Dabble in the stock market, good starter guide?

Dabble in the stock market, good starter guide?

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Igurisu

Original Poster:

146 posts

137 months

Saturday 20th December 2014
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I fancy having a play on the market, more as a hobby to be honest, just to see how I can do. My thought is to start with a fixed amount of £1k for example and see what I can do with it over 1 year. Does anybody have any reccomended reading material, books, mags or websites that are fairly neutral (not full of rampers)? Other things that cross my mind are the cost to trade, ie, the fee for buying and selling that needs to be covered and if £1k is a realistic starting amount. By that I mean does it restrict the things or stocks I could invest in?

I'm not looking to get rich quick or for a retirement investment strategy so no sales pitches please smile

Ginge R

4,761 posts

218 months

Saturday 20th December 2014
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Have you considered starting with not your money?

http://www.halifax.co.uk/sharedealing/our-accounts...

Google 'fantasy investor' for the wider range. If you know nothing about investing, and want to start with your own hard earned, you may as well put it all on black. The Sunday rags are full of advertorials and angles, so forget them. Look at money sites such as Motley Fool and as unglamorous as it might sound, visit Money Advice Service.

LimaDelta

6,507 posts

217 months

Saturday 20th December 2014
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Dummy accounts are fine for the mechanics of trading - i.e. learning how to actually execute a trade, set buy orders etc, but the whole thought process and, dare I say it, emotion, is very different when using 'real' money. Even relatively small amounts. £1000 is about the smallest you should start with. Consider your trading losses, around a tenner to buy/sell. If you are 'playing' with £100 trades, you will need to make 20% just to recover your trading losses. Even if you use the whole £1000 you still need to make at least 2% just to be in the black.

Personally (I'm not a professional trader, but have been doing this since mid 2008) I recommend spread betting. If you don't already know, SB limits your exposure, and allows you to 'trade' with much smaller amounts, but still make (or lose!) reasonable amounts. With a £1000 account, using bets of approx 0.5% account balance per point, with no trading losses you can make (or lose!) much more in relation to your account size than with a regular trading account.

For example, company ABC is trading at £100 per share. You expect it to go up, so place a long position of £5/point (0.5% of your account to keep it safe!) at £100 (lets forget the spread to keep the numbers easy). It rises to £110 per share and you have made 10 points X £5/point bet = £50 profit.

Compare this to actually investing in the stock and to make £50 on a 10% stock movement you would have had to buy 5 shares for £500. Remember those trading losses (another £20)? So actually you would have needed to buy £700 approx of ABC to make £50 profit for the same price movement.

So for small accounts SB can make much more sense, IMHO. You can limit your exposure to the trade going bad while you are learning with stop-losses, thus limiting how much you will lose.

Malcolm Pryor's book is a good start if you are keen. This is just a hobby for me, I am by no means a professional, YMMV and all that.

1CM

4 posts

111 months

Saturday 20th December 2014
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The intelligent investor by benjamin graham may be a good place to start.
Before you speculate a penny, have a clear strategy, set of rules, expectations, loss limits etc. Research the multitude of brokers and ways to invest as well, many have different structures dependent on how often you place an order.
Spend time analysing different strategies and approaches to see which one suits your investment goals and style. Log and record everything and be sure to keep up with developments on your chosen companies / funds.

If you treat it like a business then it will pay you like one - treat it like a hobble and it will pay you like one.

ringram

14,700 posts

247 months

Saturday 20th December 2014
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The market is best suited to saving not trading.
£1k is a good start for saving, but pointless with trading IMO.

DOYR, make sure you use tax wrappers where possible and ideally go for long term. Equity Income gets my vote.

Terms like Diversification, risk tolerance, investing horizon, behavioural biases etc should be understood before buying your first tranche IMO.

Ginge R

4,761 posts

218 months

Sunday 21st December 2014
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Lime Delta,

Yes, fantasy trading is different, but it teaches discipline. I spoke with a fantasy trader a while back and she told me that people join for a week or so and then fall off a cliff as they lose interest. If you want to start trading yourself, there's a significant amount of time and effort spent in researching and decision making. That's more what I was referring to.

The inclination for risk is unrealistically large when there's no physical money to be jeapordised!

anonymous-user

53 months

Sunday 21st December 2014
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You can't treat one of the hardest things you could possibly attempt as a hobby.

LimaDelta said:
I recommend spread betting. If you don't already know, SB limits your exposure
SB does exactly the opposite. It's a leveraged product and greatly increases your exposure, as much greater proportions of your capital are at risk relative to the market movements.









LimaDelta

6,507 posts

217 months

Sunday 21st December 2014
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La Liga said:
You can't treat one of the hardest things you could possibly attempt as a hobby.

LimaDelta said:
I recommend spread betting. If you don't already know, SB limits your exposure
SB does exactly the opposite. It's a leveraged product and greatly increases your exposure, as much greater proportions of your capital are at risk relative to the market movements.
I know it is leveraged, but SB requires a much lower capital outlay. As a beginner one can learn meaningful lessons with a relatively small account. Yes a greater proportion of your trading capital is at risk, but a much lower total sum, hence lower market exposure. The rest of your savings are safe at home until you are ready to step up to 'real' trading.

Trying to trade with a £1000 account will teach you nothing useful, other than it is a bad idea to try trading with a £1000 account.

trashbat

6,005 posts

152 months

Sunday 21st December 2014
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Spread betting or anything leveraged is definitely not the place to begin.

Trading rather than investing is probably not the place to begin either, but YMMV.

Demo accounts lack emotion and panic, and by default are not a good experiment. Of course, you can make it more of a challenge - e.g. "I will make 20% by this date or I will give £X of real money to charity".

The Naked Trader is a good book to read.

AIM shares are, in general, a very bad idea. So is reading private investor bulletin boards.

I suggest you start with buying shares in a well established and perhaps boring company, ideally listed in your home country, that you understand pretty well, and expect to see some success from. Pick a medium to long timeframe, like a year, and stick to it without getting bored or chasing greener grass opportunities. Pick an exit point if it falls, and stick to it unless you have compelling reasons not to.

Don't become a gambler. You need to tread more carefully than you think to avoid this.

davepoth

29,395 posts

198 months

Sunday 21st December 2014
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trashbat said:
Spread betting or anything leveraged is definitely not the place to begin.

Trading rather than investing is probably not the place to begin either, but YMMV.

Demo accounts lack emotion and panic, and by default are not a good experiment. Of course, you can make it more of a challenge - e.g. "I will make 20% by this date or I will give £X of real money to charity".

The Naked Trader is a good book to read.

AIM shares are, in general, a very bad idea. So is reading private investor bulletin boards.

I suggest you start with buying shares in a well established and perhaps boring company, ideally listed in your home country, that you understand pretty well, and expect to see some success from. Pick a medium to long timeframe, like a year, and stick to it without getting bored or chasing greener grass opportunities. Pick an exit point if it falls, and stick to it unless you have compelling reasons not to.

Don't become a gambler. You need to tread more carefully than you think to avoid this.
Sound advice. Even the most boring of boring, a FTSE 100 tracker, will return about 3% in dividend net of charges regardless of what the share price does. That's what I started with. If the price goes higher it's a bonus as far as I'm concerned.

If you want to pick stocks yourself go for something very dull (preferably a business or industry that you have personal experience of) and learn about how the operations of the company and the market affect that company's share price and dividend. With that knowledge you can start looking a bit further afield, maybe into related industries, and then spread out from there.

trashbat

6,005 posts

152 months

Sunday 21st December 2014
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FWIW, a quick summary of my personal experience is this.

As a bit of an Alfa fan, I spent a long time following the fortunes of Fiat SpA (now Fiat Chrysler Automobiles), particularly via their investor information, and eventually - about two years ago - decided it was worth buying into. I opened my first ever account and put in a bit of money.

Over time I did get bored with it doing not a lot, and, in part thanks to the Share Tips thread on here, decided it was worth chasing some AIM shares - at first, not trading, but investing. Most of those lost money, often a lot very quickly. Again I got bored and flitted around.

I learnt that most AIM private investors (PIs) are either stupid or duplicitous or both, and that in general the only money to be made any time soon from small caps is from out-trading other retail punter idiots, but if you're king of the idiots, you're still an idiot. Sometimes I did make money but it was a big net loss, and I often over-traded on the good times too, reducing gains. Often it was effectively gambling in a posh frock. In that space of time we've also seen some colossal frauds, like Quindell and many others, and some have lost almost everything.

Now I'm back in Fiat and running a double digit profit you would probably be very happy with.

And what could I have made if I'd stayed in Fiat continuously? Up to 195% gain.

Think about that when you're thinking about jumping around all kinds of alluring vehicles for future fortune.

Edited by trashbat on Sunday 21st December 13:45

anonymous-user

53 months

Sunday 21st December 2014
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If I had my time again and a mentor, or someone who was the 'finished product' I could learn from, I wouldn't even consider using real money for sometime. The psychological work and belief changes that need to be achieved to operate in a trading / investing environment are always grossly under-estimated by people beginning. Several years on and trading for part of my income, there is still serious mental work to be done to keep moving forward.

You can be a very average investor / trader, but if you're able to develop solid, mental resilience, then you really help to shift the odds in your favour.

LimaDelta said:
I know it is leveraged, but SB requires a much lower capital outlay. As a beginner one can learn meaningful lessons with a relatively small account. Yes a greater proportion of your trading capital is at risk, but a much lower total sum, hence lower market exposure. The rest of your savings are safe at home until you are ready to step up to 'real' trading.
Along that line, you may as well say, "buying the 'physical' shares with a lower capital outlay limits your total market exposure". It would, and to a greater degree than any leveraged product / derivative. There would be no risk of margin calls or owing the brokers money. Granted, shorting is practically an issue, but a fundamental issue with leverage is beginners enviably use too much.








jeff m2

2,060 posts

150 months

Tuesday 23rd December 2014
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"I fancy having a play in the market"

Rather like playing in the street.
OK if you keep a constant look out for the traffic.

I joined the fantasy share game, I probably over traded a little initially and expenses pushed me down about 700. I reached about 9,800 and hovered there.
Then forgot about it.

After finding my password and re gaining access I was sitting at 7,800 at 28theek

I fought my way back to 10,800, probably giving it more attention than my real moneysmile

Ignored it again, went back down. Do you see the pattern.

Shares need constant monitoring, not necc trading, but they do require your attention.
If you can't give the time, I would not advise individual stocks.

(Holding blue chips is fine, but you infered you were going to "Play")

DSLiverpool

14,670 posts

201 months

Tuesday 23rd December 2014
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Google "dogs of the ftse" allows you to buy in with less risk than a user chooser but you may still lose it all - in 6 years of doing it I have lost once (I redo it each year according to the observer picks)

walm

10,609 posts

201 months

Tuesday 23rd December 2014
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Apologies OP but I strongly recommend not bothering unless you treat it purely as a hobby which will cost you money.

If you want to save and want equity exposure - do what the best investor in history recommends (Warren B) and put it in a tracker. In a tax free wrapper if you can.

If you genuinely want to "dabble" then fantasy trading is a much cheaper way!!

Stock picking is INCREDIBLY hard. I can pretty much guarantee you will lose money - certainly you are likely to underperform the index over any meaningful period of time.

Your competition is going to be working 24/7 with years of experience. And even they struggle to beat the benchmark.

Lastly £1k is going to be eaten with trading costs very fast.

Twin1

89 posts

119 months

Wednesday 24th December 2014
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There's quite a good series of videos done by Killik & Co, called Killik Explains. Gives a decent overview of what to look for in a stock and general rules e.g. equity will beat cash long term; diversification etc.

Here's a link if you're interested: http://www.killik.com/insights/education/

Twin1

89 posts

119 months

Wednesday 24th December 2014
quotequote all
There's quite a good series of videos done by Killik & Co, called Killik Explains. Gives a decent overview of what to look for in a stock and general rules e.g. equity will beat cash long term; diversification etc.

Here's a link if you're interested: http://www.killik.com/insights/education/

anonymous-user

53 months

Wednesday 24th December 2014
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This is a good book to provide an overview of investment: http://www.amazon.co.uk/The-Financial-Times-Guide-...

I assume this is the updated version for this year: http://www.amazon.co.uk/The-Financial-Times-Guide-...

jinkster

2,235 posts

155 months

Friday 26th December 2014
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The Naked Trader - definitely worth the money and an easy read

Pheo

3,324 posts

201 months

Friday 26th December 2014
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I'm passive investing in Vantage LifeStrategy. Monevator blog is a good read. Investing for the long term, so not bothered about the returns at the moment. Small drip feed of £75 a month. I'm up about 9% at the moment (I'm in the 80/20 equities/bonds fund) but its critical not to look at it all the time. I try to forget about it. I'm trying to play value invest over the long term, not time the market.