Replies to post #275 on A.I.M. "In Depth" Q&A (AIMQ&A)

[Toofuzzy]

>>>>I only have £300 and I can't excatly get much more now but am I allowed to buy 10-20 stocks of a company with £4.20 per stock. Would that be a good start ?<<<<

You need to have an emergency cash account. You don't EVER want to HAVE to sell a security.
The cash account should be enough to live on for six months. If you save 10% of your salary, it will take you FIVE YEARS to save that! SAVE MORE It is the only way to get ahead. If you ever work overtime, don't spend it! Pretend it doesn't exist! If you get used to spending it, when they take it away you are used to having it to spend and will be screwed.

Sounds like you are in England

When you do start

1) Use Exchange Traded Funds (use this time to learn about them)
2) Your first fund should be a LARGE VALUE FUND based in your home country
In the United States that would be an S+P 500 Value Fund for me. Not sure what is available to you.
3)7000 lbs stock and 7000 lbs cash to start AIMing (about $10,000 each US Dollars ) unless you use LD-AIM In which case you can start with 3000 lbs stock and 7000 lbs cash (you pretend you are AIMing the 10,000 lbs stock )

Not LOSING money is just as important as making it.

Toofuzzy

[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.