Sunday, 8 June 2014

Wheeling Dealing Part 2

One of the reasons that I'm writing posts about setting up a stock portfolio is that I truly believe that stock investment should not just be the preserve of the fat cats.  Believe me the rich geezers out there aren't sitting back and accepting paltry interest rates.  They're making their money work for them more creatively.  In the days when fancy certificates demonstrated ownership of part of a company, for that is indeed is what a 'share' is, it was far more difficult for just anyone to get a foot in a door.  Now, with online resources it's a breeze.  Small amounts can be invested easily by anyone, even leftish leaning single mums.  You can even set up virtual portfolios to have a practice before dipping your toes into the water.

Back in October I started to put £200 a month in the pot with the intention of following regular advice.  I chose two unit trusts with an ethical leaning to buy into after each pay day.  A unit trust is a collection of shares managed by a fund manager and because of their supposed expertise in choosing a spread of investments it's a way of limiting risk. I've also invested lump sums in single shares and now have a portfolio of ten holdings.  So how do to I choose what to buy?  Sadly it's not as simple as closing my eyes and poking a pin at the share prices in the pink pages of the financial times.  Here's what I do.  The share price and stock market page at Hargreaves Lansdowne is my friend.

  • In the main I'm limiting myself to companies in the FTSE 350, the biggest ones in the UK. There's better availability of forecasts from a number of brokers with these big guys to help with buying decisions.
  • However, sometimes I finding out about a company from another source that sparks my interest enough for me to think about making an investment outside the regular London stock market. Tesla Motors, who make the coolest electric cars in the world is one such company. My decision was prompted by hearing that they are planning large scale expansion into Europe in the next couple of years. Via a share tip on the Internet I also have shares in Accys Technologies, an technology company with green credentials who do interesting things with wood!
  • For each share listed on the website there's information about the company.  It allows me to make informed decisions into the types of business I want to deal in.  Obviously tobacco companies and arms dealers are out. 
  • I look for shares where forecasts from a number of buyers suggest that it might be a good time to buy.  There's little graphs  and pie charts on the Hargreaves Lansdowne site that show how many of the experts think that a particular investment is worth a punt.
  • I consider the other shares in my portfolio and think about spreading investments across different sectors. It's a 'not putting eggs in one basket' ploy.  However, utility companies are particularly well represented.  After all everyone needs telephones, power and water.
  • If I've had a particularly good personal experience with a company I'll research them to see if they're a good bet.
  • There's a difference between the buying and selling price which can lead to a significant loss just after investment, especially if the share prices is expressed in pennies.  For example a share that can be bought for 30p might have a selling price of 27p, a difference of ten percent. This wouldn't necessarily preclude me dipping my toes in if I really wanted to invest in a company but it's a consideration I take into account.

Tomorrow I'll share my current selling strategy.  It was devised on the back of an envelope whilst drinking a glass of wine on my Brittany holiday!

2 comments:

  1. Buying individual company shares is always preferable to unit trusts or ISA's. Unit trust managers are there for their own pay packets, and will juggle portfolios to take commission etc (legal robbery) as and when they require. Stick to the FTSE 100, and keep a good spread. And don't forget to 'sell in May, and go away'!

    ReplyDelete
  2. Hey Cro - glad to see you're thinking along the same lines as me. See tomorrow's post. I've had a rethink about unit trusts!

    ReplyDelete