Please forward this error investment property tips beginners to 23. Please forward this error screen to 64. To a beginner, the stock market can appear rather daunting.
But equities outperform cash and bonds over most medium and long-term periods and easy routes in are not hard to find. In reality, with dismal returns on offer from banks and building societies, investing in shares provides an opportunity to hedge against rising inflation and achieve greater returns than cash, bonds and property. Shares versus cash: which has made the best returns since 1995? The basics of investing In the UK, the main stock market is the London Stock Exchange, where public limited companies and other financial instruments such as government bonds and derivatives can be bought and sold. The stock market is split into different indices – the most famous in the UK being the FTSE 100, comprising the largest 100 companies. There are two ways to access the stock market: directly and indirectly.
Although ‘directly’ is a misnomer – investing in the stock market is always done through a third-party broker – direct investment means buying the shares in a single company and becoming a shareholder. There is a wide range of broker services available. Co, whereas others are execution-only share dealing services. These are online platforms where a client can buy and sell shares independently through a share dealing account without being offered advice. Examples of these include Interactive Investor, Hargreaves Lansdown and The Share Centre. For beginners who want to be more involved and dabble with individual shares, it makes sense to open an online, execution-only share dealing account, which keeps the cost of investing to a minimum,’ says Martin Bamford, managing director of Surrey-based IFA Informed Choice. He adds: ‘When you are getting started, it makes real sense to buy blue-chip company shares on the LSE and hold them for several months.
Regular trading will kill profits quickly, with the cost of buying and selling shares exceeding the returns you can make from a small starting stake. You can find the best online broker for your portfolio size thanks to our comprehensive list of the 24 major investment platforms and run down of their costs and tools. Reading the financial press can be useful in terms of choosing which shares to buy, Bamford adds. There are also plenty of internet forums where share tips can be found. Don’t part with your money to receive share tips, as there is plenty of useful free information in the public domain. Stick to companies you find interesting and spend the time researching a company before you invest. Investing indirectly An indirect approach is a more common way of accessing shares, as it spreads risk by investing in a number of companies.
This can be done via an open-ended fund, such as an Oeic or unit trust, which is made up of shares typically from between 50 and 100 companies, and can be sector, country or theme specific. Money in these funds is ring-fenced away from the fund provider, so if the firm defaults, the money is still safe. An investment trust is another pooled investment, but it is structured in the same way as a limited company. Investors buy shares in the closed-end company, and it is listed on an index in the same way as a company such as Tesco or RBS. Trusts are less numerous than funds, but often have less expensive management charges.