1. View a demo of The Share Republic share trading platform
2. Practice trading without the risk
In The Share Republic Bananas Portfolio, a virtual share trading platform, you can:
- Open a virtual account
- Deposit virtual money
- Create a virtual investment portfolio
- Buy shares to build your portfolio
- Analyse and monitor your virtual investments
- Sell shares to realise your virtual profit or to cut your virtual losses
- Set up alerts so you get notified by email or on your mobile when a share price moves
3. Beginner’s guide to investing
If your savings goal is more than five years away, putting some of your cash into investments could allow you to earn more from your money and keep up with rising prices. Read on to get to grips with investing basics and find out if it’s right for you. (from Money Advice Service)
Beginner’s guide to investing »
4. Why invest in the stock market or quoted securities?
The main reason to invest in the stock market is that the long term rewards can be greater that leaving money in the bank.
5. What is meant by securities?
Broadly there are two categories of securities quoted on the stock exchanges
1) Fixed interest securities (colloquially known as bonds)
2) Shares (often referred to as equities).
There are many varieties of bonds and equities, as well as hybrids which contain aspects of both.
6. Risk warning
All investors should be aware that the prices of securities can be volatile. In addition to the risks attached to a particular investment, whether an equity or bond, there are market risks too.
7. Economic cycles
The daily FTSE 100 is a guide to the stock market movement. The stock market may be progressively falling over a period of time, known as a bear market; and maybe trending upwards, a situation known as a bull market.
The implication is that any investment in the stock market or quoted securities should be made for the medium to the longer term.
8. Risk appetite
Each investor should understand his/her own risk appetite. Risk is very subjective. Some regard the Stock Exchange as a casino where others will see it as an opportunity for potential rewards.
People who view it as a casino will vary from those not wanting to go anywhere near it, to those who are prepared to invest in very high risks, high rewards (and losses) instruments which are likely to be a derivative of an equity.
Those who invest for the longer term are most likely to invest in bonds and equities directly or via a fund, and may benefit from receiving interest and dividends.
9. Risk classification
Generally, investments can be categorised in risk terms as follows:
| Cash | Low risk |
| Government Securities/Bonds | Low risk |
| Funds | Medium risk |
| Shares | Medium risk |
| Penny Shares | High risk |
| Derivatives (Options, Warrants, CFDs – Contract for Difference) | Very high risk |
Cash may be considered as low risk, but it is subject to being eroded by inflation. So for example, if your bank pays you 0.00% on you deposit, and the inflation is 2.7%, then the value of your cash deposit is reduced by 2.7%
10. Philosophy
The risk classification table does not take into account your personal objectives or attitude to risk.
Talking about investing, or practicing on a virtual share trading platform that reflects markets, is very different from when you actually invest real money.
When your money is invested, it can get emotional and this can affect your judgement.
One often hears about other people’s successes, but rarely about their losses or mistakes. Don’t be swayed by tipsters.
Work out your objectives and build your investment to achieve those goals. Chasing the pot of gold at the end of the rainbow may achieve nothing and give rise to a lot of angst on the way.
11. Bonds
A bond will pay interest, usually half yearly, and at some future point, will be redeemed or mature when the capital is re-paid to the investor. The most well-known bonds are “gilts” = gilt edged = government securities.
The UK government issues gilts to supplement the funding of its activities, and has issued short (up to five years), medium (up to ten years), and long-dated bonds that pay interest half yearly. In the distant past, undated bonds have been issued and are still in existence.
There are also index linked gilts where the capital value of the bond rises with the retail price index (RPI) to safeguard the investor from inflation.
Other bonds are corporate bonds issued by companies to raise finance. These pay higher interests than gilts as the risk associated with corporate bonds are higher.
We will return to bonds in another article, as the market for these instruments have become more esoteric and needs greater explanation.
12 How do I invest my money?
There are over 2000 companies’ shares quoted on the London Stock Exchanges, and quite often, an investor will not know where to start.
Online investing is mostly about investing in equities, i.e. in the shares of companies, directly or via a fund.
You can buy shares or units in a fund (a company or a trust that invests in the shares of other companies.). In doing so, risk is spread accross different companies and sectors, and a professional fund manager looks after the investment portfolio. You pay for this management, and depending upon one’s view point or risk appetite, this takes away the fun of owning shares in a particular company.
13 How do I select a company to invest in?
There are several ways to start.
If you are about to put your toe in the water, and do not have the resources to build a portfolio consisting of shares in several companies, but want to invest directly in a company as opposed to a fund, then here is an outline of how you might start.
Where do you shop? Who is your telephone provider?
You could look at the things that you do and how and where you spend your money every day. Probably, the largest weekly or monthly expense is on food. Other household costs could be utilities, communications, banking and insurance.
You can find out about many of these companies on our Bananas Portfolio research page. Just sign up with your email and password. Click Research for basic information, and then Advance Research to reveal a drop down list of industrial and commercial sectors into which companies are classified.
The supermarkets will be classified under food retailers, and other major stores (eg Marks and Spencers or Debenhams) under general retailers. You will see many other classifications, and you might find your own employer, which may be useful if you participate in an employee share scheme.
If you click one of the industrial classifications, a list of companies will appear, with some basic data showing their market capitalisation (the total amount they are currently valued at); the dividend yield which reflects the total dividend income as a percentage of the share price; and the price earnings ratio (PER). This information is the basic valuation data you will need to start with.
The dividend yield in the amount of dividend (or interest) paid per share, divided by the price of the share, which will give an indication of the rate of income return that you should receive over a one year period.
The PER (share price/earnings per share) is a slightly more difficult concept, but it reflects the after tax profits of the company on a per share basis, known as the earnings per share, which are divided into the current share price.
If the PER ratio is 10, then in terms of earnings (profits per share), it will take the company 10 years to earn what you pay for the shares (current share price). The higher the ratio, the more expensive the share.
Broadly, the lower the dividend yield and the higher the PER, the more expensive the shares.
Conversely, the lower the PER, the higher the dividend yield, the less expensive.
But there are caveats.
High growth companies have high PER as they discount future earnings (profits) growth, and perhaps they might not pay dividends.
The higher a dividend yield, then the more the market might be expecting it to be reduced.
Some company background research is required so that one can be reasonably informed of its immediate future. Click on a company’s name in the list to view more information including financial results.
Generally, the larger the firm, the more likely it is to weather financial storms.
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14. Share prices and company information |
15. The latest news about the stock markets |
FREE live stock price and company information are now available on Google.
For 15 minutes delayed price and company news and data,including company financials, which are FREE to use and no need to register:
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Professional analysts use several sources of news to keep up to speed with the companies and sectors they follow. This is because it is perceived that news has an effect on the share prices.The following sites provide free up to the minutes news. |