I've decided the best way to invest my pennies is in the stock market. Let's assume that's a given, I'm not happy getting 1% in the bank and I've decided property is a lot of extra hassle for little extra gain.
The problem is I know faff all about shares, but I think adopting the correct strategy could nullify this fact.
I've made the following assumptions on how to minimise my risks, and would welcome the opinions of those more knowledgable than myself.
1) Diversity is key, so that no major world event (Armageddon aside) should do irretrievable harm
2) Im looking at long term growth, so whilst a modest dividend would be welcome, as long as it beats the banks paltry interest rates I should be happy - so I'm picking out FTSE blue chip shares with a good yield (4%+)
3) No 'punts' on small volatile shares
So far I've earmarked the likes of Glaxo, She'll, Vodafone, Sainsburys, Scottish Energy, BAE, Standard Chartered, Imperial Tobacco - a diverse bunch if ever there was one!
Any pointers recommended!
I went through the same scenario as you about 3 years ago. Sign up to a fantasy share account and try out first. I had some success but got annihilated on others. I ended up putting my real money into a Hargreaves Lansdowne managed fund. The results so far have been brilliant and its hassle free for me.
Two words: index tracker.
This. Very few investors are able to beat the index.Originally Posted by Seamaster73
read this last year not sure if info still useful but probably still worth a read as mentions Hargreaves Lansdown, the name jogged my memory
http://www.theguardian.com/money/201...esting-cheaper
Stock picking is for pros and dreamers. Everyone else is in funds or index trackers.
Check out the Monevator blog and website. Much useful info on there.
See, I thought my method was more 'tracker' than 'stock picker'
A large diversity across the blue chip companies is a tracker of sorts? Or am I mad? Plus, no ongoing fees once I buy the shares.
Every single person I know who has dabbled in shares has been burnt.
Unless you invest willing to lose the lot then don't bother.
Hurricane Energy :)
Fwiw I don't have time to manage individual holdings, and trading costs do mount up, so I use trackers and so called smart trackers - etfs that target dividends for example. Either way physical ETFS are worth looking at if you decide to go the collective way - they usually have low cost relative to traditional funds, many of which seem to be closet trackers anyway.
But the point you make is right, and my BIL simply buys the key holdings in Woodford's fund directly, thus avoiding management costs. But I imagine his holdings will be significant, because of the buying costs.
If you have time holding equities, bought monthly in an isa, as part of a wider portfolio certainly makes sense to me, but what do I know?
Fwiw the current widespread hostility towards equities and enthusiasm for btl is perhaps a good reason to buy the former, and maybe even avoid the latter. There's evidence that people tend to prefer the asset class that did best at the start of their investing lives, which may explain this - and equities were the best performers when I started investing, so maybe I'm biased in their favour.
And all just my view and experience - certainly not any form of advice. I have no clue, which is why I try to hold a range of assets, not just equities and certainly not just UK, and then hold them - constant trading often kills returns, because of trading costs and spreads.
Good luck, whatever you do.
Last edited by simoscribbler; 25th February 2015 at 08:11.
Buy The Naked Trader as a start, then as mentioned get a fantasy account and see what you could have lost if doing it for real :)
/voe
http://monevator.com/
This is a good read to get into it.
As said previously individual shares is risky. I got lucky picking a couple of shares to go with my funds (BDEV, BT, TW).
Only gamble what you can afford to lose
This is often said, but investing in a range of blue chip equities - as part of a balanced portfolio of investments, and with a cash buffer to ride out down periods - doesn't seem to me to be 'gambling.' I invest, and have done for most of my adult life, but I don't gamble.
The chances of the portfolio (especially if bought via an ETF or similar) falling to nil value - like a losing bet - is very small indeed, and bets don't pay dividends.
I'm certainly not talking up equity investments, because they don't suit everyone, but comments like the above are, for me, actually reasons to invest. Stockmarkets only get really frothy when everyone piles in, and despite all the QE I'm not sure we're there yet....although I have absolutely no idea what will happen. (Although I do think it's highly unlikely, state confiscation of assets apart, that my equity portfolio would fall to a value of zero.)
You would just have to work out the initial purchasing fees, versus the ongoing fees for a tracker.
Don't forget things like future purchases, asset reallocation, reinvesting dividends etc which the tracker would be a positive for. If it is a one off buy and hold very long term then the initial way could well be best.
A couple more companies and you'd have an effective FTSE tracker, which begs the question, why not just get a passive low fee FTSE tracker?
You can probably find a tracker with on-going fees under 0.1% or a more accurate tracking ETF at around 0.5%.
'Blue chips' like Lloyds, RBS, Tesco, BP, Petrofac etc etc?
Yes, absolutely. Any tracker contains winners and losers, but the hope is that the winners outweigh the losers over time. Over the last few years - partly thanks to QE, and no guide to the future - that's certainly been the case. And divis make up the bulk of returns - so long as you buy divi payers and don't over trade.
And even the losers, to misquote the great Tom Petty, might come back in the future - and pay a divi while you wait. BP is over 5% IIRC, though I don't buy individual stocks. As the OP says with cash rates so low, it looks sensible to take on a bit of risk, but YMMV of course.
But my main points are, first, that stockmarket investment (with the caveats I gave) is unlikely to have a binary outcome, like a bet, and second that while lots of folk think that stockmarket investments are too risky - and that things like BTL are better because 'you never lose with bricks and mortar' - that's the time for contrarians like me to be buying stocks. But when everyone wants in, then maybe that's the time to get out....
I believe the stock market is back to were it was in 1999. You may have missed some of the bigger gains. Every investment is a gamble whether it on shares, funds or property. I would choose the latter personally. But then I just like to see what my cash has bought. Good luck with your future investments, I think you may need it.
A good variation of opinions gents, thanks all for responding.
This will be a long term hold, so the initial costs of buying the shares isn't a huge issue - I don't plan on trading. Buy and hold.
I now own shares in BAE, Diageo, Glaxo, HSBC, Imperial Tobacco, Morrisons, National Grid, Shell and Standard Chartered.
Wish me luck, and at the end of the day it's only money. I could be dead this time tomorrow.
As somebody else has said, if you are considering investing in dividend earning blue chips, then an index tracking fund is a an easy way in. An alternative is one of the high income funds that generally invest in such shares but don’t necessarily follow the slavish adherence to tracking an index.
A couple of examples would be Rathbone Income Fund or Invesco Perpetual High Income both of which have outperformed most other ‘safe’ investments over many years. Neil Woodford, the manager responsible for the latter, left Invesco recently but his investment philosophy continues. He has gone on to set up his own fund, CF Woodford Equity Income, which seems to be following a similar philosophy.
Incidentally, if you are really looking long term, then also have a look at a fund that Woodford is about to launch, the Woodford Patient Capital Trust. This appears to be a combination of his favourite dividend earners and investment in a selection of high tech start ups.
You're right, of course. But I'd be cautious about tracking an FM's holdings.
Funds often have restrictions on them to qualify for certain benchmarks. This means the asset weightings and stock weightings aren't necessarily optimal - the fund manager has their hands tied to an extent. Any fund updates you read may have had the backside edited out of them anyway.
Also, timings are key. By the time you hear about what an FM is doing, you could be piling in there shoring up the price by which time they may be cutting their exposure.
Simply holding a stock won't necessarily reproduce the performance of an FM who's chosen their entry and exit price carefully.
AlphaOmega isn't qualified to give any kind of advice. Certainly not financial advice, anyway.
By all means buy some blue chip single shares but I'd be looking at some funds as well. I'd have a fund spread that incorporated some bond funds.
In fact this is exactly what I do now.
Don't forget to use the tax advantages that are available by wrapping some of your investments into your pension strategy. Also use your ISA allowance. There are vehicles you can use to do this available from all sorts of providers.
Buy and hold is risky business ... What are shares in woolworths, railtrack etc worth now?
I assume you have more than £20K invested in these 9 shares otherwise it's not worth it IMO.
OTOH if you have significantly more invested than this your stated holdings may leave you under-diversified.
Trackers are fine assuming you don't mind your money tracking the market down, and potentially taking 15 years to get back to where you started.
The most important rule of investing is not to lose money.
Look at something like Personal Assets Trust for a conservative investment if that is what you want. Less hassle than a few directly held equities.
None of the above constitutes financial advice btw.
Last edited by Archduke; 25th February 2015 at 20:45.
Be very careful about investing in the stock market as a newbie, the stock market is a minefield, and inside that minefield, is another minefield!
^^^ +1
Works just fine for me and hassle free. I use Hargreaves Lansdown.
As long as the market only moves upwards.
Not sure I'd want to track the market down and spend the next 15 years trying to make my money back.
Each to their own, but the implication that because the FTSE has only just returned to its end of '99 level means that folks who were in an index tracker for all those years have only just got their money back is just wrong, I'm afraid, so long as they'd reinvested their dividends. Estimates vary (depending on which kind of tracker you use) but you're looking at something in 50% to 70% return region I think, a bit better than cash. As I pointed out earlier it's the compounding effect of dividends that gives equities their long-term performance, which is why dipping in and out is such a bad idea.
And of course if someone was dripping money in over time, diversifying across other markets and asset classes, then their returns may well have been larger.
And, incidentally, the constituents of the FTSE 100 are very different now than in 1999 - which is one of the reasons that I use smart trackers, rather than punting on individual shares. Marconi, for example, was a sound business for many years, but it did manage to implode.
I'm no apologist for equities and am certainly not suggesting that anyone else buys them - since I have no clue what the future holds and am not authorised to offer advice - but as someone who is still increasing my own weighting to them modestly it does my heart good to see so much hostility towards this asset class. As a community we're probably a bit wealthier than the population, yet there are quite a few posts above - and now below! - emphasising (in a way quite rightly) the risks of equities. No issue with that, so long as those folks realise that their assets of choice (which will often be BTL) comes with its own risks.
Last edited by simoscribbler; 26th February 2015 at 09:39.
The US and UK indices have had a very, very good run since 2009. They are at or around all time highs. Retail investors, looking at this trend, have been coming back into the market with high hopes that it will continue.
Danger! Danger! Danger! Watch out below!
Just my opinion, of course.
You can make decent returns if you're willing to lend P2P - I've made over 6% from Zopa in the last couple of years - but otherwise, Hargreaves Lansdown and index funds are fairly foolproof.
Are you nuts?
I have some HUR but there's no way I'd recommend them as a share to a newcomer to stocks. Any small oily is very volatile just now....
Its not opinion ,its fact!!
Since central banks have followed a policy of quantitate easing and loose monetary policy asset prices (shares and property) have sky rocketed. Simply as cash gives almost zero returns investors put their cash elsewhere. This is illustrated by almost zero inflation , very low wage inflation yet house prices rose 10% last year and the FTSE 100 is at an all time high!
The question is what happens when these polices end? Asset prices will fall as investors move back to cash. This is why there may be a reluctance to raise interest rates.
Interesting article on it here;
http://www.thetimes.co.uk/tto/busine...cle4363109.ece
"“Quantitative easing, whereby we bought huge quantities of Treasury bonds, made it very cheap for the government to borrow. It obscured the cost of rising public debt and made it possible for the government to put off making tough budgetary choices. It also probably deterred risk-taking by corporate America. Growth has been hard to sustain even with this aggressively easy policy. The longer we persist with this stance and keep rates where they are, the more likely it is that we are perpetuating an illusion, an economy still founded on debt and artificially maintained asset prices.
“This worries us. We have great economic brains, including, ahem, my own; but frankly, we don’t know what to do. No central bank has been in this territory before and we have an obligation to the American people and to our economic partners not to screw it up.
“For that reason, I am committing to no interest rate increase at all in 2015. There is a danger, and it’s been referred to by the Bank of International Settlements, that, in the absence of consumer prices inflation, all we are doing is inflating an asset-price bubble. It’s a theoretical problem, though. If we raise rates now before growth has been properly established, we may get a financial crisis anywhere and amid economic stagnation. I’m not going to risk that. We went into this unprecedented monetary stimulus quickly, six years ago, to stabilise the financial system. We have no responsible option but to come out of it only gradually."
Well I agree with the analysis but I hesitate to call my view of the future as fact. It's an interpretation of the evidence and an expectation of the future. In other words it's an opinion. Nothing wrong with that of course. As Niels Bohr said: "Prediction is difficult, especially if it's about the future".
Here's a fact though: bullish sentiment is currently at levels ONLY seen in the past at significant stock market tops.
Could be different this time of course! :)
If you go to the disco, dance near the door.
And wear your running shoes.
Should be an interesting day 😀
I'm just (very belatedly I accept) considering getting my long term savings out of the negligable rate homes they are currently in.
I've been considering equities, via funds of course, but am aware the market is already high. If one invests in a fund that is targeted at equities does this prevent the fund managers moving in to cash if they see the beginnings of a crash?
And if not equities where? Gold looks like it is currnetly half way between recent highs and lows. If there is a stock market crash will Gold rise? What about UK domestic property funds, i.e. packaged buy to let? Whilst BTL has become less attractive for the individual surely as a fund it stil makes sense?
Your opinions would be of interest, thanks.
Yep. I used to invest in individual shares but now I just do ETFs.
Hi Jeremy - we all wish we knew the answers to those questions!
The only one I can really comment is gold. I've worked in the market for a few years now, and it's insanely difficult to predict. A couple of weeks ago the US interest rates went up, and gold jumped by $50 per ounce (?!). It feels like gold is no longer really following the broadly accepted anti-cyclical pattern of years gone by (ie strong economy, weak gold price and vice versa).
Diversity of holdings is key. Speak to a decent IFA and go from there. Good luck (to us all!)
Five years ago I opened a stocks and shares ISA and bought a number of funds with a rough 75 / 25 split across equities and bonds. To date, not one of them has lost any money and my top 2 performers have returned a very healthy profit.
BNY Mellon Long Term Glob Eq Inst W Inc (ISA Direct) +35.79%
Rathbone Global Opportunities Inst Acc (ISA Direct) +31.46%
It was pretty easy to be honest, I used Fidelity and filled in a few questions which matched my risk profile with their suggestion of funds and ended up with a ready made portfolio.
Much the same can be done now using a so called 'robo investor' platform like Nutmeg. if I was a first-timer I'd start somewhere like that, I think.
Nutmeg? I think I’ll have a look at that myself :)
Quantitative Easing has forced the situation of traditional low risk savers to become higher risk investors - in the search for yield.
It will all end in tears...
I have a fair bit of experience both personally and professionally in equity markets and my bro is actually in middle of setting up a fund.
My two cents are as follows:
1) make your investments through a shares ISA
2) you have almost 0% chance of out-trading the market as you have significantly less resource than professionals such as hedge funds/banks
3) over the long term equity holding should outperform every other asset class if history is anything to go by
4) equity markets are probably overpriced but as it's impossible to time the market consistently well, now is always as good a time as any
5) you will never get rich quick with equities but as one asset class among a range, it's a good place to park a portion of your cash
All the best!
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Some sage advice here.
My only suggestions would be consider a SIPP and invest in shares via that route, that way you can recover at least 20% via the tax man and take 25% of your portfolio out tax free at 55.
Also consider your risk profile. If you are happy to take a punt, go high risk, if not consider med to low risk funds.
The benefit of using something like a SIPP is you can spread your risk across lots of different markets, assets and government schemes, so I have a mixture of property, global markets, FTSE and bonds,
It has worked very well for me (touching wood).
Another good punt is Enterprise Investment schemes. Net 25-30% returns over 2-3 years, because of the tax relief you get, but assumes you pay tax of course.
Whoever does not know how to hit the nail on the head should be asked not to hit it at all.
Friedrich Nietzsche
2 years later and anyone who took your advice made a pretty penny!
Didn't do too badly myself
Yesterday was good but today cancelled that out.....
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If only I was a member two years ago, what's you advice for the next two years!
My current stance on stocks and shares is to hold funds in my SIPP account and invest in specific companies in my ISA account. I must admit I do have some funds in the CF Woodford Equity Income.
With the FTSE at an all time high and Article 50 having just been signed I am half tempted to sell up half my holdings and wait to how the market reacts for a while.
Have managed my own pension in a sipp with a mixture of stocks, ITs and bonds for the last 15 years through the 2008 crisis, I'm now semi-retired and still an active investor. Prior to opening a sipp I was invested in company schemes requiring open ended funds but found them poor value. Diversity is key but also risk appetite. In your 20s and 30s and 40s you can take more risk. 50 plus is more about cautious growth and wealth preservation. Another downturn is inevitable, it's just a case of when. Personally, I think most markets are overvalued ATM but Russia is worth a limited punt as are some retail charity bonds. Have also invested successfully to date in tax efficient VCTs (I'm much less encouraged by EISs) but feel that these are becoming less attractive with recent new regulation so am gradually liquidating that part of the portfolio.
Myself, I like a mix of bonds and stocks at my age but as always DYOR.
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Last edited by tswatch66; 30th March 2017 at 17:35.
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