Ever wondered how the stock market actually works? And whether a recession is a good time to dip your toe into its swirling waters?
Surely with certain companies’ share prices plunging off the graph now would be a good time to Buy Buy Buy!
I donned my red braces and pin stripes and trotted off to Farringdon in The City to chat to financial advisor Amanda Davidson, a non-executive director of the Financial Services Authority and a director of wealth management firm Baigre Davies (wealth management – doesn’t that have a lovely ring to it!) . Amanda, not surprisingly, is evangelical when it comes to putting money aside for a rainy day, and says shares can be an enjoyable and interesting way to do that, so long as you don’t put in money you can’t afford to tuck away.
She pointed out that despite the recession the FTSE (Financial Times Stock Exchange)is at a reasonable level and not depressed. “With shares it is a question of time not timing,” she said.” Trying to second guess a market rise can mean that rises are missed so it’s best to get on with the investment when it suits you!”
Jumping around buying and selling might be fun, but you are probably likely to do better by sticking with an investment for the long haul. Shares, as we know, go up and down, but the longer you have them the greater the odds are that you make money rather than lose it.
So how do you choose where to put your money? Amanda’s advice is to be wary of committing to one or two companies, at least as a beginner, especially as, if you want to buy and sell your profits could be eaten up in the dealing costs if you are investing relatively small amounts of money. She advises small investors to start off with a unit trust, (a mix of different shares) which spreads your risk out by stopping you from putting all your eggs in one basket.
“That said equity investment (buying shares in on particular company) is a good idea over the longer term as real growth can be achieved.” she said, with the proviso that you should never put your “emergency short term money” into shares.
So if you’d like to get into the stock market start reading the financial pages and begin to get a picture of which companies are going up and which are going down. Alternatively you can have all the fun of the fair without losing your shirt by opening up a Fantasy Share Trading Account with the Halifax. (halifax.co.uk/sharedealing/gettingstarted/fantasytrader). But be warned -you’ll get hooked!
Scary statistic of the day:
According to the Office of National Statistics women are bearing the brunt of the UK’s job losses – unemployment rose for women by 46,000 for women last year but fell by 103,000 for men.
Deal of the day:
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