Advice for a total beginner in stocks / shares

[Bullionstu]

OK so as title says I'm just thinking of getting into shares with no real experience at all. 

I'm 33, have a half decent career (34k) and have a few grand saved in the "rainy day fund). I bought my house about 5 years ago and up to now have been battering the money into restoring it. Now it's about finished I've been working on my gold stack, which is up to about 3 grand now. 

 

Reading the forums over the past few weeks it seems the concensus is "I made money on gold, I retired on shares"... so I thought I'd look into it. 

I'm sorry to just jump in and ask but I come from working class stock, my parents saved and paid their mortgage but never 'invsted' as such, and all my mates live month to month buying cars on finance and flying to ibiza twice a year. I'm trying to do something while I'm still young (ish) enough to make some money on the long game - 10 20 years +.

Do I just buy shares in an isa or am I better off investing another way? Thoughts appreciated!

[FlorinCollector]

I watch a guy on youtube called Dave Ramsey who is quite good to listen to for advice. 

He is American so some of the ideas are slightly different but most of the basics are the same as we should be trying. 

Should give him a try mate.

His idea is baby steps to help build wealth not too sure on all the steps but the first few are:

1. Have $1000 in cash for emergency. (I would say just £1000 for us)

Next is to either pay off all debts apart from mortgage then build 6 months of wages for an emergency fund. 

Can't remember exactly but his vids r good  

I'm sure he also prefers funds or index's to individual stock picking. 

[Tn21]

 

2 hours ago, Bullionstu said:

OK so as title says I'm just thinking of getting into shares with no real experience at all. 

I'm 33, have a half decent career (34k) and have a few grand saved in the "rainy day fund). I bought my house about 5 years ago and up to now have been battering the money into restoring it. Now it's about finished I've been working on my gold stack, which is up to about 3 grand now. 

 

Reading the forums over the past few weeks it seems the concensus is "I made money on gold, I retired on shares"... so I thought I'd look into it. 

I'm sorry to just jump in and ask but I come from working class stock, my parents saved and paid their mortgage but never 'invsted' as such, and all my mates live month to month buying cars on finance and flying to ibiza twice a year. I'm trying to do something while I'm still young (ish) enough to make some money on the long game - 10 20 years +.

Do I just buy shares in an isa or am I better off investing another way? Thoughts appreciated!

Hi, This is just my opinion and thoughts on the matter.

I think the indexes and indicies are overpriced big time at the momment so my advice would be to stay well away from the markets for the time being. Whilst staying well away from the market I would try an build up your cash pile which will then allow you to go on the offensesive when the markets corrects or goes into recession territory. At that point you will be able to get 60p on the £ for example and would proivde ample opportunities for stocks to be bought at a cheaper rate. 
@Bullionstu

[Tn21]

Tony Robbins has a book titled Unshakeable which gives some useful advice on choosing funds to buy into. At the momment one the cheapest tangible assets on the market is Silver. Get your self some silver and maybe some gold as a preservation of wealth and just stack the cash untill you see real VALUE in the markets. 

Gold and silver I think will be good in the long term but be cautious with the stocks for the time being !
 

[Tn21]

I wouldn’t advise on getting in sooner rather later as entry point is key so why buy into the stocks when they are high. I don’t expect stock markets to keep on making higher highs for the foreseeable future so be patient and enter when you see fair value. Admittedly 2017 was a epic year for the stock market on some of the indices but alot of the fundamentals have been ignored and central banks have used cheap fiat money to prop the markets up.

All of which will catch up and hit us all at some point. 

 

 

[Tn21]

Waiting on the sidelines can be costly but for me regarless of what Tony Robbins and Warren Buffet says im happy to stay out and try and build a cash pile in the mean time. A book or a piece of advice on tv is not always going to be right 100% of the time. 

@Bullionstu it is your choice but do your research and make up your own mind. Follow what @MrGeorge  says and join a few investment forums. 

 

[blindedbythelight]

As per above I would look at other more focused investment forums and sites. You should look at and develop a complete financial "plan" and you need to look into using ISAs/Pensions (do you have a contributory/salary sacrifice work pension scheme etc) as Tax wrappers. A lot also depends on your risk profile - its very different investing in FTSE100 vs Aim shares for example.

Have a look at Monevator.com (+ similar sites) and read further about passive investing in low cost tracker funds vs individual shares.

 

 

[JB3]

There's plenty of evidence that 'time in the market' beats 'timing the market'.

Indeed, the Times did a retrospective study of three (fictional) people putting a fixed amount into the market, buying a FTSE tracker, each year. The first bought at the top of the market, the second bought at the bottom (so got more for their money) and the third just put a little in each month.

The guy who bought at the bottom significantly out-performed the guy who bought at the tops, as one would expect.

However - the one who just bought when they could did best of all.

 

The reason?

 

Dividends. Everyone forgets dividends but, over the long term, they form the majority of the increase value especially if you are buying blue chip / large cap stocks.

 

But you get zero dividends on the side lines, waiting for the bottom you will never see until it's passed.

 

'The best time to invest in the market is when you can.'

 

I still only have about 25% of my investments in stocks - I split them equally between stocks, bonds, hard assets, and cash - but I never try to time the market.

 

 

[Lowlow]

My advice, stay single and don't have children, and don't start living an expensive lifestyle, do that and you've already won.

Having said that, the best investment for most people is buying debt.

What kind of debt ?  What if I told you that you could invest in debt that would pay you 15-20% interest, have zero chance of default, and would give you peace of mind all at the same time, would you invest in it ?  That's the situation if you purchase you OWN debt i.e. pay off your own credit card.  There's no mathematical difference between buying a debt instrument that pays 15% interest and paying off your own credit card to save yourself from paying 15%, the math is the same, so if you have credit card debt buy the best investment you have available to you ... your own credit card debt.

Then once you've paid off your CC debt, buy other debt that you owe.  If you are paying 8% on a loan, or 5%, you're not likely to find a better note to buy than your own debt at that rate, not without taking risks ... and you know you aren't going to default on yourself, so your own debt is a perfect investment.

Same with a home mortgage.  If you can't find a debt investment that pays higher interest than what you are paying on your own home mortgage, with comparable risks associated with it, then you are better off paying off your own mortgage than investing in lower paying notes.  It simply makes NO sense to invest in a certificate of deposit paying 1.5% if your own mortgage is costing you 3%, that makes NO sense at all.  There is no mathematical difference if you had your home paid off and decided to mortgage it at 3% so that you could invest in a certificate of deposit paying 1.5% ... you would never make that decision, but that's exactly the decision you've made if you choose to get something like a CD without first paying off your mortgage.

Stock investing, same thing.  Buying stocks (shares) before you've paid off all the debt you have is the same mathematically as if you borrowed money from the bank so that you could buy shares, and would you do that if your debts were paid off ?  Yes, you might make 10% in the stock market, or it might go into a bear market and you could lose money ... everyone is a stock market genius at a market top, not so much once the bear starts chewing your face off.

All that said, if you don't have a penny in debt ... have at it!  The world is yours.  Once you are in the black you can start investing in whatever you want at your age, you are young enough to lose money and have the chance to start over from scratch.  I highly recommend "The Richest Man in Babylon", available as a PDF online for free (search "the richest man in babylon pdf"), available in any bookstore in the United States, probably available in any bookstore in the English speaking world (and beyond ?).

The other book I would HIGHLY recommend if you are going to be speculating in stocks is "The Disciplined Trader" by Mark Douglas.  Trading stocks (not buy and hold, but actually moving in and out of positions), futures, options, etc, is mostly about your own mind and how you react to what is going on, and this book is about disciplining your own mind, understanding yourself and how your ego and feelings influence your own behavior in the markets.  Most don't know this, but the overwhelming number of people who trade the markets LOSE MONEY, they do WORSE THAN CHANCE, and this book explains why that happens.  That is not an exaggeration, you could literally write a computer program that randomly buy and sells stocks and do better than the overwhelming number of people who actively trade stocks, because their own feelings work against them in the markets.

Just my opinion.

[onlyroadtoheaven]

42 minutes ago, Lowlow said:

 I highly recommend "The Richest Man in Babylon", available as a PDF online for free (search "the richest man in babylon pdf"), available in any bookstore in the United States, probably available in any bookstore in the English speaking world (and beyond ?).

 

100% agree with reading The Richest Man in Babylon.

I would join ADVFN for free and read their forums (although be very selective as there is a lot of ramping on there), look at the charts and build a "monitor screen" of shares to look at each day. The naked trader is a fun book to read if you are starting out and links in well with ADVFN.

If you really believe in metals then there are loads of miners on the market but many are badly run. I have watched HOC for years and it seems like a well run company, however I am not invested in this as I don't want to over expose myself to PMs on AIM.

I have decided to spend a year buying physical silver or whilst it appears to be cheap. This will work well for me as I like buying something tangible and it will stop me buying clothes/shoes/women. 

Having said all that I ended up losing a fair bit last year on what I thought were good well run companies (such as Glaxo) while speculative bad shares that I didn't buy did well. Perhaps do the opposite of what I have written. Good luck either way.

 

[Bullionstu]

All very intereating! Thanks to all that took the time to reply!

I'd nevery thought of just hammering the mortgage but when it's spelt out like that it doesn't half make sense!

[60015]

If you're looking for long term investments I'd be looking at Investment Trusts rather than individual shares.

A personal favourite of mine is City of London Investment Trust. Have a google and a good read.

[Guest]

On 10/03/2018 at 16:35, Bullionstu said:

OK so as title says I'm just thinking of getting into shares with no real experience at all. 

I'm 33, have a half decent career (34k) and have a few grand saved in the "rainy day fund). I bought my house about 5 years ago and up to now have been battering the money into restoring it. Now it's about finished I've been working on my gold stack, which is up to about 3 grand now. 

 

Reading the forums over the past few weeks it seems the concensus is "I made money on gold, I retired on shares"... so I thought I'd look into it. 

I'm sorry to just jump in and ask but I come from working class stock, my parents saved and paid their mortgage but never 'invsted' as such, and all my mates live month to month buying cars on finance and flying to ibiza twice a year. I'm trying to do something while I'm still young (ish) enough to make some money on the long game - 10 20 years +.

Do I just buy shares in an isa or am I better off investing another way? Thoughts appreciated!

DO NOT BUY SHARES. STOCK MARKET IS AT ALL TIME HIGHS. Sorry for all CAPS, but seriously, do not buy stocks. P/E ratios (price/earnings) are extremely over stretched and most smart money has cashed in and left the market.

Do not take my ideas as investment advice, but be wary of what is happening right now in the markets.

Build your stack is the only advice I can give. 

I posted on this page about today: http://thesilverforum.com/topic/8179-equities-going-parabolic-is-the-crash-near/?page=5&tab=comments#comment-166359

 

PS Inter bank liquidity has dried up (precursor to 2008 crash).

[60015]

46 minutes ago, RichRock said:

DO NOT BUY SHARES. STOCK MARKET IS AT ALL TIME HIGHS. Sorry for all CAPS, but seriously, do not buy stocks. P/E ratios (price/earnings) are extremely over stretched and most smart money has cashed in and left the market.

Do not take my ideas as investment advice, but be wary of what is happening right now in the markets.

Build your stack is the only advice I can give. 

I posted on this page about today: http://thesilverforum.com/topic/8179-equities-going-parabolic-is-the-crash-near/?page=5&tab=comments#comment-166359

 

PS Inter bank liquidity has dried up (precursor to 2008 crash).

The stock market is not at all time high. FTSE 100 closed today at 6952, that's over 10% off the high of 12th Jan when it was 7778 and is lower than at any time in the last 12 months.

I've absolutely no idea if it's a good time to buy shares or another 20% is about to be lost but lets at least stick to posting facts.

[Tn21]

personally I think there is still more downside to come on the FTSE, DOW Dax and in the markets as a whole. 

[Lowlow]

7 hours ago, RichRock said:

PS Inter bank liquidity has dried up (precursor to 2008 crash).

Libor is back.  Not good.

[Guest]

14 hours ago, 60015 said:

The stock market is not at all time high. FTSE 100 closed today at 6952, that's over 10% off the high of 12th Jan when it was 7778 and is lower than at any time in the last 12 months.

I've absolutely no idea if it's a good time to buy shares or another 20% is about to be lost but lets at least stick to posting facts.

 You are correct about the FTSE, apologies for not being clearer, I must remember not to post after a couple or three glasses of Rioja. When I talk about all time highs I am talking about the last few months in comparison to the last 10 years or so.  I would say we are seeing the beginning of the other side of a blow off top. My opinion is Feb on the DOW looks like sellers are now in control and that the correction will be surprisingly deep, the correction could be at least 50-60% from the Jan high.

 

[Guest]

8 hours ago, Lowlow said:

Libor is back.  Not good.

Deutsche Bank AG

[vand]

On 3/15/2018 at 21:13, JB3 said:

There's plenty of evidence that 'time in the market' beats 'timing the market'.

 

This is less than half the story. Yes, you can prove that "taking the best 10 days out of the last 40 years will halve your total returns" but that is a very, very narrow view. 

consider:

If Jonny X is the world's worst market timer then not only will he buy stocks near a market peak, but he is also duty-bound to sell them NOT AT BULL MARKET PEAKS, BUT AT BEAR MARKET BOTTOMS. This is what most clueless investors do. They not only buy stocks near peaks, but also crystalize their initial mistake by selling during the ensuring panic. This is what this brainless articles that advocate "don't worry about the timing" don't consider. 

 

Most people who bought Fidelity Magellan LOST money... Despite being invested in the world's greatest growth fund during the world's greatest bull market. 

You can literally have the greatest investment vehicle in the world and still lose money if you don't understand why your are invested in the first place.

http://www.innovativewealth.com/wall-street-wisdom/individual-investors-bad-investing/

 

Today's homework in light of this:  find the best return from a bull market peak to a bear market bottom over a 20 year time period.

 

[JB3]

 

On 23/03/2018 at 17:05, vand said:

 

They not only buy stocks near peaks, but also crystalize their initial mistake by selling during the ensuring panic. This is what this brainless articles that advocate "don't worry about the timing" don't consider. 

 

 

 

Indeed, but that is the point: you have to truly not worry about the timing.

 

Buying in a boom and selling in a slump is the opposite of that: that's timing your buys and sells according to sentiment.

[vand]

On 3/19/2018 at 05:38, Lowlow said:

My advice, stay single and don't have children, and don't start living an expensive lifestyle, do that and you've already won.

Having said that, the best investment for most people is buying debt.

What kind of debt ?  What if I told you that you could invest in debt that would pay you 15-20% interest, have zero chance of default, and would give you peace of mind all at the same time, would you invest in it ?  That's the situation if you purchase you OWN debt i.e. pay off your own credit card.  There's no mathematical difference between buying a debt instrument that pays 15% interest and paying off your own credit card to save yourself from paying 15%, the math is the same, so if you have credit card debt buy the best investment you have available to you ... your own credit card debt.

Then once you've paid off your CC debt, buy other debt that you owe.  If you are paying 8% on a loan, or 5%, you're not likely to find a better note to buy than your own debt at that rate, not without taking risks ... and you know you aren't going to default on yourself, so your own debt is a perfect investment.

Same with a home mortgage.  If you can't find a debt investment that pays higher interest than what you are paying on your own home mortgage, with comparable risks associated with it, then you are better off paying off your own mortgage than investing in lower paying notes.  It simply makes NO sense to invest in a certificate of deposit paying 1.5% if your own mortgage is costing you 3%, that makes NO sense at all.  There is no mathematical difference if you had your home paid off and decided to mortgage it at 3% so that you could invest in a certificate of deposit paying 1.5% ... you would never make that decision, but that's exactly the decision you've made if you choose to get something like a CD without first paying off your mortgage.

Stock investing, same thing.  Buying stocks (shares) before you've paid off all the debt you have is the same mathematically as if you borrowed money from the bank so that you could buy shares, and would you do that if your debts were paid off ?  Yes, you might make 10% in the stock market, or it might go into a bear market and you could lose money ... everyone is a stock market genius at a market top, not so much once the bear starts chewing your face off.

All that said, if you don't have a penny in debt ... have at it!  The world is yours.  Once you are in the black you can start investing in whatever you want at your age, you are young enough to lose money and have the chance to start over from scratch.  I highly recommend "The Richest Man in Babylon", available as a PDF online for free (search "the richest man in babylon pdf"), available in any bookstore in the United States, probably available in any bookstore in the English speaking world (and beyond ?).

The other book I would HIGHLY recommend if you are going to be speculating in stocks is "The Disciplined Trader" by Mark Douglas.  Trading stocks (not buy and hold, but actually moving in and out of positions), futures, options, etc, is mostly about your own mind and how you react to what is going on, and this book is about disciplining your own mind, understanding yourself and how your ego and feelings influence your own behavior in the markets.  Most don't know this, but the overwhelming number of people who trade the markets LOSE MONEY, they do WORSE THAN CHANCE, and this book explains why that happens.  That is not an exaggeration, you could literally write a computer program that randomly buy and sells stocks and do better than the overwhelming number of people who actively trade stocks, because their own feelings work against them in the markets.

Just my opinion.

This is all excellent advice.

Most people do personal finance/investing backwards, which is why they are so bad at it. They increase their earnings but also run up overdrafts, then credit cards, never truly build a foundation of financial stability, lump on an oversize mortgage on top, and spend the rest of their lives trying to make the numbers all add up.

Pay off debt as quick as possible

Build a cash savings buffer of at least 3 months

Begin by building a base of low risk assets

Add more risky assets as your circle of competence grows, your debts shrink, and your base of low risk steadily increases

 

Normally I would add investing in a home as you finances allow and put this in the "base of low risk assets", but I think UK property is very overpriced right now so. It's a tricky one, unfortunately. If you already have a home with a mortgage then the one of the best thing you can do with extra cashflow is to pay off the mortgage as quickly as possible, but that doesn't mean you should go out and buy a house if you don't already own one. Renters will continue to be fleeced if they stay renting, but they'll also be fleeced by outrageous prices (and probably negative equity) if they take the jump onto the housing ladder.

 

 

[vand]

Also, if you want to become competent in the realm of stocks and shares, it is essential that you understand the different approaches that you can take, broadly:

- passive (index) investing
- value investing
- growth investing
- trading

Books will be your best resource, and I would advise to stay well away from online boards like ADVFN where it is all too easy to become entangled in the hot stocks of the moment and where (apparently) there are no losing traders.

[Pipers]

I have been lucky enough to of had family members who have worked in the city, one untill he retired in the late 1980's so he saw good and bad times.  He said most lose unless it's a bull market even then they lose less, he said they couldn't pick a walk over.  Like the PM market stocks are similar esp if you choose a ftse tracker  buy when cheap then add stop buying when rich buy something else that's cheap!  Over 30 - 45 years the person who buys items that are under valued will do better than the person who buys items that are over valued. 

 

 

 

 

 

 

 

[PEAL87]

I would recommend reading "how to own the world" a brilliant book on passive investing and creating a decently diversified portfolio. Not a difficult read and a great intro with some good examples.

Everything i have read highlights two things...

1) never try and time the market, you'll get burnt. Little and often is a better way to cost average and see a decent return ( note this is for long term market investments 15 years+)

2) costs really ramp up over a period of time and significantly impact your returns. Especially with managed funds.

Personally I put money monthly into an ETF through Charles Stanley - have a look at the Vanguard Lifestrategy funds. The costs are low, they are well diversified across the world markets and have different funds depending on your appetite for risk. I put into the Life strategy 80, so higher balance of equities and lower split of bonds.

If your on Reddit its worth getting onto the ukpersonalfinance sub. Lots of good info to trawl through. I've attached the flowchart they recommend everyone to review which gives some pointers.

[JB3]

Looks sensible, although I'm not sure *all* of your post-pension investments should be in S&S ISAs (first pale blue box in the bottom right corner).