Stock & Shares

About Stocks and Shares

Many people have some form of investment that includes stocks and shares whether directly or indirectly. If you have a pension, Unit Trust or life insurance policy the probability is that part of the fund will be invested in stocks and shares. Some employers also offer the opportunity for employees to buy shares through a save as you earn scheme.

What are stocks and shares?

All limited companies (or plc.) will have an issued stock value (total share capital). The stock is then divided into a number of shares that each represents partial ownership of the company. A small company owned by one person may have just one share issued, whereas a larger company (e.g. HSBC) will have issued many millions of shares. The stock value or share capital of the company does not represent the value of the company on the stock market.

Most investments involving shares will be in companies that allow their shares to be traded on a stock market. The share price will go up and down depending on what investors are prepared to pay and the supply and demand for the individual shares.

Note

If a company closes down, the shareholder is the last in line to be paid after all the company’s debts and liabilities have been settled.

How to buy stocks and shares

Anyone can approach a broker who will buy shares for you. The broker will charge a fee for purchasing shares for you and there will be a small amount of stamp duty to be paid. A fee will be charged for each company’s shares that you buy. Therefore direct investment is best for those who have a substantial
amount to invest.

For those who wish to put aside a regular amount or invest relatively small sums of money, the most common route is through a Unit or Investment Trust. These investments are effectively a pool of money that can be spread a number of companies to reduce the financial risks.

What are the investment risks?

Investing in shares is more of a risk financially than having money on deposit or invested in a savings account.

A lower degree of risk is attached to investing in a Unit Trust, because they spread the risk by investing money in many different companies. There are Unit trusts that will invest in a range of industries (sectors) as well as those invested in a narrow sector (e.g. technology). A narrow sector will increase
the risk factor.

The same principle applies for direct investment in shares, but unless there is a very broad spread of sectors and individual companies in a share portfolio, the financial risks will be much higher.

How to select shares to invest in

Selecting which share to invest in is not an easy process. Factors to consider include the price of the share, the industry the company operates in, the state of the company’s finances and how the general economy will affect that particular company. All of this requires research and can be time consuming.

Most Financial Advisers can access information about a company more easily than the average man on the street, so using the services of a Financial Adviser is often the best starting point when investing in share based investments.

Stock Market and Share Trading Articles

  • Currency Trading – What You Need to Know - Currency trading has taken the country by storm – and with good reason. Conducted online, the pace of foreign currency trading is fast (deals can be completed in seconds) and furious. With the advent of mini-forex accounts, it’s become incredibly easy to get into the market. You can get started with a Forex mini account with many online brokers for as little as £100 – and the potential for quick turnaround and profit is enormous. Like any opportunity with a high potential for profit, though, currency trading offers a high potential for loss. Currency trading is not for the weak-willed or the cautious, despite many who will tell you that they have a foolproof system for making money hand over fist. If you’re thinking about getting in on the excitement of currency trading in the volatile worldwide market, there are a few things that you should know. Currency Trading – What It Is Currency trading is exactly what it sounds like. You buy and sell lots of foreign currency with the intent of seeing a profit. It’s a bit more complex than trading shares in firms and corporations because the profit is dependent on the relationship between pairs of currencies – the exchange rate. Here’s a simple example to illustrate how currency trading can make your money grow. As an example: On October 9, the exchange rate for Indian rupees to the British pound is 86.66 – for every GBP you trade, you can buy 86.66 rupees. You sink £1000 into the deal and have 86,660 rupees which are worth £1000. Four days later, on October 13, the exchange rate drops to 84.05. You put in an order to buy 86,660 rupees worth of Brit pounds, and end up with £1026 and change back on your money. By December 1, the exchange rate climbs up again – to 88.08. You take your original stake plus the profit you made and buy 90,398 rupees, and hold tight while you watch the market shift and play. On January 5, the exchange rate drops to 85.33 and you suspect that it’s going to head up from there. You cash in your 90,398 rupees for £1059 and change. That’s an extremely simplified version of how you can make money in foreign currency trading. Most traders don’t hold their currencies for long terms. In fact, the biggest money – and the biggest risks – are made in what’s called ‘day trading’, where the aim is to close out all of your trades over the course of one day. In order to grow your money at day trading, you either need to keep a very keen eye on the world currencies market and shift your investment around from spot to spot by hand – or you need to depend on a system. Foreign Currency Trading Systems Most traders in currency depend on a system to watch the factors that affect the value of particular currencies, and put in a bid to buy or sell when the factors converge. These systems are based on careful analysis of the market history and other factors. Many of the most successful traders will tell you that in order to be successful, you must have the right system – and you must trust it implicitly. You can devise your own system – or use one devised by someone else. The trick is to believe what the system tells you and allow it to make your decisions. Currency trading is volatile and exciting – one might even say it’s addictive. You can make – and lose – a great deal of money trading a commodity that you never see or hold in your hand. Before you take the plunge into currency trading, take the time to research and study the market and learn about the various systems of trading and analysis. Just keep in mind that there’s no right or wrong system – only the one that works for you. Dive in – and have fun!
  • The Art of Share Trading - The well-informed investor understands that the up-and-down nature of the stock market dictates that one fill their financial portfolio with a variety of stocks, bonds, certificates of deposit, and so forth. Dividing your monies between several investment opportunities “cushions” one against financial ruin should one investment fail. The world of purchasing and trading of stocks is a highly-competitive, yet lucrative avenue for both experienced investors and those just beginning with a few stock purchases. A good rule of thumb to remember as an investor is that when it comes to the stock market: “You win some-You lose some.” When a “share” is purchased, the “buyer” has actually secured a percentage of ownership in the company. It is quite normal that the available percentages of ownership for sale to investors are limited so that companies can maintain operational control over their companies. This “capping” of shares available for sale influences the prices of individual shares. When several investors are buying into the ownership of a company, the prices of the shares increase, and when several investors begin selling these shares at the same time, such activity drives the prices of the shares down. The brave, wise, successful investor will “buy” when the majority are selling and “sell” when the majority is buying. This is a delicate dance which requires much study and decision making on the part of the investor. The stock market isn’t for the faint-of-heart to be sure. There are several options for share trading. Individuals can watch the movements of stocks that are being traded on the London Stock Exchange. A useful tool for this is the FTSE All-Share Index, which is a compilation of the FTSE 100, FTSE 250, and SmallCap Indexes. The FTSE All-Share index lists eligible UK. Companies and it strives to present a respectable 98% of the capital values of these UK corporations. Individuals can then make purchase and trade decisions based on the activity present on the stock exchange. It is not recommended however, that one make financial decisions based solely on movements within the exchange. It is best to research a company thoroughly before making final dispositions as you most certainly want to get out of, or stay away from companies on the verge of financial collapse. There are a number of trade centere’s to assist investors with the transaction of selling their shares to willing buyers. The use of one of these trade centere’s is most helpful to the more experienced investors, but even those new to trading can find a trading centere helpful. For investors new to the stock exchange marketplace, it might be prudent to consider the value of employing a financial broker who can assist in the choosing the shares that are most likely to produce favorable returns and can predict consistently the best times for trading of those shares Even more experienced investors have found the financial broker who has an “ear’ tuned to the fast-paced, ever-changing trends of the stock market to be a wise investment in the long run. The best of these brokers will be “schooled” on how to diversify one’s portfolio in order to make the most gains from investments and reduce the risks of large losses. They have many tools at their disposal to aid in deciding what shares to purchase, when to trade them, and aid in the trade transactions of your shares as well. You can find qualified financial brokers through local company directories and also via the internet. Careful study of the practices of any financial firm is recommended to ensure they can assist you in meeting your investment goals.
  • Share Trading Where to Start? - For some insight from popular blog have a look at this article: ‘how to start share trading’. Organisation and dedication are two primary keys to joining the rank of share traders. This system provides a risk and return structure that could either provide a greater return on your investment or help you loose your investment capital quickly. Share trading firms do a majority of their business online and a simple password protected site can allow you to make personal decisions regarding share trading. While it may be easy to set up an account it may be necessary to learn a few things about the process. As a service to customers there are some share trading firms that will provide a market timing function that is intended to assist investors in knowing when to initiate transactions. In many cases the share trading company is the primary beneficiary of your investment dollars. Some investors tend to view share trading with a bit of skepticism and will simply seek out the best long term investment and refuse any headaches that may be associated with share trading. However, for those who have the time and interest to conduct some personal research, there can be a solid investment strategy using share trading as the primary mechanism. A word of caution that you are likely to hear from seasoned share trading investors is to simply track some of your choices over a period of time without actually investing. This allows you to see, with risk or return, how sharp your skills may be at share trading. Doing some research on companies you may be interested in is another good way to determine if they prove solid enough to make a commitment in share trading. The Financial Services Authority (FSA) applies certain rules to share trading firms and they provide a venue of redress should there be a conflict with the share trading firm you are working with. That doesn’t minimize the fact that share trading can never promise a return. There are many who have been able to thrive on share trading, but there are others who are disenfranchised because their investment strategy required a lot of labor and a corresponding loss of revenue. When you work with a share trading firm you are authorizing them to buy or sell at your direction. The firm may derive its income from a variety of sources, but they will typically do what you request without questioning you about the transaction. This is primarily due to the fact that the majority of share trading sites are predominately automated and the requests are managed without a human comparison of the viability of the request. To their credit, many share trading firms do have a competent staff on hand to help assist you in answering question, but you have to remember – they can’t answer a question that hasn’t been asked. Many sites provide a glossary of terms associated with share trading along with a sampling of financial articles that may help you determine your next move. Most share trading firms will also have a rather comprehensive set of terms and conditions that help you understand more about the services they provide along with information on the risk potential involved with share trading. If you have the time, patience and research skills, then share trading may be an ideal vehicle to help you manage risk potential as well as allowing you to understand the various ways share trading may help you in your quest for greater short term investment strategies.