Buying shares - where do I start?

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foggylad

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How would a newcomer learn about buying shares, how to go about it, which shares to buy, advice available, etc, if one was to consider trying them on a small scale.
 
Can I resurrect this thread as i am asking myself the very same question. Some genuine advice would be appreciated.
 
I think the reason this question got no replies first time round is because it is so broad.

Obviously if you want to buy shares you must open an account with a broker. There are different levels of service and different levels of price. My advice is go with a low cost broker. The higher levels of service are just an excuse to charge more and not really worthwhile. just my opinion.

Now a question. Why do you want to buy shares? Do you expect to make money at it, do you want to do it for a hobby that might be profitable.

What kind of money are you intending to spend on shares. I don't mean how much I mean what kind. Is it "my life savings", or "a few bob I have kicking around in a current account that I will end up wasting if I don't find something better to do with it".

Another question, who are you, what age are you, what financial commitments do you have.

I think it is fair to say that there are three approaches to buying shares.

1. Invest in a passive fund. This means that you should expect to get the average return less a little bit for costs.

2. Invest in an actively managed fund. Here a professional fund manager will charge you extra to invest on your behalf. I understand that most such fund managers using their years of professional skill and judgement fail to beat approach number 1 and of course they charge well for their services.

3. Open an account and trade for your self. What makes you think you can do better than the professionals? In my opinion there a number of reasons why this approach may have a better chance of success than the others. But if you don't know what they are you have a long and expensive learning curve ahead.
 
Step 1, is to swallow as much information online as possible. Many websites are free. Get into the habit of reading them for half an hour every day. You'll get a feel over the course of maybe 6 months how it all works, the type of investor you are, the type/diversification of shares you'd like to buy, where you'd like to buy etc.

Definitely check out fool.com and fool.co.uk. Also morningstar.com, digitallook.com, seekingalpha.com, ....

What I'm getting at is there's a lot to take in, it's not a case of "Oh, CompanyX is on the 9 o'clock news and they just signed a deal so I should pile in"! Get to know the companies on a broad level - it can be quite interesting, and addictive.

When it comes to pulling the trigger, there are threads on here already about different brokerage options.
 
Great reply cremegg and camel.
I personally want to invest 80% (circa) of my life savings in shares. I am still only 26 so it wouldn't be the end of the world if i took a hit as i have (hopefully) a long working life ahead of me.
I have held my savings in deposit accounts so far and the pay back is not worth a great deal, therefore i am more interested in high risk. I think I am better to take these kind of risks early in life while mortgage free etc.
I am currently researching stock brokers, and two names keep creeping up (davy & goodbody). I am currently based in the UK and am curious to know if i am better using UK brokers.
 
Wouldn't be able to say authoritatively without checking the facts but I'd imagine that due to much higher competition and throughput the UK guys would be cheaper. Not sure if the UK has discount brokerages like the US (e.g. E*Trade, Zecco, etc.) but it's worth doing a quick Google anyway.

I obviously can't give you advice on what to do with your money etc. but just to say that my mindset sounds very similar to yours regarding risk levels, your age, etc.
 
Saxobank in UK have 0.15% commission on trades, but charge an inactivity fee. I use them and am happy enough so far. In Ireland you can apply through Somerville (www.sam.ie) and you have the option of a managed account, paid-for advice, or just trade yourself. (Disclaimer: I have no other connection to SAM or Saxo; I originally found the links through AAM myself).
 
oreillycavan said:
Great reply cremegg and camel.
I personally want to invest 80% (circa) of my life savings in shares. I am still only 26 so it wouldn't be the end of the world if i took a hit as i have (hopefully) a long working life ahead of me.
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It appears you are considering investing in shares directly using your own skill and judgement. The conventional advice is that you are unlikely to make a profit doing this. While I think that it is possible, I certainly don't think you are going to do well from the start.

Thinking that you can profit by investing in shares from the start is like thinking that you can go down to your local chess club and beat most of the guys who have been playing for years at the first attempt. And those guys probably don't even cheat.

I suggest that you don't start with 80% of your life savings, rather a small amount that you can afford to loose, and expect anything you buy in the first year to be an educational cost. After all you would not expect to take up any other acidity and expect to do well with out any learning curve.

oreillycavan said:
I have held my savings in deposit accounts so far and the pay back is not worth a great deal, therefore i am more interested in high risk.
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Your plan seems to be to go from no risk to high risk without considering medium risk. Which is not a criticism just wondering if you realise and are happy with this.

oreillycavan said:
I think I am better to take these kind of risks early in life while mortgage free etc.
I am currently researching stock brokers, and two names keep creeping up (davy & goodbody). I am currently based in the UK and am curious to know if i am better using UK brokers.
Click to expand...

If you are considering buying a house at some point perhaps you should save for that before buying shares. Your time horizon may not be to the end of your working life. In my case I even bought a house and continued to buy shares, it was kids that reined me in.

Are either Davy or Goodbody at the low-cost end.

Is your home currency sterling or euro.

camel said:
Step 1, is to swallow as much information online as possible. Many websites are free. Get into the habit of reading them for half an hour every day. You'll get a feel over the course of maybe 6 months how it all works, the type of investor you are, the type/diversification of shares you'd like to buy, where you'd like to buy etc.

Definitely check out fool.com and fool.co.uk. Also morningstar.com, digitallook.com, seekingalpha.com, ....

What I'm getting at is there's a lot to take in, it's not a case of "Oh, CompanyX is on the 9 o'clock news and they just signed a deal so I should pile in"! Get to know the companies on a broad level - it can be quite interesting, and addictive.
Click to expand...

While I agree with Camel, I would add that reading and informing yourself only helps to a degree, until its your own money and pride on the line the lessons don't really sink in.
 
cremeegg said:
It appears you are considering investing in shares directly using your own skill and judgement. The conventional advice is that you are unlikely to make a profit doing this. While I think that it is possible, I certainly don't think you are going to do well from the start.

Thinking that you can profit by investing in shares from the start is like thinking that you can go down to your local chess club and beat most of the guys who have been playing for years at the first attempt. And those guys probably don't even cheat.
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You don't need to 'beat the market' to make a profit from stocks if going with trusted companies long term. It is pretty tricky to beat the average market returns but even if you trail the market 1-2% you still can make a profit and beat the alternatives. That been said, getting burnt is very possible too.
 
RobFer said:
You don't need to 'beat the market' to make a profit from stocks if going with trusted companies long term. It is pretty tricky to beat the average market returns but even if you trail the market 1-2% you still can make a profit and beat the alternatives. That been said, getting burnt is very possible too.
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Unless you are aiming to beat the market, why not just buy the market. Approach 2 that I outlined above.

There are many market tracking funds available, which probably cost less that it would cost you to replicate it yourself.
 
QUOTE]It appears you are considering investing in shares directly using your own skill and judgement. The conventional advice is that you are unlikely to make a profit doing this. While I think that it is possible, I certainly don't think you are going to do well from the start.[[/QUOTE]
I have got a quote for setting up advisory direct share portfolio from Davy. With annual fees and transaction commission, I would really need to invest >100k to make it feasible.
I am still considering opening an execution only account but if I do go down this road I will be sticking to the big name reliable (Glanbia, Kerry, Ryanair etc.)
If you are considering buying a house at some point perhaps you should save for that before buying shares. Your time horizon may not be to the end of your working life. In my case I even bought a house and continued to buy shares, it was kids that reined me in.
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I am hoping to increase the savings over a 4 to 5 year period allowing me to buy a reasonable house back home(valued around 150k). Maybe I am deluded and only see the positives but if it all go's wrong I can still apply for a mortgage like the majority of people.
Is your home currency sterling or euro.
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My home currency is euro. I am living in the UK for the next 12 month.
I hope to begin researching UK brokers this week.
 
Saxobank in UK have 0.15% commission on trades, but charge an inactivity fee. I use them and am happy enough so far. In Ireland you can apply through Somerville () and you have the option of a managed account, paid-for advice, or just trade yourself. (Disclaimer: I have no other connection to SAM or Saxo; I originally found the links through AAM myself).
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Thank you dub nerd. When I have my research complete (hopefully two weeks time) I will post up a break down of UK stock brokers V Irish stock brokers
 
cremeegg said:
Unless you are aiming to beat the market, why not just buy the market. Approach 2 that I outlined above.

There are many market tracking funds available, which probably cost less that it would cost you to replicate it yourself.
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I'd favour buying the market myself but as there are some problems with this approach that exist in Ireland that are absent elsewhere I wonder what really is the best approach. Some on this forum argue a basket of stocks is superior for Irish residents. I'd be great to see someone calculating this out sometime with historic returns.
 
Have a look at the following websites. www.iii.co.uk This site when you register will give you all the news updates from each company (mainly U.K.). They will show you the volume of shares traded (delayed 20 minutes) and prices, they will give you information on the fundamentals of the company that you wish to research as well as a discussion forum. You can also see graphs going back over 10 years showing the share price.
Another website that is useful is www.moneyam.co.uk This site, when you register will give you "live" trading prices as well as similar information to the above site.
 
I have had 6k sitting in a deposit account and the return is not worth it. So I am also looking a buying and selling shares. Some 10 years ago while living in Spain, I did it, putting about 1k into 4 different companies. After six months, I cashed them in and made a decent profit on 3 and the 4th broke about even - a month later I would have made a couple of hundred euros on that one!

Are these companies that offer a free demo trading account any good? Most of the sites I look at seem to be written for someone who is knowledgeable about dealing in shares and keep using all their technical terms without explaining them.
 
No, I haven't. I believe brokers to be at the more expensive end of trading shares, though stand to be corrected.
 
oreillycavan said:
QUOTE]
I am still considering opening an execution only account but if I do go down this road I will be sticking to the big name reliable (Glanbia, Kerry, Ryanair etc.)
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Before you consider investing in a single share I would strongly recommend you read and read for about 12 months! If you could start with the following, if you have not already read them:

http://www.amazon.com/dp/0471445509/ref=rdr_ext_tmb (Common Stocks and Uncommon Profits and Other Writings)

http://www.amazon.com/The-Intelligent-Investor-Definitive-Investing/dp/0060555661/ref=pd_bxgy_b_text_y (The Intelligent Investor)

http://www.amazon.com/Security-Analysis-Edition-Foreword-Editions/dp/0071592539/ref=pd_bxgy_b_text_z (Security Analysis)

http://www.amazon.com/Little-Book-Common-Sense-Investing-ebook/dp/B008W02TIG/ref=sr_1_3?s=books&ie=UTF8&qid=1415815158&sr=1-3&keywords=common+sense+on+mutual+funds (The Little Book of Common Sense Investing)

As a general rule, beginners are recommended to stick with Large Caps as the the tend to be less volatile than Mid Caps and Small Caps. And it this respect your big names are not Large Caps.
 
Better maybe to read this http://www.cfapubs.org/doi/pdf/10.2469/faj.v70.n1.1 by Jack Bogle Vanguard founder and follow Buffets advice which is
Buffett effectively argues that it's wiser to invest in a boring index fund than it is to invest with people who try to beat the market
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in http://uk.businessinsider.com/warren-buffett-recommends-sp-500-index-2014-3?utm_content=buffereac72&utm_medium=social&utm_source=facebook.com&utm_campaign=buffer?r=US

Apologies if this info is a repeat.
 
Firstly the irish stock market has done very well over the last 2 years, but very few people were investing in irish shares 2 years ago. Even though it has recovered well it is still too small and undiversified. It was decimated during the financial crisis (one of the worst in europe)and is still at 50% of the levels it was at in 2007. In 2007 it was dominated by banks, now it is dominated by food companies. I think you must look outside Ireland for diversification, some of the big global european companies would be a start.
Also you must decide what you will do if the share drops alot in value ( do you have a stop/loss price below which you will sell), this is very hard to do in practice. Sometimes when you have a stop/loss the share price will turn around the next day and go back up leaving you stranded. However it will also protect you from devastating losses like what happened with irish bank shares. This is the really hard part of investing, making decisive decisions, and also being wrong sometimes and moving on
 
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