Stock Investment Advice Required for a Newbie
Discussion
Hi All,
I am looking for some advice. I tend to have a minimum of £10k of "disposable" income. It'll typically increase throughout the year significantly, and I'll only draw on it for 2x annual expensive holidays - the figure still increases and only really drops back to the £10k mark if I've just bought a car.
This £10k tends to sit in a bank account, gathering no interest and whilst I've not needed it for emergencies, it's nice to have it there for something unexpected.
On reflection, I do think I've been very silly over the last few years just having it sit in a standard bank account with interest rates being so low and inflation so high and I've started to think about investing it for medium to long term.
I'd like to start small - investing around £1,500 to £2,000 initially to see how it works out for me - though I don't expect to make money overnight.
I've chosen that modest figure because I can afford to lose that without being overly annoyed over it. Over time I could invest more.
Whilst I do not have much knowledge of stocks or trading, I am also not stupid.
I am aware that because I have no real knowledge of the market, for someone like me this is effectively gambling.
But my question to you is, is putting my money into an already well-established company a relatively safe bet compared to buying lower-end stocks that I think will boom in value?
Surely if I put the money into Apple (as a complete example) I'd generally be safe - I might not make much money from it, but likewise, I'd be unlikely to lose it all?
Would this be a good way to start? Or is it just as risky to put money into such large companies like this?
I've (possibly wrongly) always thought that buying stocks of already massive companies would net me small returns with low risk, whereas buying stocks of small companies has the potential to net me massive returns albeit at a much bigger risk of losing my investment. Is this a correct assumption?
Also, say I did have a couple of grand invested and something personal came up, am I able to easily "cash out" and retrieve that money within a few days or weeks etc? Or is this something I'd be locked into for years before I can access my money (whether I'm up or down)?
Additionally, are there any platforms you would recommend using to buy stock? Or any you would specifically avoid?
Lastly, would I be a complete idiot to do this with such a lack of knowledge or is it a case of "everyone has to start somewhere"? I've always assumed the stock market as very unpredictable and nobody really knows what's really going to happen... But then again if that was the case then surely people wouldn't make so much out of it so consistently.
Thanks for your time.
I am looking for some advice. I tend to have a minimum of £10k of "disposable" income. It'll typically increase throughout the year significantly, and I'll only draw on it for 2x annual expensive holidays - the figure still increases and only really drops back to the £10k mark if I've just bought a car.
This £10k tends to sit in a bank account, gathering no interest and whilst I've not needed it for emergencies, it's nice to have it there for something unexpected.
On reflection, I do think I've been very silly over the last few years just having it sit in a standard bank account with interest rates being so low and inflation so high and I've started to think about investing it for medium to long term.
I'd like to start small - investing around £1,500 to £2,000 initially to see how it works out for me - though I don't expect to make money overnight.
I've chosen that modest figure because I can afford to lose that without being overly annoyed over it. Over time I could invest more.
Whilst I do not have much knowledge of stocks or trading, I am also not stupid.
I am aware that because I have no real knowledge of the market, for someone like me this is effectively gambling.
But my question to you is, is putting my money into an already well-established company a relatively safe bet compared to buying lower-end stocks that I think will boom in value?
Surely if I put the money into Apple (as a complete example) I'd generally be safe - I might not make much money from it, but likewise, I'd be unlikely to lose it all?
Would this be a good way to start? Or is it just as risky to put money into such large companies like this?
I've (possibly wrongly) always thought that buying stocks of already massive companies would net me small returns with low risk, whereas buying stocks of small companies has the potential to net me massive returns albeit at a much bigger risk of losing my investment. Is this a correct assumption?
Also, say I did have a couple of grand invested and something personal came up, am I able to easily "cash out" and retrieve that money within a few days or weeks etc? Or is this something I'd be locked into for years before I can access my money (whether I'm up or down)?
Additionally, are there any platforms you would recommend using to buy stock? Or any you would specifically avoid?
Lastly, would I be a complete idiot to do this with such a lack of knowledge or is it a case of "everyone has to start somewhere"? I've always assumed the stock market as very unpredictable and nobody really knows what's really going to happen... But then again if that was the case then surely people wouldn't make so much out of it so consistently.
Thanks for your time.
Presumably you mean £10k a year. Read around this forum a bit, there's plenty of guidance on here. In a situation such as yours convention dictates "low cost global tracker". In simple language that means spread your risk and keep the running costs as low as possible.
And you definitely want it in a "tax wrapper". These are typically either ISA or SIPP, both with great tax advantages. If in doubt, splitting 50:50 between the two is nice and simple.
ISA - you invest out of income that's already been taxed. Your investments cumulate tax free and anything your draw out is tax free.
SIPP - is a form of pension. You get income tax relief at your highest rate on anything you put in. You investments then cumulate tax free. Under current rules you can, after retirement age, withdraw 25% tax free. The rest is taxed as income.
And you definitely want it in a "tax wrapper". These are typically either ISA or SIPP, both with great tax advantages. If in doubt, splitting 50:50 between the two is nice and simple.
ISA - you invest out of income that's already been taxed. Your investments cumulate tax free and anything your draw out is tax free.
SIPP - is a form of pension. You get income tax relief at your highest rate on anything you put in. You investments then cumulate tax free. Under current rules you can, after retirement age, withdraw 25% tax free. The rest is taxed as income.
I would strongly advise against buying shares in an individual company- have a look at index trackers that rise and fall with the FTSE, S&P, Nasdaq etc.
Also make sure you put it in a tax free wrapper - either an ISA and/or SIPP (pension) - there are advantages and disadvantages to both.
Once you’ve made a decision set up a monthly direct debit and “drip feed” money in - I’d start small to begin with then increase as your knowledge and confidence grows.
I use Vanguard as their fees are pretty reasonable- plenty of info about investing on their website which assumes no prior knowledge.
But do lots some reading before you commit any money - there is a wealth of info on this forum for starters. Try and get in the habit of reading financial pages and also MoneyWeek and The Economist- no need to pay for these - get yourself a library card, download Libby and PressReader and borrow them for nothing!
Also make sure you put it in a tax free wrapper - either an ISA and/or SIPP (pension) - there are advantages and disadvantages to both.
Once you’ve made a decision set up a monthly direct debit and “drip feed” money in - I’d start small to begin with then increase as your knowledge and confidence grows.
I use Vanguard as their fees are pretty reasonable- plenty of info about investing on their website which assumes no prior knowledge.
But do lots some reading before you commit any money - there is a wealth of info on this forum for starters. Try and get in the habit of reading financial pages and also MoneyWeek and The Economist- no need to pay for these - get yourself a library card, download Libby and PressReader and borrow them for nothing!
TREMAiNE said:
would I be a complete idiot to do this with such a lack of knowledge or is it a case of "everyone has to start somewhere"? I've always assumed the stock market as very unpredictable and nobody really knows what's really going to happen... But then again if that was the case then surely people wouldn't make so much out of it so consistently.
There are no foolish questions. As you say, with a vaguely sensible approach and a limited amount of luck you should be able to join the crowd of people who consistently achieve good returns. Two very basic guidelines,Don't try to be clever, dipping in and out of things.
Don't panic when you see a bit of a downturn.
Panamax said:
Presumably you mean £10k a year. Read around this forum a bit, there's plenty of guidance on here. In a situation such as yours convention dictates "low cost global tracker". In simple language that means spread your risk and keep the running costs as low as possible.
And you definitely want it in a "tax wrapper". These are typically either ISA or SIPP, both with great tax advantages. If in doubt, splitting 50:50 between the two is nice and simple.
ISA - you invest out of income that's already been taxed. Your investments cumulate tax free and anything your draw out is tax free.
SIPP - is a form of pension. You get income tax relief at your highest rate on anything you put in. You investments then cumulate tax free. Under current rules you can, after retirement age, withdraw 25% tax free. The rest is taxed as income.
This is a sensible approach. Won’t go too far wrong with this if you drip feed money in consistently over a decent period of time (look up pound/dollar cost averaging)And you definitely want it in a "tax wrapper". These are typically either ISA or SIPP, both with great tax advantages. If in doubt, splitting 50:50 between the two is nice and simple.
ISA - you invest out of income that's already been taxed. Your investments cumulate tax free and anything your draw out is tax free.
SIPP - is a form of pension. You get income tax relief at your highest rate on anything you put in. You investments then cumulate tax free. Under current rules you can, after retirement age, withdraw 25% tax free. The rest is taxed as income.
Panamax said:
Don't panic when you see a bit of a downturn.
Definitely this…2022 was a pretty ghastly year for stock markets - I invest monthly in the S&P 500 and the feeling of “throwing good money after bad” was especially strong at the point I’ve marked on the chart.
Thankfully I resisted the strong temptation to “cut my losses” particularly in light of what came later.
Usual advice is not to check your investments too often - they’re a long term commitment after all - but human nature being what it is this is difficult advice to follow.
TREMAiNE said:
But my question to you is, is putting my money into an already well-established company a relatively safe bet compared to buying lower-end stocks that I think will boom in value?
Surely if I put the money into Apple (as a complete example) I'd generally be safe - I might not make much money from it, but likewise, I'd be unlikely to lose it all?
Would this be a good way to start? Or is it just as risky to put money into such large companies like this?
Unless you're prepared to spend time researching individual firms, you'd be better off buying a fund that includes many companies' shares (as this will spread your risk). A passively-managed tracker fund will have cheaper ongoing fees than an actively-managed one. Surely if I put the money into Apple (as a complete example) I'd generally be safe - I might not make much money from it, but likewise, I'd be unlikely to lose it all?
Would this be a good way to start? Or is it just as risky to put money into such large companies like this?
Regarding platforms, this gives a good indication of what's available and their costs at various portfolio levels: https://moneytothemasses.com/saving-for-your-futur...
As a beginner, you're not going to go too far wrong with Vanguard.
PS: I'd echo the comment above regarding tax wrappers.
TREMAiNE said:
Additionally, are there any platforms you would recommend using to buy stock? Or any you would specifically avoid?
There's a partial list here:https://monevator.com/compare-uk-cheapest-online-brokers/ For a broad world or all world tracker, either a Fund or an ETF would be what you are looking for.Look at a fee structure that matches how you expect to buy/sell (so if you'll only trade twice a year, don't look at one with several "free" trades bundled in a significant annual fee for example).
Poke at the web site, see if it is nice to use - there is an element of you get what you pay for, but I only touch the thing a few times a year and would rather keep the money in my pocket and accept a less pretty platform.
Some people must have a mobile app. I'm the opposite - why do I want to carry access to a significant amount of wealth around in my pocket?
Especially for simpler portfolios, it is easy enough to just look what the current fund price is and see if it up of down, rather than logging in. That said, looking frequently doesn't improve performance, and unless you are great at sitting on your hands tends to make it worse.
I don't bother posting much but your post is very honest. At the top of this page FXCM advertise and even in a raging but hated Bull market they declare that 66% of CFD customers lose money, put aside that the number is questionably low and consider how many actually make meaningful amounts.
The reality is shares/markets are a business and unless one can devote at least the same amount of time to this as they would to anything else seeking the same return, they should be careful.
The big risk is missing the fact that external circumstances, macro and luck can all play a part.
If I had my time again, I would actually listen to what Warren Buffett said and that is "buy a low cost index fund". The only thing in the market that has an upward bias is the major indices and if someone tells you they are a "buy and hold" investor with our without diamond hands, ask them about, GE, GM, Xerox, Research in Motion, Nokia and thousands of others and then walk away. The only thing that can be held (based on past experience) is the index and that's a fact.
There are of course active funds which seek to outperform the market and many have but some have imploded also so again a lot of research is required there and again the bogeyman of investing, drawdown, this is the amount from peak equity to the low point, in ArkK, I think it was 75%, it's tough to hold through that unless you know and believe in the correct mechanics.
Anyway based on my experience and listening to a lot of people who are more successful than i ever will be, if one wants to make consistent returns on their own account, it is a business and needs to be treated as such. I was told this by a trader who appeared in Market Wizards book and I was very dejected but the truth is often hard.
The reality is shares/markets are a business and unless one can devote at least the same amount of time to this as they would to anything else seeking the same return, they should be careful.
The big risk is missing the fact that external circumstances, macro and luck can all play a part.
If I had my time again, I would actually listen to what Warren Buffett said and that is "buy a low cost index fund". The only thing in the market that has an upward bias is the major indices and if someone tells you they are a "buy and hold" investor with our without diamond hands, ask them about, GE, GM, Xerox, Research in Motion, Nokia and thousands of others and then walk away. The only thing that can be held (based on past experience) is the index and that's a fact.
There are of course active funds which seek to outperform the market and many have but some have imploded also so again a lot of research is required there and again the bogeyman of investing, drawdown, this is the amount from peak equity to the low point, in ArkK, I think it was 75%, it's tough to hold through that unless you know and believe in the correct mechanics.
Anyway based on my experience and listening to a lot of people who are more successful than i ever will be, if one wants to make consistent returns on their own account, it is a business and needs to be treated as such. I was told this by a trader who appeared in Market Wizards book and I was very dejected but the truth is often hard.
Some good advice on this thread but my 2p.
- Accept you're average and can't pick good companies
- Understand your appetite for risk
- Think really hard whether you understand it
- Make use of appropriate tax wrappers
- Buy a low cost index or multi-asset fund that matches that appetite for risk
- Accept it WILL go down as well as up
- Try not to look too often
- Keep costs low
- Stick to the plan
KPHs said:
For the sake of variety the only thing that matters is the red figure turning blue. See if you can locate a demo trading account and give yourself a virtual lump sum of around £10,000 then see how many times you can turn that figure blue.
First bit of bad advice on the thread IMO.Playing with fake chips isn’t even remotely similar to the real thing.
Edited by okgo on Wednesday 13th March 12:25
I am in a similar situation where I have a pot which is a bit of a rainy day fund, so have had around £10k in an investment ISA with Fidelity which I top up on a monthly basis and then use to cover off any major expenses over the year. I have the bulk of the funds in the Fidelity Index World Fund which is of today showing +24.74% which is a fair bit better than anything from a high street bank!
You need to distinguish between cash in a rainy day fund and long term investments. I'm not sure the OP has done this.
i.e. The description at the top talks of "disposable income" but it really sounds to me like it is actually the emergency / rainy day fund that bobbles around the 10K + mark. - If it is the rainy day fund, then you can't take too much risk with it so stick it in cash / equivalents or premium bonds etc. It's not "investable" as investments can (and will) go down as well as up.
If though, you are talking about having spare money left over each month that you want to long term invest, then you'll have one set of responses. (probably around tracker funds etc)
Or if you want to have some play money to gamble with single stocks / CFDs or crypto, then you'll get a different set of responses.
OP needs to come back and confirm which of the questions they are actually asking?
i.e. The description at the top talks of "disposable income" but it really sounds to me like it is actually the emergency / rainy day fund that bobbles around the 10K + mark. - If it is the rainy day fund, then you can't take too much risk with it so stick it in cash / equivalents or premium bonds etc. It's not "investable" as investments can (and will) go down as well as up.
If though, you are talking about having spare money left over each month that you want to long term invest, then you'll have one set of responses. (probably around tracker funds etc)
Or if you want to have some play money to gamble with single stocks / CFDs or crypto, then you'll get a different set of responses.
OP needs to come back and confirm which of the questions they are actually asking?
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