Buying shares - starting out

[John]

So I want to get into the stock market and would like to know a few things...

Where do I start? :D

I'm thinking of buying the Financial Times for a while so I can monitor some weekly trends over a lengthly period of time... how long should this be? Buying shares in big companies is expensive but surely as these companies continue to make a profit (assuming they do, for the case of the argument here) isn't it all proportional, all relative? I've been told that I need to invest in small companies that I think will grow, but how on earth do you tell what's going to happen? It can't just be pot luck, there must be some logic to looking out for small-time companies who are destined to get bigger, or so the shareholder would hope.

Do any of you currently play the stock markets and if so what kind of companies are best to watch out for?

Any advice much appreciated.

[Win2Win]

Why the FT.....you can use online systems for free, and even run test portfolio's for you :)

[mathare]

So I want to get into the stock marketOut of interest - why?

[John]

In reply to Mat:

I like the idea of putting money on something and getting profit in return. :)

More specifically, I'd just like to buy some shares in something. It's something I'd like to learn more about and if I can learn more about it then I can invest in it properly. I know a few people - family and friends who have shares in companies and would like a piece of the action.

In reply to Keith:

I know I can, but with the current time I have available it isn't really possible for me to do that. I'm looking to expand what I know. :)

[Win2Win]

Education and knowledge, read plenty of books, make sure you understand it all. Most folk just jump in on a whim. Remember most pension managers are not professional gamblers, hence the mess they are in :)

I sold all my poker shares for a nice profit last week, and I'll buy them back in 2-3 months when this bill has settled down, and the Yanks figure out ways around it.

Stick to investing in things you know about, my best is Arena Leaisure, it was obvious to me some years back that at around 14p a share (now 40p), and with the plans they had in the horsey world they would grow. Still worth investing in now, but growth will be nowhere near as good.

[Street cry]

start small my 1st investment was in edinburgh oil and gas 5 yrs ago at 66p sold for about dbl and have done reasonably well with other small companies but have lost interest now prefer betting on horses good luck though John

[Win2Win]

Betting is much quicker for profits. :)

[mathare]

Betting is much quicker for profits. :)This is partly why I asked John why he wanted to get involved with the stock market.

You know your gambling so why not spend the effort required to learn about shares and how they work to focus on one particular sport and look for betting angles on that, or to research possible racing systems and so on. I can understand you may want to diversify your investments but you're a gambler so if you're prepared to put the effort in to learning about shares you may be better off putting the same effort into improving a skill you already have.

Would you rather be amazing at one skill or average at two?

[Win2Win]

I'm amazing at many :) .....apart from my shares in Betamax :lickme

[John]

Thanks for the advice guys, have only just gotten round to reading this post again. I can see what you're saying Mat, and I do still wish to expand upon my knowledge in the gambling world. Stocks and shares is simply another item I'd like to add to occupy my brain. Will read up on areas that interest me Keith and those I know a thing or two about.

Cheers again.

[Workshy]

I suggest you read up on the subject regardless of whether you're going to invest John. Plenty to learn and many variables to consider.

Infact, I generally believe when it comes to investment/self employment, one should spread their funds across several ventures. Not good to rely upon one 'business'.

[John]

Yeah, that makes sense, lots of reading to get through!

Maybe I can buy shares in Win2Win now it's a limited company. :D

[Win2Win]

A limited company that has just turned 1 year old :)

[John]

Happy Anniversary, darling! :hearty

[Onlyforfun]

Pick 2 or 3 companies at most. One good way is to look at retail. If a new shop (chain) opens and you like what they are doing, it is busy etc then consider it as an investment. I was a great fan of Caffe Nero (50p-250p) and Carphone Warehouse (75p-350p). Didn't buy either though :mad: .

The other big potential gains are in commodities, especially among so called "juniors". These are companies that own prospecting rights and maybe also "resources" or even "reserves" in order of ascending importance. As they are basically non-profit making the share price is low and once they do start actually digging a resource out the ground and selling it, money starts to flow and the share price should increase by factors of 2-20.

I don't agree that gambling banks rise faster. For comparable risk there is not much to choose, and indeed it is rare for a share to become completely worthless. For example, I own a stock called Gold Ore Resource, which is currently producing small amounts of gold from the tailings left when a mine was closed, it has expanded the defined resource and is on track to start digging out new ore next year. Because of the existing operation it is unlikely that the price will go below 30 cents and if evertuthing goes to plan and the gold price holds above $500 I would expect it to go north of $3. Not many betting banks will increase 6 times in a year.

[Win2Win]

Not many betting banks will increase 6 times in a year.
Mine do :D

[Onlyforfun]

For the same downside risk?

A big tip for buying junior resource stocks, only buy after they issue new shares to raise cash or instigate an early exercise of warrants.

[imranali]

i recently purchased some books, it did warn against the normal advice of diversifying too much in the market, at most 3 good stocks

the method of selections are as follows (in summary)

1)identify businesses that are of meaning to you, so your interest remains high in tracking those stocks daily.

2)remember you are not buying stocks, but rather part of a business, so its time to act like a business owner

#)the 10-10 rule --- if you are not willing to keep that stock for 10 years don even think of keeping it for 10 minutes.

4)identify if the business has sufficient moats (protection against threats) such as strong branding like pepsi etc, reluctance of public to switch to other alternatives becasuse something is too establihsed etc (betfair) and so on and so forth.

since moats are subjective in nature and cannot be left to instincts, the FIVE BIG NUMBERS are utilised in order to establish a link between the moat and business

if i am not mistkaen the 5 numbers are

of most imprtance is

1)ROIC- return on investment capital MUST BE < 10 % FOR LAST 10 YEARS

2)sales growth rate must be more than 10 % for last 10 years each\

3)earnings per share growth rate as above

4)equity growth rate

5)free cash flow growth rate all as above musrt be 10% and above for last 10 years

once you have found such a stock which qualifies all of the above, you can be pretty sure this will perform well, such as keith's systems, while we cannot predict the future projected performance, we can be confident they will reflect past years performance in general.

now, the golden key

you must purchase the stock ONLY if you find value

in other terms, you must be confident your paying only 50 cents for smth wortht 1 dollar.

how woul you know?

1)according to the abobve calculatins, you can determine the estimated sticker price of the stock (real value)
compare your manual calcualtions with that of the experts analysis of the stocks currently. Take the smaller esrtimation just to be conservative. The samller of the two must BE AT LEAST 15 % GROWTH PER ANNUM, COMPOUNDED.

once you have determined this sticker price, you do not buy yet

look at the current price, estabnlish a MOS (margin of safety) = 50 % of the sticker price

only if current trading oprice is 50% of sticker price(real value) the nyou plunge into the share.

the concept of this is to get solidly placed stocks in a weak market, and at a value price too.

in the long run, if you were to buy business that costs 1 dollar at only 50 cents each, you cannot go wrong, and the ROI on this the author claims ranges between 15-25 % yearly, compounded, enough by the time you retire into the m,illioms from a 10000 bank.

i bought the book from www.ruleoneinvestor.com