You need to start doing a lot of homework.
Shares can go down in value as well as up, in fact shares can become worthless, be warned there is a risk.
However if you stick to the FTSE 100 there is little risk of them being worthless or FTSE 250 there is a higher risk but still quite low.
You can get shares wrapped up in an ISA, but to less value, because you can make more and HM Government don't want you getting too rich without Tax kicking in.
Do not just buy shares in one company, look at a minimum 3 companies in which to buy stock, this spreads the risk of losing.
The trick with shares is make sure the company is paying a dividend, and also has a high investment in R & D, this helps you find a sound company with a fairly sound future. Also arrange to have the dividend paid out in more shares, this improves the performance of increasing your 'value' through compound interest, and if it is wrapped up in an ISA can double your money in 5 to 8 years.
Lets say the share is ￡20 each you buy 50 that is ￡1,000 and the dividend pay out is 5% at the end of the year you will be paid 2.5 shares, so you now have 52.5 shares, so the next year you get 2.625 shares and have 55 shares, but if you have bought the correct shares that are performing well, they will now be selling for ￡22.05, so your 50 shares are worth ￡1102.5, oh and if they are paying 5% then you will actually get 2.68 shares not 2.625 and it goes on.
Initially compound interest doesn't appear to do that much, but 10% growth doubles your money in 7 years, and quadruples your money in 14 years, but also 5% dividend payout doubles the shares you have in about 13 years, but also those shares will now be trading at probably 4 times what you paid for, so your ￡1,000 has become ￡4,000 except you now have 100 shares not 50 so they are worth ￡8,000 however note the time span.
This doesn't happen overnight, those telling you about get rich quick (especially 'Day Trading) schemes are on a quick route to poverty, I have a couple of friends who did day trading, one started with ￡500,000 and in one month made ￡25,000, except the following month he lost ￡28,000?
After 6 or 7 years he was down to his last ￡95,000 and went and bought a house to renovate?
Check out P/E ratios, this is Price Earnings Ratio and should ideally be between 10 and 14 (if they are lower the better but check out why they are so low, they could be going bankrupt) 17 P/E and above and check what is making them so high and if they are worth leaving alone for now.
Do lots of homework, check out Industries you know something about, if you don't understand how they make their money avoid them, also Local companies are always worth looking at, because you might be able to find people who either work for them and know how good or bad they are, or get more reports in the local news and press an so be able to follow them easier.
1. You don`t need a share ISA until you have used up your CGT allowance.
2. You don`t use up your CGT allowance until your profits on investments exceed ￡10,800 p.a.
3. You need sufficient funds to get started.
4. You buy shares through a broker.
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If you have not any idea of share market then it is not safe to invest in stocks, as you have told that one of your friend is recommending you to have Savings Account in a bank is good for initial stage and do understanding stock market trends while this duration after that you will invest n stocks. Another option is that If you have idea of Fixed Deposits then it is safe and will give more interest than that of savings.
Hi
I am a student and have saved some money from part time jobs. I am looking to invest the money and would love some advice. I have heard of buying shares, but I don't know that works?
My friend tells me that he has a saving account (ISA) and recommends that I do the same.
But I want to do something else, can someone please explain to me how the share business works? What do I need to get started? Where do I buy the shares?
Any advice would be greatly appreciated.
Thanks in advance.
