Stock Market Investments

there are no workable get rich quick schemes

A naive lady named Deanne Forrest lost all her savings, and some money she borrowed, (a total of £12,500 in all), by dabbling in on-line stock market trading.  Specifically Deanne got involved with something called binary options trading, which is as risky as betting all your worldly goods on one spin of the roulette wheel in a Las Vegas casino.

Investing should be more like watching paint dry or watching grass grow.  If you want excitement, take $800 and go to Las Vegas.  ~  Paul Samuelson

Wall StreetLet me make one thing abundantly clear, this kind of on-line trading is not dealing on the stock market in any sensible way, this is gambling, pure and simple.  It’s even called spread betting, and spread betting is a very fast way for you to lose a hell heck of a lot of money.  It’s not investing, it’s just high-risk gambling, and has as much to do with real finance as on-line dating has to do with real relationships.

Investing in the stock market is something totally different from these fast, on-line, get rich quick scams.

The stock market is a place, (real or virtual), where the prices of stocks and shares of major companies are quoted, and those stocks and shares can be bought and sold at those quoted prices.  The major shares are also grouped to give an indication of the overall strength of the market; for example the FTSE 100, in London, and the Dow Jones Industrial Average, on Wall Street.

In general, one buys and sells stocks and shares through a broker, either by telephone, or increasingly these days through an on-line service.  There are specialist stock brokers, but most people are most likely to use their bank to buy and sell shares.  If you want to invest in your national stock market, check with your bank first.  I can almost guarantee they will offer stock market services.

If it’s not a get rich quick scheme, why would you want to invest in the stock market?

In general, the stock market is an indicator of the overall health of a country’s economy.  If the overall economy of the USA is doing well, then Wall Street will generally do well.  If the overall economy of the United Kingdom is doing well, then the City of London will generally do well.  But, every now and again the markets will go crazy, for no readily apparent reason.

Every once in a while the market does something so stupid it takes your breath away.  ~  Jim Cramer

There are two basic ways of investing in the stock market;

  1. You can buy into a unit investment trust, (however it’s named or described).  This allows you to invest in a group of shares, thereby spreading your risk.  Unit trusts are the way most people get involved with the stock markets.  The main downside of a unit trust is that your profits can get eaten up by the trust manager’s fees and charges.
  2. You can buy the shares of specific companies in your own right.

You also make money through stock market investments in two ways.

  1. 737-300wAn increase in the market price of the shares you have bought.  For example, if you had bought shares in The Boeing Company on February 12th 2016, you would have paid $105.12 per share.  If you’d sold those same shares on December 16th 2016 you would have received $154.50 per share, a handy 50% profit.  But remember,the price of shares can go down as well as up.
  2. Receipt of regular dividends from the company.  These dividends represent your share of the company’s earnings.  For example, shares in Royal Dutch Shell, an oil and gas company, had a yield of 6.05% in the last year.  It’s easy to find out which companies have paid the most back to their shareholders.  The Boeing dividend yield is currently 2.82%.

If you buy into a unit trust, then the fund manager takes all the income from the markets they invest in, and then adds the profits to the value of your units.

Historically, investments in the stock markets have outperformed all other liquid investments, and all other personal investments with the exception of real estate, (property).  However, the value of all assets can fall as well as rise.  Many ‘expert pundits‘ (there’s an oxymoron for you), are predicting an imminent crash in the stock markets.  These things have a nasty habit of becoming self-fulfilling prophecies.

Should you want to invest in the stock market, then your first choice is whether to buy into a unit trust, or buy the shares of particular companies for yourself ~ cutting out the middle-man.  These choices are not necessarily mutually exclusive.

It’s very easy to find information on investment trusts ~ just type something like best performing unit trusts into your search engine.  Whatever you do, don’t believe most of what the sales teams at these companies tell you.

Choosing companies whose shares you’re going to buy for yourself is more difficult, but you could try typing something like best performing US stocks into your search engine.  If you are buying shares in particular companies in your own right, don’t put all your eggs in one basket.  Spread your investment among different companies and different market sectors.

p1030876Stock market investments should easily out-perform most other ways of saving and investing, with the exception of buying property, (real estate).  The caveats are; choose wisely, don’t put all your eggs in one basket, never borrow money to invest, pay off all your debts before investing in the stock market, and stock market investments are for the long term.  Expect to hold your shares for years rather than weeks or months.

The stock market is not a get rich quick scheme, never was, and never will be, no matter what some silver-tongued salesperson might have you believe.  A good rule is, don’t believe sales people, some of them tell lies are economical with the truth.

~

christmas-cardsthese opinions are mine and mine alone

jack collier

jackcollier7@talktalk.net

Advertisements
%d bloggers like this: