Rookie In Shares

[vman7]

Forum

I have 2 grand that i would like to play with in the share market but need some advice on where to start. ideally i would like to buy penny stocks and be diverse so maybe 4 penny stock companies and put £500 in each

what sites, tools etc do you use to find out about new and upcoming companies. i have read other forums were people are mentioning companies which i have never heard of but i would like to know is how they find out about them, what do they read to invest in them

Any advice for a rookie would be appreciated

thanks

[DotBomb]

Forum

I have 2 grand that i would like to play with in the share market but need some advice on where to start. ideally i would like to buy penny stocks and be diverse so maybe 4 penny stock companies and put £500 in each

what sites, tools etc do you use to find out about new and upcoming companies. i have read other forums were people are mentioning companies which i have never heard of but i would like to know is how they find out about them, what do they read to invest in them

Any advice for a rookie would be appreciated

thanks

Try motley fool first. If your interested in penny shares, try the Uk banks. hahaha

PS after about 5-6 years doing the share thing, ive decided to close down my trading accounts and stick the cash in the bank. Contrary to what the newspapers are saying. Sometimes you run with the crowd. Sometimes you need to do the very opposite. Either way if this represents under 10% of your net worth. go for it.

[longtomsilver]

£2k isn't really enough in my humble opinion. If you split it four ways then you'll be paying circe 80quid on the first buy and sell through a cheap internet broker. That's 4.5% straight away (including stamp duty). It really depends how you wish to invest in shares. If you can make regular purchases to build your portfolio then go ahead. I only invest circa £750 per month into stocks and shares having a varied portfolio and use the rules of averages to lower my purchase costs.

My grandfather told me that the only way to get rich as an ordinary fella was to get rich slowly - and he said that from his £160k Bentley so he knew what he was talking about.

[Fawkandles]

When I started, I decided that its not worth investing less than 700 quid in one holding, and upped that to 1k recently.

I pay £13 per deal (per buy/sell) with Barclays. Its more than it seems.

But tbh the cost should be the least of your worries - picking a good stock and at the right time is the hard bit!

[vman7]

tomposh - who are you investing in at the moment?

i wish i could afford to put £750 a month a way each month in shares alone...........

[GeordieAndy]

I haven't the time to do this myself at the moment but the plan is to do this when I don't have to work (hopefully!) in 5 years time

However I was going to start with the fantasy shares stuff for 6 months or so to get a feel then invest a little - has anyone used any of these?

[bearwithasorehead]

Like has been said - 2k is, unfortunately not really enough - you get loads of risk for that amount, but not enough clout. It is like poker - you need a big float to ride out the luck going against you.

I invest NOT* less than 2k at a time because if you do the sums anything less gets you eaten on the fees and tax.

Do the sums:

fee for buying: £12 (that 0.6% of your investment gone)

stamp duty on buying (0. 5% of your investment)

selling fee 0.6% gone.

So even on 2k you're looking at 1.5% of investment in fees.

So for 500 on each share you're looking at about 5.4% just eaten from the investment ON EACH SHARE before you even think about it.

*exception, when my broker has a discount buying period I buy small amounts of very risky shares.

[bearwithasorehead]

I have quite a lot of time on my hands - I wouldn't recommend an actively managed portfolio to anyone if they can't spend an hour or two every other day reading company reports, general economic news and so on.

The option for busy people is investment companies that don't charge fees upfront. On other threads some tips were (and these are NOT my tips): BGS, BGFD SDP (these are bundled investments in Asian stocks)

NII, JII, NGC - these are in Indian stocks

EST, BEE, JRS - these are in Eastern Europe

For less risk there are lots of UK investment companies. I like DNDL up 30% this year.

I own some of these - most of them don't pay any dividends though :angry: .

Then there are my individual shares: DRX, PVCS, PRV, ATD, OXB, NFDS, AZN, GSK, NG.

Some of these are high risk.

I don't really have enough money to invest in such a large number of shares, ideally I'd like to sell some of the dogs and concentrate on a few though I think all of the above companies bar one (can you guess?) have good prospects.

Even with my time I find it difficult to keep up with just the news on these shares.

[bearwithasorehead]

Sorry to highjack thread but I realise the last post was a bit waffly.

KISS

keep it simple stupid is the advice I would like to give. You can see I haven't really stuck to it. That's why I say, fewer individual shares is easier to manage if you have a life/wife/kids.

Some people say they only hold 2 or 3 shares at a time, say, of a minimum of 2k in each. It is risky, but at least you won't miss an opportunity to sell out at the right time.

The alternative with this method is you buy, say, Drax at a peak of 10 pounds a share and..... can never sell it without losing at least a grand of your money because it never goes back up to that level. The dividends are hardly a consolation in that case.

I own Drax, but not many shares and bought at 4XXp so I am 'ONLY' £300 down if I sold tomorrow.

[longtomsilver]

bearwithasorehead has a different stategy to mine. not to say that we aren't both right. it's a mine field out there.

I invest mostly in defensive stocks that pay a reasonable dividend and reinvest that by taking the stock option every time. They say elephants don't run (look at the FSE 100/250) and with £2k to invest in that's the only place I would be willing to put my money and even then the risks simply aren't worth it. re. the dividend thing... if your not reinvesting the dividends and actually relying on that as income then i'd say that it's better to keep the money somewhere safe and have the security if you need it in the future.

When I started out I was naive and made some spectactular losses by following the share recommendations in the papers (mostly VIs trying to flog off their bad investments I think). Got my fingers burnt on numerous occassions. One I remember ended up paying 12p back in the £1 (Parkland - or something) I lost £2k on it - thanks Natwest for saying BUY.

£2k is still alot of money and I wouldn't recommend going near the stock market until you fully understand the markets and the risks associated with it. If we go through Great Depression Part 2. alot of people could very well lose their shirts.

Edited December 15, 2010 by tomposh101

[bearwithasorehead]

bearwithasorehead has a different stategy to mine. not to say that we aren't both right. it's a mine field out there.

I invest mostly in defensive stocks that pay a reasonable dividend and reinvest that by taking the stock option every time. They say elephants don't run (look at the FSE 100/250) and with £2k to invest in that's the only place I would be willing to put my money and even then the risks simply aren't worth it.

When I started out I was naive and made some spectactular losses by following the share recommendations in the papers (mostly VIs trying to flog off their bad investments I think). Got my fingers burnt on numerous occassions. One I remember ended up paying 12p back in the £1 (Parkland - or something) I lost £2k on it - thanks Natwest for saying BUY.

£2k is still alot of money and I wouldn't recommend going near the stock market until you fully understand the markets and the risks associated with it. If we go through Great Depression Part 2. alot of people could very well lose their shirts.

It sounds like Tom is a bit further on in terms of experience than me. At present I am up for more risk than him. Sounds like the OP is youngish, so maybe that's ok. Only he can decide.

I agree that if 2k is 'all' his worldly wealth then it is too risky.

Agree to never follow the newspaper tips. Though it is worth reading them and sometimes tracking - see if they are right.

You have to be psychologically prepared to lose real money in this game

[porca misèria]

With £2k I'd suggest two alternatives:

(1) Buy funds rather than shares. Your risk and return are spread, and you get it professionally managed. Choose your sector or theme, then find a good manager in your sector.

(2) Consider companies you know well, identify one that you expect to prosper but that is not overpriced, and invest in it. If your own or a friend's employer is thriving, well-managed, and not so big that everyone knows about it, that can make an ideal scenario, though still high risk.

[Fawkandles]

Don't let these doom-mongers put you off.

I started with 1k savings, and gradually top up every month from my very average earnings around 300 quid a month. Being good at saving is just as important as earning lots imho! (i dont drive etc, dont buy much stuff generally). Oh and get a girlfriend - half rent bills

My money has doubled in 6 months, and I'm a noob! Had between 2 and 5 holdings at any time, 700-1800 in size.

Go for it, but research it a lot.

[vman7]

Thanks for the advice guys but im still none the wiser....

The 2k i am willing to invest is money i can afford to lose. What sites, books etc can i read to learn about investing?

What should i be looking out for on company reports?

I agree that funds may be better - do any of you recommend any funds/fund managers?

[Fawkandles]

Thanks for the advice guys but im still none the wiser....

The 2k i am willing to invest is money i can afford to lose. What sites, books etc can i read to learn about investing?

What should i be looking out for on company reports?

I agree that funds may be better - do any of you recommend any funds/fund managers?

If you invested in the same stuff as the fund managers you would keep 100% of the profits rather than a small slice of the actual increase in company value. If you want to make the most of your money, and are willing to learn, and willing to keep an eye on your investments - do it direct by buying the stocks. Its very easy to use the account.

"money i can afford to lose" - a good attitude, and why not split it into 3 lumps of 650 and buy three stocks? It will cost you overall about 70 quid in costs to open the account, buy 3 shares, and sell them again whenever.

Depending on your appetite for risk, you could double your risky money or make a safe 30% within a year easy with some careful research.

Have a watchlist of say 6 shares that you keep an eye on, and be patient when thinking about buying. Great opportunities usually appear a few days after one of my panic buys!

As for picking those shares ... thats up to you. Personally I read a lot of investment forums such as the iii and LSE boards, and resdpected posters may mention what they are invested in.

This is only step one, and would not just buy for that reason. I then go and dig around looking for reasons for that company to fail first, asking "what could go wrong? Is it fairly priced now? Is it well-funded? etc".

I look for oil companies with a low market cap of 50-200 million squid, that I think could feasibly grow to 500+, then assess the risk, then buy

It goes wrong quite often though, and you have to be willing to sell on losses. Other stuff fizzles out and you pay costs to dump it. But then one successful one can go up by 100%+ and you wonder what you were worried about!

But thats just my style, and NOT FINANCIAL ADVICE. Do your own research!

[fadeaway]

The above comments are spot on.

When I first started out - I did the same as you. I was terrified, so I thought diversity would save me.

I did silly things like put £400 in 10 different companies and lost quite a bit of money, commission killed me.

Nowadays I do everything in at least 2k chunks, often before breakfast without worrying.

The most important bit of advice though is DON'T GET EMOTIONAL.

If a share you hold is going down and things look grim - TAKE YOUR MONEY OUT. Don't wait around thinking/hoping it will make a heroic comeback.

Think about it - what is more likely to get your money back: having it sit in a share that is currently going down, or having it sit in a share that has been going up? Simples.

RUN THE WINNERS AND CUT THE LOSERS.

You will get it wrong and you will make losses, but make the losses small ones. If you make a profit, keep it going.

I started trading early this year and am running at about +60% 'interest' rate. My original goal was only to beat the shitty rate my bank were offering.

Best books: Anything by Robbie Burns.

No financial advice intended etc.

[longtomsilver]

It's good to see other opinions and have an interest in securing your future.

Doubling your money in six months sounds too good to be true long term. i.e. 3 steps forward, 2 steps back.

If you are single then the best advice I could give would be to spend some of it on nice clobber (especially shoes) get out and buy a lady a couple of drinks. The best financial bet I made was getting hitched as my essential outgoings halved. I couldn't afford to invest what I do now as a single man!

[Fawkandles]

It's good to see other opinions and have an interest in securing your future.

Doubling your money in six months sounds too good to be true long term. i.e. 3 steps forward, 2 steps back.

If you are single then the best advice I could give would be to spend some of it on nice clobber (especially shoes) get out and buy a lady a couple of drinks. The best financial bet I made was getting hitched as my essential outgoings halved. I couldn't afford to invest what I do now as a single man!

I usually get flamed for saying these things! Glad to be on a forum with like-minded folk

This tip has attached risks - dont tell your girlfriend!

(Considering polygamy now)

[Lagarde's Drift]

Same here, my outgoing are pitiful now that we share the burden. That being said I know couples where one pays for everything, caveat suitor...

[Fawkandles]

Oh and fill your shares isa before april every year. Wont regret it in the future.

[nohpc]

I'd be looking at junior oil companies or junior miners if you fancy a high risk punt. You could spread it by buying a fund or ETF.

Rockhopper and Bowleven are possible junior oilers about to take off. As with any investment that can double or better your money these are all very high risk.

My preference is for ETFs.

[Fawkandles]

I will be getting into mining to make my investments more diverse. HER is a fresh young mining company with a lot of potential in 2011/12. I intend to buy in and then forget about it for months whilst it does its thing. Certainly not worried about buying in too late for once

[ftbinthewaiting]

There will be a steep learning curve when you first start investing in shares. I've been invested for just over 2 years, but I'd say it took 12 months plus to understand a bit about what I'm doing, and another 12 months to feel half way confident in my decision making. I treat it like a second job, but fortunately have the time to put in.

advfn.com is worth a look as a website about shares - some excellent posters there, but also a lot of folks "ramping" various shares.

My advice with £2k would be to make not more than 2 investments. Investing less is not probably not worthwhile due to the dealing charges etc, e spread (buy price versus sell price), but starting with £1k in 2 companies might be a way to go. Having said that, investing in 4 companies might be better from a learning perspective, but be prepared to be 3-8% down on your investment straight away.

As for stock picking, it really is a case of doing your own research, doing a lot of reading, visiting the website and viewing presentations online, reading the bulletin boards, reading the financial results, canvassing the views of others etc. Try to take the time to compare the market capitalisation of any given company versus that of its peers. It can take a LOT OF TIME to research investments properly. And it will take many months to understand how the markets work if you're completely new to it.

I'd recommend that you make a decision and stick with it for more than a few days. The temptation is to buy and then sell at a loss, or buy a sharply rising share only to see it fall back as traders take profits.

An alternative would be to set up a virtual portfolio, and "pretend invest" for a few weeks and see how it goes. Remember to account for a £8-13 charge for each trade and for the spread in doing this.

If I were to give one piece of advise it would be: research > decide > buy > hold unless your reasons for investing change due to company news or world events

Hope this is of some help.

Edited December 21, 2010 by ftbinthewaiting

[jaywall]

Hi, some great posts above and i have to say i agree pretty much with every thing ftbinthewaiting just said.

I would add my two penneth worth though, all in my very humble opinion !

A good way to start out, IMHO, is to pick an assortment of companies in sectors that interest you that have recently gone way outside the curve and also some that people thought should have but didn't. Up, down and sideways. And then pick back through the news and every bit of info you can get your hands on to figure why what happened happened.

Have a read up of investing strategies but don't take advice from well known share sites or in fact anyone at all without DYOR (doing your own research) It is time consuming but it's work. If you know more about a company than the masses then it's less likely to surprise you.

Technical analysis can be usefull IMHO but only as part of an indication of when to buy and when to sell absolutely NOT what to buy. Fundamental analysis (your all consuming research) determines what to buy.

Never chase a rise, unless you already know something about it. If you miss it because you were looking at something else, forget about it. Concentrate on the ones you know about.

Stick to a sector you like until you know enough about it, dont spend 12 months learning about mining or oilies and then jump into an engineering firm on a whim. If you know your sector and you know what affects it you are at an advantage,

Doing nothing can be the hardest but most profitable part of investing.

iii.co.uk is an easy place to start out getting to know the language and particulars, as is advfn mentioned by ftbinthewaiting above. Read but ignore all tips/advice on the BB's at most they are leads to follow up, nothing else. Have a look at fundamentals of companies in a sector you like, then read the last year or so of RNS's, have a look at the companies website, AIM stocks will list certain things there that are useful. By all means check out stock sites like Motley Fool but bear in mind if they were on the money every time we would all be rich by now, you have to have your own informed opinion or you will most likely lose your money.

Good luck and if you consider this 2K an investment in yourself as much as a financial one, and you put the time in then you won't lose.

Edited December 21, 2010 by jaywall

[live in hope]

With £2k I'd suggest two alternatives:

(1) Buy funds rather than shares. Your risk and return are spread, and you get it professionally managed. Choose your sector or theme, then find a good manager in your sector.

(2) Consider companies you know well, identify one that you expect to prosper but that is not overpriced, and invest in it. If your own or a friend's employer is thriving, well-managed, and not so big that everyone knows about it, that can make an ideal scenario, though still high risk.

Best thing is to put it into 3 or 4 good funds at hargreaves lansdown in an isa. Maybe 4 of 500 quid each . Their recommended are probably ok. And then forget it.