Small investors and risk
For small investors the stock market looks scary with warnings that you can lose all your money. It’s easier to just put your money in the bank and accept interest that barely covers inflation. With low interest rates, that situation has got worse. You do have to put a lot of thought into share dealing and you can lose money! You just have to learn as you go along and not get greedy.
You also have to be diverse and not invest all you cash on the stock market. There are other investments and even gold can be an investment, because it tends to go up when there is serious economic problems. The small investor might invest in property, but that’s likely to be the property he or she lives in.
Then there investments like peer to peer lending. I have been lending money through Zopa for the past few years and the 4% I get isn’t a lot, but the risks are lower than the stock market.
I built up a portfolio on the stock market slowly and I always have to assess the risks associated with each company. The company I think has the most potential is Graphene Nanochem, they are high tech with a great new products. The share price keeps dropping though and so on paper at least, I’m losing money. I think some companies are technically very good, but don’t always have the business expertise. I’ll stick with Graphene Nanochem for a while, I think they could come good eventually. I also like to invest in companies that have problems and Premier Foods leveraged and expanded and then the economic crisis hit and the share price dived. I walked around the supermarket last year and their Mr Kipling cakes didn’t look very appealing. They were in old fashioned packaging and looked like they had been on the shelf for a while. They now have new products and new production lines and the directors themselves are big shareholders. The latest financial statement wasn’t great, but didn’t crash the share price either, so they are looking good.
I have high hopes for Solo Oil who will soon develop from explorer to producer. I think the oil price could start to climb too, which would help Solo. Owning a few shares in an oil company is good insurance against rising petrol prices too.
RSA insurance is looking better, as a result of higher motor insurance premiums and rumours of an interest rates rise. I’m back in profit with RSA and they continue to consolidate the business. Things are looking great, but they are better. There was a rumour of a takeover bid which would give me a very good return.
There is a lot of speculation about M & A at the moment. Companies that rely on government contracts are looking to merge in order to survive. These companies are now bad investments as the government cuts more and more. As benefits are cut the discount supermarkets will lose sales and the traditional ones like Tesco and Sainsbury could get their lost market share back. I do have a few Tesco shares and they look promising. Tesco has broad appeal and is often the only supermarket in some areas.
Monitise is looking better after entering into a new joint venture for a joint bank account controlled by smartphones. Immupharma is a company developing a cutting edge drug and their share price is up this morning too.
That’s all for today, the obvious thing to do when looking at investments is to look for value and limit risk. You do have to take a limited risk on the stock market though. My returns on paper dropped to zero earlier in the month as fear spread with the Greek crisis. I’m back up to a 5% return, but not recovered fully yet.
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