Money: Safety first tip for a white knuckle ride. Don't panic!
David Prosser assesses the pros and cons of picking winners rather than paying someone else to do it
However, investors would be wrong to ignore equity investment simply because it does not always offer the smoothest ride. Not least, this is because over the longer term, shares have performed much better than other types of investments. In fact, this is more true the longer the period that you look at.
Unfortunately, if you are investing over the shorter term there is more of a danger that your money will not do so well. But leave your money in equities for five years or more and you stand a good chance of making money.
Of course, this is not to say that all investors should pile into shares today. Clearly, many will feel happier investing through a unit or investment trust, funds designed to limit risk by investing in lots of different shares.
However, investing on the stock market yourself, rather than delegating the job to an investment fund manager, does have its advantages.
Richard Hunter, head of dealing at NatWest Stockbrokers, which claims to do more share deals on behalf of small investors than any other broker in the United Kingdom, says a unit trust can be so widely spread that you get little benefit from individual star-performing shares.
Another reason for buying shares directly rather than through a fund is that many companies offer their individual shareholders attractive perks such as discounts on goods and services, something that investors who hold shares through unit or investment trusts do not get.
P & O, the shipping company, for example, is very popular with small investors because it gives its shareholders very generous discounts on cross-channel ferry crossings.
While it is wrong to invest in a particular share simply to benefit from a perk, discounts and special deals are a bonus if you think buying the shares makes sense from an investment point of view.
In addition, many investors like buying shares because it is fun to sift the winners from the losers.
The buzz of occasionally beating stock market professionals at their own game often makes share dealing worthwhile, even before you start counting your profits.
Do not presume that simply because you have no idea how to read a balance sheet, stock market investment is not for you. Justin Urquhart-Stewart, a director at Barclays Stockbrokers, says: "An awful lot of people have a great deal of knowledge of companies, even though they're not analysts".
He recommends that an investor starts by studying companies of which he or she has direct experience. This might be the company for which you work, for example. Or it might include companies that run shops where you are a regular customer.
Equally, many customers of the building societies that converted to banks earlier this year, and received free shares at the time, might have a feel for how well their investments are likely to do simply by virtue of being customers of the new banks. It is often the customers who first notice when the way in which a company is run takes a turn for the worst.
Of course, it is not sensible to invest in the shares of Next, say, just because you were very pleased with the last pair of shoes you bought there. Fortunately, however, there are plenty of sources of advice to which you can turn to get some help with understanding the finances and prospects of particular companies.
Reading the coverage of the stock market and company finances in the Independent and the Independent on Sunday will give you much information. There are also several specialist stock market publications to read. Scrutinising the media will not turn you into a savvy City trader overnight, but it is an excellent starting point.
In addition, many stockbrokers make a living from giving advice to investors who want a little bit of help with their share selections. You do not have to pay the earth to benefit from this advice. Most brokers simply charge slightly higher share dealing commissions to investors who want advice. Alternatively, one broker, The ShareCentre, has a premium rate telephone line that you can call to check whether the experts think your latest hot share tip is such a good idea.
The key to successful stock market investment is to think long term. As long as you do not risk money that you cannot afford to lose and as long as you do not panic the moment things get a little dicey, you will benefit from buying shares. After all, remember that despite the October 1987 stock market crash, share prices ended that year higher than they began.
And as Richard Hunter, of NatWest, says: "If you've taken the quantum leap and decided to invest in shares, why not go the whole hog and do it directly?"
21 November 2014 06:44 PM
Your children have it all, your partner gets nothing
21 November 2014 07:12 PM
Halfords is gearing up for Christmas
21 November 2014 06:54 PM
Fields of dreams: venture capital trusts help young companies to grow, potentially delivering big returns for investors
21 November 2014 06:32 PM
There are many reasons for people to turn to high-cost credit, but being turned down by their banks for a loan is one
21 November 2014 07:15 PM
The £150 incentive from Yorkshire and Clydesdale runs from now until 28 February next year, but you must use the official Current Account Switching Service (CASS) and close your existing account to qualify
14 November 2014 04:42 PM
For the rising number of homeless women, the struggle is compounded by health problems and by losing their children
14 November 2014 05:37 PM
Research from Sainsbury’s Bank Credit Cards this week revealed that 15 per cent of people making a large purchase on their plastic didn’t use one with 0 per cent interest on purchases
14 November 2014 05:23 PM
Last week was hangover time, when Stock Spirits, a vodka producer, distilled a profit warning that sent its shares crashing more than 25 per cent
14 November 2014 05:17 PM
Investment melting pot: the price of gold may have fallen but Artemis Strategic Assets believes its value cannot be debased
14 November 2014 05:05 PM
Interest rates are currently as low as 0.1 per cent
14 November 2014 05:01 PM
The energy watchdog Ofgem has slammed Scottish Power, while Citizens Advice reports a string of complaints about it
14 November 2014 04:57 PM
John Lush from Hampshire got into debt with payday lenders and had the help of a debt management adviser to clear the £20,000 he owed
08 November 2014 12:00 AM
01 November 2014 12:00 AM
01 November 2014 12:00 AM
10 tips for taking out a personal loan
Simon Read: There may be trouble ahead for cohabiting couples who don’t make a will
Money Insider: Would £150 make you switch banks?
Gold-plated pensions – the key to retirement freedom?
Bargain Hunter: Find the deals that have real value beneath the Black Friday hype
- 1 'Kidnapped boy may have been abused and murdered by VIP paedophile ring,' say police
- 2 Ridley Scott on Exodus: Gods and Kings casting: 'I'm not going to get it financed if my lead actor is Mohammad so-and-so from such-and-such'
- 3 Girl, 7, gets Tesco to remove 'stupid' sign suggesting superheroes are 'for boys'
- 4 This letter from a reader explains why women can’t play football
- 5 'You should come to my house and eat cheeses with me': 4-year-old sends adorable love letter to girl at school
Rochester by-election: Ukip gains second MP as Tory defector Mark Reckless holds seat
Ukip says babies born to immigrants in the UK should be classed as migrants – which would include Nigel Farage’s own children
'Beast of Bolsover' Dennis Skinner takes Ukip MP Mark Reckless to task moments after he is sworn in
The young are the new poor: Sharp increase in number of under-25s living in poverty, while over-65s are better off than ever
Tamir Rice: 12-year-old boy playing with fake gun dies after being shot by Ohio police
Exclusive: UK approved £7m Israeli arms sales in six months before Gaza conflict
iJobs Money & Business
£16000 - £18000 per annum: Langley James : IT Support; Helpdesk, VMware; Manch...
£35000 - £450000 per annum + £3k car, £70k ote: h2 Recruit Ltd: Do you want to...
£Attractive Package: Citifocus Ltd: Prestigious financial institution seeks to...
£Negotiable: Citifocus Ltd: Experienced operational risk professional with ban...
Day In a Page
A deceptively spacious, beautifully presented Georgian home with 3000sq ft of living space and five reception rooms
A five-bedroom Victorian home with four receptions, superb gardens and paddock in Pembury
An eight-bedroom house on the south side of the The Green with cinema, wine cellars and summer house
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
A three-bedroom, 15th-century cottage with original features in the picturesque village of Sissinghurst
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens