How to trade on the stock market. #investments
Trading on the stock market is a little like swimming with sharks, then just as you think you have the experience to be safe in the water, you realise it’s full of piranhas too! It is high risk and you can lose all your money.
Firstly you have to find a good dealing service that is reliable. I use the Halifax because although they are expensive, they are reliable. My first investment was a nice ethical investment that would help save the world (maybe). The company went into administration and I lost the lot. That taught me some valuable lessons. Forget ethics, do your research and don’t put all you eggs in one basket. You also have to become very aware of the prevailing economic climate.
The oil price is low at the moment relative to what it was. Brent crude is about $41 a barrel and it has been over $100 a barrel. There is a glut of oil around the world and lots in storage. One strategy you could take would be to buy shares in a big oil company like Shell. Their ’B’ shares pay a quarterly dividend and the size of the company makes it a fairly safe bet. They are also merging with BG so they will be even bigger and be able to survive low oil prices better than most companies. You can make money two ways, first those quarterly dividends and as the oil price rises the share price will rise so you make a capital gain too. You could buy into a smaller oil company like Premier Oil whose shares are trading at 51p compared to around £5 when the oil price was high. You could have bought at 34p a few weeks ago when oil was $34 a barrel, but as the oil price has risen so has the share price. Premier Oil looks a safe bet based on that rise, but nothing is ‘safe’. Premier Oil has huge assets but it also has huge debts. Staying with oil, you could invest in a company involved in oil exploration at Horse Hill, the so-called Gatwick Gusher. It’s a joint venture and so you could invest in any of the companies. I have Solo Oil because although they own a small share in that licence, they also own a share in a licence to explore on the Isle of Wight and will soon be getting a return on a well in Tanzania. That well is connected to the pipeline and a sales agreement is in place to sell gas which will go to a new processing plant. Solo Oil’s share price bounces around and the market makers keep changing the spread. The spread is the difference between what they sell at and what they buy at. In the case of Solo today, the spread is over 9% making big profits for market makers and limiting trade. Solo is high risk, but the potential returns are high.You could double or treble your investment.
The FTSE 100
The FTSE 100 index is an index made up of the top companies (by market capital) and many people think investing in these companies is safe. It isn’t safe but safer than the AIM market. The problem is when there are economic problems there is a rush to safety and the FTSE 100 shares get overpriced. So what appears to be low risk can also mean low returns. You can, however, pick up bargains by watching the FTSE 100. The banks look like a good bet at the moment and I bought back into Lloyds but I’m watching Barclays too.
Interest rates are low and banks are offering 2% on savings accounts so the higher returns from the stock market look attractive. Even Zopa offering 3.9% looks attractive compared to banks and I have been with Zopa for about 5 years now with few problems. I wouldn’t recommend borrowing money at low-interest rates to invest but many people do and make a good return.
Timing your investment
Try to time your investments so you buy low and sell high. The FTSE 100 was over 7,000 last year and so that was a good time to sell and now could be a good time to buy with the FTSE around 6,130 and climbing. We don’t know which way it will go tomorrow. There are lots of political risks with a referendum coming up and a multitude of other political risks around the work.
Next week, Halifax share dealing will cut their dealing fee from £12.50 to £3.95 for just 2 hours on Wednesday. I’ll think about what I can buy or sell between now and then and maybe take advantage of that reduced fee.
That’s it for this week. Remember, I only have ideas, I don’t give investment advice; make your own decisions. If you would like to follow this blog just enter your email address in the space at the top of the sidebar or you can follow me on Twitter for updates. There are more ideas, pictures, art and music on my Facebook page.