Stock Market

[wizard]

Hello everyone, I was wondering if someone could give me some advice or help. Im thinking about taking the plunge and having a little dabble on the stock market. Maybe buying some shares in a company and watching them grow etc... How do I go about buying them? Can I buy them online? Obviously the higher the return the better!

Has anyone got any general tips and advice they could offer me?

Thanks in advance!

[AlanS107]

You can buy shares online. In fact, I think most people do now. There are many sites that you can use; Comdirect, Halifax, Barclays, T D Waterhouse, and many others. Their charging structures are different and it depends on how you are going to trade (frequency, size, etc) as to which broker would be the most economical.

Whether you make a profit depends on the shares you buy and future price movements which largely depends on future events. Because future events are random, no one knows whether prices will go up or down in the short term. But over a long term (5-10 years), shares will probably, but not necessarily, go up. Taking dealing costs into account, you have to be very lucky to make a profit in the short to medium term.

If you want to seriously learn a bit about investing before actually spending any money, I suggest you go onto www.fool.co.uk which is a site specialising in financial matters. It is free and you will get lots of advice if you ask.

If you are interested in trying to make a profit by picking shares that rise in value, look at the "value investing" forums. If you are interesting in making a profit by receiving income from share dividends, look at the "HYP investing forums".

Whichever route you take, only invest money you can afford to lose and remember that nobody (not even so called experts, journalists, etc.) can know the future movements of prices. It's all a gamble unless you have inside knowledge (which is now illegal)
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[wizard]

Thank you very much for that excellent answer Alan. One question which I forgot to ask was, is it worth investing small amounts such as �20 - �30 or would I need to be investing larger amounts to see any real profits?

[AlanS107]

No, it is not worth investing that �20-�30 directly into shares because of dealing costs which are typically �10-�15 a deal. It is probably not worth investing less than �1000 per deal otherwise dealing costs and stamp duty eat into your capital.

For these smallish amounts, you should think about investing in a tracker fund. These sorts of funds will track the FTSE and thus you can benefit in any rise in the market. Fees are typically 1% per year, so they do not have such a great effect on your capital.

There are many tracker funds around. I have heard that Legal & General has a reasonable fund, but I have no personal knowledge. But remember that this should be a long term investment and it is risky.

If you are more interested in the short term, it is hard to better a high interest internet cash account. These pay typically 5% or over, there is very little risk, no fees, and you have immediate access to your money. If you have not got a mini cash isa at the moment, then you should invest your cash in something like the Alliance & Leicester online isa paying 5.4%. If you don't invest in an isa, then Alliance & Leicester pay 5.35% on the internet saver, but a basic tax payer will have 20% deducted. There are many other building societies and banks that have internet accounts but I believe that Alliance & Leicester rates are hard to beat.