches work well at different times but what time is it?

Livermore took 14 years before he figured out something important he should be doing.
Darvas showed a loss after 6 years of study before he became successful.

Currently Weinstein and Darvas are working but they might not always. O'Neil is similar to Weinstein.

Then there is fundamentals which are the key. All this technical stuff is to find where the value investors are buying.

How about an actively managed long/short fund run by a manager with a reasonably good track record?

Ok, you said you are a higher rate tax payer. Using a mini cash ISA for stoozing is not such a good idea, because you will have to repay the stoozed amount eventually, and that means withdrawing the £3000 from the ISA and loosing that tax tear's ISA allowance. If you are a higher rate taxpayer, tax planning is just as important as the investment decisions you make.

ISAs have been pronounced dead, but this is misplaced. ISAs are an incredible long term tax benefit. But the key is that as a higher rate taxpayer you must make full use of your ISA allowance every tax year. This way, the allowances will build up and eventually you will have a large amount sheltered from tax. For example, if you use the ISA allowance of £7k every year for 10 years, you have a fund of £70k plus hopefully any return earned. If at that point you decided to derive an income from the ISA, you would move it all into gilts at, say, 5%, you have a tax free income of £3,500 per annum.

The key is therefore to never withdraw anything ever from your ISA. You already have a mini cash ISA this tax year, so you can only have a mini share ISA for this year. From next tax year, I would go for a self select maxi ISA with an online broker. If you are risk averse, you can invest as much as you want up to 100% in gilts or index linked gilts. You just buy them in the market and hold them until maturity. Go for at least 5 years remaining (you have to in an ISA anyway) and don't make the transaction size too small, otherwise the dealing cost for the trade will make the whole prospect unattractive from a cost standpoint. In subsequent tax years, pay the maximum allowance into the same self select ISA. They typically charge a flat fee regardless of the fund size.

If you abide by these rules, which similarly apply for equities, you have just saved yourself the typical 1.5% management fee of unit trusts. Once again, avoid unit trusts at all costs; you will just end up paying a lot in fees. Let's say at one point you have a fund of £20k. That's a whopping £300 per annum in fees.

I cannot overstate how important the cost factor is. Costs will significantly eat into returns, especially in low return eras like the current one.


The first thing I would recommend you do is save £3000 in cash in a normal account so you can eventually repay the stoozing balance without having to touch your mini ISA. Open a self select share mini ISA before the end of this tax year in April and pay in the £3000 allowance. Choose a provider with a flat fee for this and all further ISAs (e.g. Comdirect). In the next tax year open a maxi ISA and pay in the £7,000 allowance over the year. The provider will aggregate these share ISAs, so you will have one single fund of £10,000, which will get bigger and bigger as you make more contributions. You can then start trading in this ISA account.

What you trade is entirely up to you and your risk profile, but I would strongly recommend to put 50% away in gilts. If you are interested, I can explain here further how to trade in gilts. The rest can be individual shares or collective investments. As for the collectives, no unit trusts, only low cost investment trusts or iShares. I would go for a global growth IT, such as Foreign & Colonial, Alliance Trust or British Empire and Securities. They are all extremely low cost (Alliance is the cheapest and also the lowest risk). BTE now trades at a premium, so I would avoid for now. Alliance has an attractive discount at the moment. F&C has been lacklustre recently. If you just want to track the FTSE, go for iShares. Stay away from index tracker unit trusts, they are far too expensive (0.5 - 1% charge per annum).

What many people, including myself, do is build a portfolio of high yield individual shares (for example Lloyds TSB (the classic), Shell, BAT, SSE, Scottish & Newcastele etc.). Motley fool has two model portfolios, although they are now a bit old, and the new one is now subscription only. You will need at least £10k to even start thinking about that, so I would stick with the collective investments I described above for starters.

If you don't want to dabble with individual shares for now and just get some experience for now, stick with gilts, iShares and the low cost investment trusts.

Any more questions, and I will be happy to help

Hello

Yes I was aware about the fact that I shouldnt withdraw money from my stoozing account. The plan was to save enough money to pay the CC off, obviously before interest became due, and leaving the money in the ISA.

Im not risk averse, I would like to take some risks with my money in the hope of getting better returns.

Could you tell me more about gilts? I dont know much about them. Anything in fact And these collective trusts, and ishares?

Could you maybe suggest some advice on how to split my money each month? Like I said I will have around £1k per month to put somewhere. In terms of what the money is for and the timescales, I dont really need easy access to my money, or not all of it anyway. Between 2-5 years, depending on the market, some of this money should be available for a small deposit on a property (for living in).

Many thanks
Christian

Well learn money management and stop loss, u dont want to loose everything do you? Good luck.

here is a snippet from the Motley Fool about why you should avoid Unit Trusts. I still would not use index trackers, as they suggest at the end of the note, but iShares. 0.5% is still too much, iShares charge about 0.2% if I am not mistaken.

10. Managed funds

Millions of UK investors entrust their money to highly paid, highly educated, professional fund managers. Almost all of the money that pours into pension, insurance and investment funds is controlled by these clever folk.

However, perhaps the City's greatest myth is that these high flyers earn their fees by beating the market and, thus, giving their investors value for money. Sadly, this isn't true: over the long term, less than a fifth of fund managers beat the market benchmark they seek to outperform. And yet they charge fees of, typically, 5% upfront plus 1.5% a year.

Rather than be disappointed by these "experts", I prefer to invest in a low-cost, simple, flexible index tracker. The best index-tracking funds charge no initial fees and an annual fee of around 0.5% a year. These low charges give me an immediate advantage over investors in managed funds, because more of my money gets working on day one.

here is a useful article:

Three Tips For Starting With Shares

I am also a beginner in the investment world, but are managed funds really such a bad idea?
Among funds I purchased a year ago include Fidelity Special Situations, Framlington UK Select Opportunities and Invesco Perpetual Income. I have been pleased with all their performances as they have outperformed their respective indices according to www.citywire.co.uk. The investments were made via a discount broker (Hargreaves Lansdown) so the initial fee was in the region of 0.5%, not 5%, and there is also a discount on the annual management fee and also a loyaly fee. All the funds are also highly regarded by Best Invest as well.

Horses for courses I suppose.

Best regards,
Greylocks

Don't know the other two funds, but Fidelity SS is managed by Peter Bolton, one of the best value investors in the business and up there with the Buffett's and Lynch's of the world. His fund has outperformed the market by a large margin year after year, and I would certainly recommend putting your money in there. However, Bolton will probably be retiring in a few years and Fidelity will certainly have a hard time replacing him.

I would say you were lucky to pick the funds that outperformed. 75% of funds fail to outperform the index, so your odds at beating the index with managed funds are 4:1. 'Tis as simple as that.

I'm yet another complete beginner looking at how best to invest >£20k with a view to having the option of cashing out in around 18 months to 2 years. Whether I do will depend on if my investments are outperforming the advantages of a large deposit on a house at around 100-150k, dependent on what house prices do.

In my ideal scenario, the investements would be growing at greater than 1.5 times the interest rate at that time and I could leave them invested and put down a smaller deposit from cash savings (which are running at >20k).

As I said I'm a complete beginner, currently reading some basic investment educational books. (Thanks for the booklist LATPD - I will get round to them at some point).

From that basis a lot of the advice Bubble Pricker (BP from now on!) gives makes sense to me, especially regarding charges etc. However BP, I don't understand your recommendation on gilts. Specifically I don't understand the following:

1) There is a lot of talk of further IR rises due to increasing inflation and to reduce further borrowing. Is this not really bad for gilts in that any yield benefits over cash are eroded, leading to a reduction in trading value, and the final capital repayment is eroded due to said inflation?

2) I understand that despite point 1, gilts are a relatively safe investement and so give your investments some protection from complete loss, but why recommend 50%. I thought that if a self select ISA was composed of >60% gilts/bonds the entire ISA was exempt from (edit) income tax completely. Surely this is reason enough to go for 60% if you are already planning to invest 50% in gilts?

I cannot express express enough how much of a beginner I am, so don't take this as attempted criticism. Are my points factually wrong - so far I've really only learnt anything about equities? Perhaps I'm missing some other critical facts? Either way, free education is most definitely appreciated

K,
Whatever you do in investing, I suggest you get acquainted with teh weekly broadcasts on:

http://www.FinancialSense.com

Cheapest exposure is via trackers of which there are loads.

I did this and also started an investment club , another good and cheap way of learning about stockmarket investing.
That was 4 yrs ago , I now run my own pension via a SIPP as well.

Dames

To Bubble Pricker

"What you trade is entirely up to you and your risk profile, but I would strongly recommend to put 50% away in gilts. If you are interested, I can explain here further how to trade in gilts."

I'd be very grateful if you could expand further on this. I currently hold some bonds in an OEIC within an ISA wrapper, but I'd like to follow a route similar to your own. I'm going to open a self-select ISA and start trading shortly, so any advice would be greatly appreciated.

Boring perhaps but for an investment period of 3 years you should stick to cash - at 5% gross and zero risk you can do no better.
You will need the funds in a short time - why risk the capital to try and get an extra say 5% pa?
If you were already successfully trading that would be another story but you're not.
Don't try and do what you haven't been trained to do.
if you want to punt use a very small proportion of your capital.

Which means don't get a brokerage account and buy shares directly. The trading costs will wipe you out, if you buy less small amounts (say <500 quid)
Typically tradingcosts are around 20-25 quid covering buy and sell. On 500 quid that's 5% of your profit gone in transaction costs.

Invest in funds instead (beware of entry, exit and annual management charges).
Cheapest index tracker: M & G Index tracker: 0.35% annual charge, works within and ISA, and no other fees.

The most straightfoward exposure to the FTSE that you can get.

Ive decided to buy a few funds within an ISA:

Merrill Lynch Gold and General
Fidelity Special Situations
Legal and General Japan Index

I have £1k in each of those at the moment, and am probably looking at 1 or 2 more for some diversity. I have put £3k cash into an ISA as well.

Longer term I am going to save up probably equal amounts cash/equity. The reason for this? The cash as a deposit for a property, the equity for long term. I am in no rush to buy- I would like to wait for the bottom, but will buy in 3 years if I prices are 50% less than they are today.

Hopefully in a year or so, I will start to buy shares directly. The first thing I want to do is buy a portfolio of high yielding shares to hold long term. Once I have those solid foundations in place, I am going to try and invest small amounts in companies that I expect to grow.

Thanks everyone from your advice so far.

Er, isn't an I share the cheapest and quickest to arrange - perhaps through a self-select ISA, though I haven't checked

true, I forgot about that one, but you pay trading costs don't you and need a brokerage account?
If you're a regular self-select ISA saver that's up to 150 quid a year in costs vs 10-20 quid (0.35% AMC) on a 3000-7000 min/max isa,
I'm assuming 12.50 trading costs, which seems to be the norm for non frequent traders.

Other option is Halifaxes sharebuilder which doesn't allow you to time your purchase. Which I really don't like.

In terms of arrangement, I found my m & g ISA pretty trival to set up. Just buy using CC on the web and done, less hassle than the brokerage account (Selftrade failed me on the credit check for some daft reason, while comdirect took me without problems)

I liked the ML fund, but it's really really expensive cost wise. What in-out and AMC are you paying?

Fidelity's special situations: That's the one A. Bolton was running rather well, if I recall correctly, he's no longer managing that fund, so it remains to be seen if it will keep doing as well.

If gold's your thing, also look at Ruffer Baker Steel Gold Fund - ruffer.co.uk
Lovely company

Hoodlessbrennan.com = lowest cost Self Select ISA, I thnk

The initial fee is 0.5% through Fidelity.co.uk. I just logged on to check what the AMC was but couldnt find it....

A Bolton is still running the SS Funds. Have the read the book about his career by the way? Its a very interesting read. It also has a lot of stats on the perfomance of the fund over time. Incidentally, the worst period performance-wise was the two years during the last recession (following the housing crash )

Can anyone give me some advice? I have the following investments:

2004 Mini ISA (Fidelity)
£1000 Merrill Lynch Gold and General
£1000 Fidelity Special Situations
£1000 Legal and General Japan Tracker
2004 Mini ISA (Cash)
£3000 Abbey National

Over the next year, I want to invest £1000 per month. I think short-term, I want to buy at least a couple more funds to get some diversity. However I may decide I want to buy some individual shares. If I opened a self-select ISA, would that mean if I decided I wanted to buy just funds this tax year, I would have to pay the dealing fee (£12.50) every time I put some money in? In which case it would be better not to bother with a self-select ISA?

Maybe its better for me to use my ISA allowance this year just for funds, save up some cash, then put £7k into a self-select ISA next tax year? (I mean April 2006) Hopefully this would be enough to start building a high-yield portfolio.

Many thanks in advance.

You're right, I was thinking of Fidelity European Values, formerly Bolton's.

AMC on ML gold is 5%, I think with the best discount I could find, the AMC was 2 or 3%.

Good tip. I think I'll get an account with those guys. 7 quid trades, quite nice. Shame about the 50 quid AMC, but still a good deal.
Limited foreign market trading though.

What do you do for a living and do you have investment expertise? What term for holding and for saving? What risk profile - will you accept a 20% fall? What tax profile?

Hi Financial Planner

Thanks for the reply.

Im an IT Consultant, also part-qualified accountant (I work on a financial package).

Investment expertise is limited- I have become interested in investing in the last year or so, so have been reading up as much as possible. Actual 'real' experience of buying and selling shares is zero, however I now consider that I have a reasonable grasp of how the markets work. I am also fairly confident in my ability to be able to understand what sort of shape a company is in by looking at their balance sheet and other financial statements.

What term for holding and saving? Cash savings will go towards a deposit on a place to live- that will be 2-5 years, depending on a) the market reaching the absolute bottom or, being able to find a bargain a year or so earlier than that (a house too good to pass by). Regarding the high-yield holdings, unlimited. I wont need access to them. I want to hold them for many years and hopefully watch them grow. I mentioned above that once I have these in place, I would look to buy additional shares where the criteria is different- buying shares that I expect to grow more quickly in price. Risk profile: Cash and high-yield are intended to be low, the rest is higher risk. I dont know a good way to quantify it, but I could stomach a 20% fall, yes.

Tax profile: Do you just mean what tax rate I pay? I am a higher rate tax payer.

Cheers
Christian

If it were me - 50% cash for deposit and 50% Ruffer (.co.uk) Equity and General / Baker Steel Gold
But I'm not you!
As the sergeant in NYPD Blue said -'Take it easy out there...'
Don't forget tax relief on pensions and tax free growth
HTH

TDWH are doing 2 months free share dealing at the moment, though I don't know if that covers ISAs. Website is www.tdwaterhouse.co.uk

I am slowly warming to the idea of taking less risks with my money for the time being- i.e. filling at least a mini cash ISA every year. Could you tell me why you rate this Ruffer company so highly?

Also, what do you mean when you say 'Don't forget tax relief on pensions and tax free growth'?

I dont have a company pension, but I do put £100 away each month into a stakeholder. Not a lot, but I am only 26 and my priorities lie elsewhere at the moment.

Thanks for your help