Dummy guide to stock market

Dummy guide to stock market

By: bahek Date of post: 12.07.2017

Tuesday 19 December Getting a piece of the stock market action can be tempting for novice investors. Tales of other people's gains can make you wonder why you are squirreling cash away in a safe but not especially profitable savings account when you could be buying into funds that could help your money grow much faster.

But the first question to ask yourself before investing on the stock market is how you would feel if you initially lost money. Another golden rule is to leave your investment alone for the medium term - at least three and preferably five or more years. A stock market investment needs time to develop, and huge gains in short periods are unlikely.

To spread risk, a fund could be the best way to begin. Although it is easy to buy shares in a single company, it is just as easy to buy an investment made up of the shares of companies - a fund such as a unit trust or an open-ended investment company Oeic.

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You can also buy investment trusts and guaranteed equity bonds GEBs. Investment trusts, like funds, are a collection of shares in companies but have a more complex structure than unit trusts or Oeics. GEBs are invested in a number of stocks, but run for a set period and usually promise to return the initial amount invested, plus a set amount of growth. Whatever your first investment, don't forget to use your individual savings accounts Isa allowance.

Holding an investment within an Isa wrapper entitles you to a certain amount of tax relief, including from capital gains tax CGT. John Chatfeild-Roberts, fund manager at Jupiter, says: Spread betting If you have a few thousand pounds to invest you could spread your money, says Fiona Sharp, senior financial adviser at M2Finance4Women.

But choosing even three funds is a big task. There are income funds and growth funds, UK and overseas funds and those which combine all of these elements.

Equally dangerous is choosing a fund purely based on past performance.

He recommends starting with a fund that invests in the UK. He also recommends a fund of funds for beginners.

These spread risk even more by investing in a selection of other funds. Some of Cockerill's favourites include Credit Suisse Multi Manager UK Growth and New Star's Active and Balanced Portfolios.

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Another option for a beginner is the tracker, which follows the movements of indices like the FTSE The investor participates in the growth or losses of those companies. However, a tracker fund is a passive investment because it simply follows the index.

dummy guide to stock market

It isn't run by a manager actively looking for the stocks he or she believes will make the best gains. Ask an expert If you have a large sum to invest, a financial adviser should be able to narrow the vast choice down for you and choose a selection of funds that fit together.

However, if you are just starting out and making your own decisions there is a wealth of information on the internet that shows how funds have performed and what they invest in.

Individual fund management house websites also provide much detail to help with the decision.

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One more point to consider is how you put the money into the investments. Most funds allow you to make regular investments, drip feeding your money into the market, although this is not usually an option with guaranteed equity bonds.

A beginners guide to investing on the stock market | Money | The Guardian

The principal advantages of regular investments is that you can do so even if you don't have a lump sum, and putting money into the market over time means you don't buy when the price per unit may be high.

The managers behind your chosen fund of funds will be able to let you know whether you can make regular contributions. International edition switch to the UK edition switch to the US edition switch to the Australia edition. The Guardian - Back to home.

Thinking about taking your first steps in the world of stocks and shares? Jo Tura shows you how to start investing. Sharp also likes the Credit Suisse Multi Manager range and the T Bailey Cautious Managed fund.

The Guardian back to top.

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