Buying Some Shares

[Pat Hartman]

To get good personal management, you need a lot of money to open an account. For something less than a half million dollars, you'll pretty much be on your own or be part of a comingled fund managed by computers.

At this point, it's a little like going to a casino. How much money can you afford to loose? Are you looking to do day-trading or buy and hold? Day-trading is a full time job. I have a couple of real investment accounts managed by professionals. Retirement funds need to be segregated for tax purposes so most people will have two accounts. One personal and another for an IRA or 401K. I also have an account I dabble with. In that account, I buy companies whose products I like. I tend to buy less expensive companies. For some reason, I prefer to have 100 shares of brand x rather than one share of Microsoft. It is the little guys that have the most upside potential if that is what you're looking for and I've picked more winners than losers but have not beat the return over time, of the professionals. If you are familiar with an industry and have some sense of whether or not they will be experiencing growth in the next few years that might be one option. If you don't have a particular company in mind, you can invest in an index fund. They have the cheapest fees of the comingled funds options.

I don't like Mutual Funds. Most have extremely high fees and they tend to be hidden. Also, based on the way the US tax code works, your Mutual Fund could be losing money and yet you will incur capital gains tax liability if the fund sells assets at a gain. That always irked me when I had some funds in my portfolio. Mutual Funds are not as liquid as indexed funds either. They settle at the closing price for the day. You could buy an index fund that only buys technology stocks. Or you can buy the DOW or NASDAQ or S&P or whatever UK or EU groups you like.

I also played around with options for a while. To write option contracts, you need to do it in 100 share lots. So I had 100 shares of IBM. I would look at the futures and decide if I would be happy selling my shares for x dollars and if so, I would sell a call. That is an offer to sell my shares of IBM at some point in the near future at x dollars per share and I would get paid y for the option. The hope of course was to keep the option fee and not actually have to sell the shares. With only 100 shares to play with, there is no way to make a lot of money but I managed to eke out a few hundred dollars during the year and never had my option called so I got to keep the shares. The real money, as well as the real danger is in shorting a stock. That means that you borrow someone else's shares and sell an option to sell them to someone else. These are "naked" calls because you don't own what you are selling. The problem is that if the stock goes up rather than down, the option will be exercised and now you have to go out and actually buy shares at the market price. There is no downside to your potential loss in this scenario. At least if you are selling your own shares, like I was, your loss is limited.

 

[Steve R.]

Do you have an account already set up at a brokerage house such as Ameritrade, Schwab, Robinhood, etc? If not that would be the first start, many institutions have a minimum investment requirement let's say $500.00 to open. Once you have the account and the minimum deposited I would strongly suggest you put your money into a money market type account, to begin with. This is a "safe harbor" account meaning very little risk. After spending a reasonable amount of time getting familiar with the company's onsite tools you could then venture into a purchase. Are you familiar with Moringstar?

@Uncle Gizmo: @AccessBlaster is pointing you towards the correct way to get started. Establish a brokerage account first. Look for a brokerage firm that has a variety of online research tools. One research tool that I use is "Value Line". There is a complication with using Value Line, it is $$expensive$$, so you would need to find a library which carries it. However, the number of libraries that carry Value Line in the US has been in decline. Value Line, may soon "disappear" as a hard copy product. Anyway, I'm getting ahead of myself here.

A free online resource that I use is Seeking Alpha. Another online resource is MarketWatch.

A general (editorial) word of caution. Stay away from mutual funds. Many brokerage firms and even companies publishing "stock" recommendations push mutual funds.

How can I prove that I own shares? Do I get a certificate, paper? online? How's it done?

Getting paper stock certificates has gone out-of-style. So what you own in the way of a stock, is shown on your brokerage statement.

How do I know the Firm I am dealing with is trustworthy? (the brokerage)

Research and word-of-mouth.

My investing strategy:
Individual stocks where the financial health is high and the company is buying back shares.
Stocks that pay a dividend that is above the inflation rate. Was typically a dividend above 3%, but inflation is currently on-the-rise. So that strategy may require some tweaking.

Another editorial aside: Stocks now are in a bubble. This bubble may burst, but the when is unknown. You do not want to buy stocks when they are hitting new highs. Best to buy them when hitting new lows (assuming the underlying company is still financially healthy.).

Remember, do your own research and don't accept any advice given here as being appropriate for you.
That's it for now.

 

[CJ_London]

I use AJ Bell with a self investing ISA - and manage my own investments. Fees are low, management is all pretty straightforward. I spread across 4 industries at a time and get to know them well and have a mixture of investments in large and small businesses. I look for a mixture of gains and income over a 6 - 12 month period. Agree with Steve, there is a bit of a bubble but UK shares overall are now roughly back to where they were before the Covid crisis so my view is movement is now dependant on what happens next. UK growth seems to be OK at the moment, but inflation is on the rise, transportation and energy is getting expensive, retail, hospitality and travel are struggling. Within those sectors there will be winners and losers and there will be other sectors than will no doubt thrive under those conditions.

Do a lot of reading of financial press, take your time making a decision and make sure you spend time looking after your investments. Create some rules around your investment strategy and use the tools available to help maintain them. If you have industry knowledge - make use of it. You are often posting on green matters, perhaps you have potential investment knowledge in that arena?

One other way to help spread the load is investment clubs. Clubs usually consist of 10-15 like minded people. They each put in an initial stake and then a monthly investment. Each member chooses an industry/type of company/whatever to investigate and come back with recommendations. The group decides on which which recommendations to invest in. In the background one or two people monitor existing investments and make sell recommendations. Meetings are typically once a month.

 

[Uncle Gizmo]

Thanks for all this info! I'll have a think on it and get back to you, with more questions I suspect!

My interest in shares was provoked when I read that increases in inflation will significantly erode the value of your savings.

It appears that it's safer to buy property, a business, and shares.

 

[Jon]

Inflation sucks. People say there is risk associated with investing in shares. But they fail to mention that inflation is guaranteed to devalue your money. i.e. The risk is 100% certain you will lose money by keeping it in any investment vehicle that produces returns lower than inflation, such as typical bank accounts.

From my perspective, the accurate way to view risk (my truth!) is that in the short term, investments are a gamble, while in the long term they are near a dead cert. A bank account paying interest is safe short term, but guaranteed to lose you money long term.

 

[Isaac]

I've been thinking of buying some shares, and I have no idea how to go about it!
I've just started watching some videos for beginners, but if you would like to chip in with some advice it would be most welcome!

Also - I had a quick look for a database for handling stocks and shares but I couldn't find anything. Again if you can point me in the right direction..

I've enjoyed using Robinhood. It's VERY beginner-friendly and, frankly, just has a superior layout and GUI intuition than Webull...but, Webull is nice too, IF you can tolerate seeing 10,000 options all on the same screen, and know or care what they are for. (Neither the icons nor the sequence of menu options make much sense at all, so it takes a while to memorize how to do things from the worst-looking app in history.....BUT, "experts" say it is best).

My brother, who is a more serious investor than I, uses Ameritrade and Schwab apps.

Robinhood is an excellent place to start to begin getting familiar with basics and especially the psychological rhythm of it.......which is, in my opinion, the largest aspect of the 'battle' by far..

 

[Uncle Gizmo]

I use AJ Bell with a self investing ISA - and manage my own investments. Fees are low, management is all pretty straightforward.

Update!

I've taken Chris's advice and gone with AJ Bell. I like having the interface on my PC. I don't like/trust anything on my mobile, to easy to hack or steal!

I've brought some Tesla shares, and straight away lost money! I'm not too worried, as I intend leaving them alone for at least 5 years.

Thanks for all the advice. If you have any other advice, please post....

 

[oleronesoftwares]

Be careful play smart!

In this regard i do

 

[oleronesoftwares]

I've brought some Tesla shares, and straight away lost money! I'm not too worried, as I intend leaving them alone for at least 5 years.

Long term investment in shares is advisable if
1. One is young and building for the future
2. One is close to retirement and building inheritance for one's next of kin/dependents.
3. One has idle funds and you intend to place it somewhere for a period of time.
4. You understand the industry future the company is in and certain of the viability of the industry in future

 

[oleronesoftwares]

Inflation sucks. People say there is risk associated with investing in shares. But they fail to mention that inflation is guaranteed to devalue your money. i.e. The risk is 100% certain you will lose money by keeping it in any investment vehicle that produces returns lower than inflation, such as typical bank accounts.

From my perspective, the accurate way to view risk (my truth!) is that in the short term, investments are a gamble, while in the long term they are near a dead cert. A bank account paying interest is safe short term, but guaranteed to lose you money long term.

Starting up a venture capital company with a group of individuals can be a good investment, you can always start small, get individuals to manage the firm, study various industries advice on which to invest in per time.