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Ideas for new investors #finance #investments

If you’re new to investing and haven’t yet bought your first shares it might be a good idea to see if your analysis of the stock market is good. Several brokers offer ‘fantasy’ accounts and I have a couple with London South East. One is a copy of my ‘real’ portfolio and one is just to track a few companies. It is a good idea for new investors to open an account and then use their ‘portfolio’ like an investment game.

ideas for new investors

Dealing charges

You can run your fantasy account just like a real account and it will take into record dealing charges and stamp duty. Stamp duty is 0.5% when you buy shares. Dealing charges vary from broker to broker. I use Halifax which is 12.50 but they do a discount rate for 2 hours each month of 3.95 which I try to use. The Halifax also offers a research service via Digital Look and will email some info to you. When Solo Oil issue an RNS they are emailed to me.

fantasy portfolio

Fantasy Portfolio

This is a fantasy portfolio that I set up in May of this year. I started with £5000 and I’ve bought shares in four companies. I bought Alliance Pharma because although it is usually a boring share that doesn’t move, it does jump every now and it jumped up just after I bought. The return on that is 5% in just 3 months. Berkeley group performed well too, benefiting from rising house prices. I lost on Polymetal Int because the global economy hasn’t improved as much as I expected. WPP is a very large PR company and I expected the business to business prospects of WPP would be much better than the business to consumer prospects of many others. You can see why it is a good idea to diversify from this portfolio but the timescale is too short to tell if I made good choices or not.  We need some results from the companies before we know for sure if this is a good selection.

Research

As I have already mentioned you can do research using Digital Look. There are free services that offer copies of annual reports too. On London South East you will get news, brokers recommendations and the RNS (Regulatory News Service) service, but prices will be delayed 15 minutes. You can get live prices on Google.

Google alerts

Google alerts are useful for getting news and other information on companies. Set up an alert at least a month before you intend to invest in a company. I have alerts for interest rates and the MPC as well. I check the futures price for Brent Oil at the end of each day and also the GBP to USD exchange rate. If the exchange rate was rising I would be thinking about investing in a US company but a rising pound could be bad news for a company that gets its revenue in US dollars like the big pharmaceuticals.

Shorting

Shares are shorted when brokers expect the price to drop and so it is a good idea to see if the shares are being shorted before you buy. If a share has been shorted and has suffered a sustained loss such as the spectacular fall recently by Carillion that might be an opportunity to buy at a bargain price. It might be oversold. Check out Shorttracker for shorting info.

NAV

You will come across the term NAV (net asset value) sometimes. If you divide the NAV by the number of shares in an issue you get the value per share. If the value per share is higher than the share price that can be an indication that they are undervalued.

New investors

So where should new investors begin? Opening a dealing account would be a good start and then do your research and buy shares in just one company. It would probably be a good idea to look at a fairly safe company in the FTSE 100. How much you invest in a single company depends on how much your entire pot is. Many small investors invest too much and don’t diversify enough simply because their pot is relatively small. It would be great if we could invest a few hundred in every company on the stock market, that would be really diverse but the dealing fees would cripple small investors. So you have to compromise. You should also invest quantitatively. If you invest £10,000 in each FTSE 100 company (fairly safe) then you might reduce that to £5000 in FTSE 250 companies and even less on the AIM market where risks are high.

This week

This week was better for me than it has been. Carillion recovered a little and I was pleased to see Immupharma make good progress. Returns are low everywhere now and so if we can get 10% pa on the stock market we’re doing well. I’m up about 1.5% this week after a couple of months of my portfolio losing value. These losses are ‘paper’ losses. You don’t make actual profits or losses until you sell your shares. I’ve sold a lot of holdings at a profit even though I have paper losses at the moment so I do have a real return on my investments. Two brokers have tipped Solo Oil with one giving a target price of 0.9 which is the highest it has been in the past year. Neil Ritson said he expects 1p by the end of the year. Solo Oil is trading at 0.25 p this morning. You could buy a million shares for £2,500 and they will be worth £10,000 by the end of the year if Neil Ritson’s prediction comes true. They are due to be consolidated, though. The consolidation is one new share for twenty old shares, so a million shares will become 50,000 shares; albeit more valuable. They might not end up 20 times more valuable, consolidations don’t always work for the best. The big risk concerns discounted share issues to institutional investors. If there are no more of those, the company has a good future. Dilution should favour the private investors, not the institutional investors only.

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