Pondering the news one day I asked a friend, ‘how do people get into organised crime?’
His response was ‘Plan it?’.
And getting started at anything requires a similar approach.
Share trading isn’t quite organised crime although it’s not short of the odd criminal and in the current economic climate it could be argued it isn’t always organised!
But if there is something you want to do, you need to find out as much as you can about it before you do it and something that involves parting with money you could easily lose requires very careful consideration.
This global recession is sparking interest in share trading in a lot of people because right now there is a lot of cheap stock available. Very few companies have escaped the crash and many are currently undervalued which means in theory they should go up in value (eventually).
I thought I’d take a look myself so this is from my experience as a total novice only intending to dabble. (Anyone with a bucket of money that wants to invest a lot should think about speaking to a specialist)
The first thing anyone wanting to get into share trading should do is research.
To find a suitable online trading platform I recommend starting at moneysupermarket.com they compare online share trading providers which will give you a list of options to start researching.
I particularly like Interactive Investor. You can create an account for free, add stock to an imaginary portfolio and watch what happens without spending a penny. (Of course you wont make any money either but you can keep an eye on stock market movements.) Users can set alerts and be notified by email if a particular stock moves up or down in value and then decide to buy or sell.
**Remember, the ‘Bid’ price is the estimated price you’ll get if you sell, the ‘Offer’ price is the price the stock is on offer for and the price you pay can be somewhere in between.**
When you actually buy shares you have to pay for each transaction. The cost of this varies but £10 per trade is a pretty good price. This applies to the purchase and the sale so to buy and then sell the cost will be £20.
So straight away, if you buy £100 worth of shares it will cost £120 before profit which means the stock needs to go up over 20% before you make any money.
The stock market is divided into sectors (such as mining, automotive, financials etc) and I recommend picking a sector you are interested in and sticking with it to begin with. Trying to look at companies across multiple sectors is possible but by sticking with one you can develop a more in-depth knowledge and specialise. There are enough companies in each sector to keep anyone busy!
Once you’ve chosen a sector, do more research! (Do you see a pattern forming?)
Interactive Investor gives live access to the latest news about each company but it also makes sense to set up a folder of ‘favourites’ in your web browser with the websites of all the companies you are looking into. Some even have RSS feeds you can subscribe to so you get the latest news as it happens direct from the horse’s mouth.
Top stock market investors will phone the companies and their competitors to get as much information as possible about a company before investing. This can actually reduce the risk involved in buying shares. If a company sounds shaky, don’t buy!
Subscribe to industry websites or magazines and really get under the skin of a sector. Soon you’ll know which companies are worth investing in and which to avoid like the plague.
So – Is share trading a good idea?
The idea of getting rich quick from share dealing is a glamorous one and even a possibility but don’t part with a penny until you have researched the facts and understand the risk.
Go in with a ‘long haul’ mind-set and you will be more likely to invest in good solid, stable companies.
Go in with a ‘get rich quick’ approach and you are more likely to take risks which could lead to big losses as well as big returns.
In the current volatile market conditions there are some bargains to be had but at the moment there aren’t really any big winners out there.
At the moment the winners are actually the companies who aren’t losing as much as the rest but everyone is feeling the strain of the credit crisis.
With that in mind, I don’t think there is much to speculate on immediately which will give large short-term returns but when we are finally at the bottom of the trough that is the current crisis, there will be a lot of bargains to be had.
Therefore, research now and invest in the future.