Posted on: 30th September 2014
It’s a minefield for a beginner when thinking of buying stocks and shares.
You’ll definitely need a helping hand. Even if you know what you are doing it’s no guarantee you’ll do well. Our advice is to be cautious and know as much as possible. Before you buy, know this:
Find out about stock investing. The golden rule is buy low and sell high. Makes sense. So if your 100 shares at £15 each have risen to £20 a year later. You’ve made £500.
Stock and Value aren’t the same thing:
How much a company is worth is different to stocks. They are discovered by multiplying the stock price of a company by the number of shares it has issued. A company whose stock price is £7 can have a higher market cap than a company whose stock price is £30. It depends on the amount of shares issued.
You have to make an educated guess about the value of a company. And guessing is a big part of stocks.
Being successful in the stock market depends on being able to find out what a company’s future returns are. Something might be performing well, but it doesn’t mean the stock price is going to maintain itself. Remember a stock price goes up when more people want to buy the stock than to sell it. But it goes down when more people want to sell the stock than to buy it. It’s reactive. Top Tip: A company can seem like it’s worth more than it actually is when it has a lot of shares. A smaller company with fewer shares could be undervalued.
Get your finances straight:
Best to start off on the right foot. Get rid of loans, apart from your. Have a backup of finances just in case.
Mutual funds or individual stocks?:
If you invest in that particular mutual fund, you are investing your money in many different stocks. This makes things a safer bet. Buying individual stocks is riskier, but the reward is higher.
Never invest without researching the company. You don’t know how it will perform in the future but you need to look at balance sheets and statements over the past 10 years. Look at the balance sheets and income statements for the past 10 years to see if they are sound. Read the latest reports. Talk to customers and competitors to get a better idea.
Write a strategy:
Who are your favourite companies? If you have targets and strategy then things will be easier. It could be £50 a month. Just watch the fees involved.
For more information on how to invest, get in touch with us at. Our friendly expert team will be happy to help.