A.I.M. "In Depth" Q&A

[ls7550]

Hi Chiffle,

Investing £300 in stocks may involve incurring a £12.50 cost to buy (brokers fee), on top of which you'll have to pay 0.5% stamp duty. The market maker will also take a slice out of that (difference between the bid and ask prices). 5% of your money will disappear in just having bought some stocks. That's a hefty overhead. If later you need to sell those shares the round trip might have cost you 10% of your savings assuming the share price remained unchanged, worse if the share price had declined.

I'd be inclined to build your savings in a safe cash deposit account for the time being. You're young and will likely need some cash to hand relatively soon (next few years) and stocks are really only suitable for longer term investments (10 years+).

Gaining experience with stocks however is a valuable lesson, so perhaps rather than actually trading with real money, try paper trading (pretend money) for a while, looking into the actual costs involved, reading company reports etc. - which will stand you in good stead for later years when you perhaps have more surplus amounts that you don't mind locking up for the longer term.

You're definitely on the right track by getting into a savings habit from a young age. Over time I suspect you'll do well.

Best. Clive.