"It's a good idea to invest directly on the stock market," he adds, "as you can identify much better with the companies that you put your money into. For example, my 10-year-old son owns some BP shares. This means he will only let us get petrol from a BP garage. This gives much more meaning to equity investment than buying something like an M&G fund."
It is probably easiest to begin by investing in really large UK companies, the so-called "blue chips". These may not be the most exciting but, over time, they tend to produce solid returns. Blue chips are also much less likely to go bust. "Look at companies you know something about, check their results and what people are saying about them," advises Mr Read. "Go for ones that are financially sound and promise a long rise in earnings and income."
It is wise to invest in a number of companies to spread your risk. With a few thousand pounds it doesn't take long to create your own portfolio of seven or eight shares.
There is plenty of advice on how to invest and which shares will suit your investment aims. First, there is the media. Read the City pages of newspapers and specialist magazines. Contact Proshare, which promotes private shareholding and will send you helpful fact sheets.
Then there are professional advisers. There are several hundred stockbrokers around the country who will buy and sell on your behalf, giving you as much, or little, advice as you feel you need. Apcims can give you a list of the brokers in your area, as well as information on the stock market.
If you have a sizeable amount, usually pounds 50,000 (more in London), a broker can offer a discretionary service. Having discussed your investment goals, he will buy and sell the shares that are thought appropriate, giving you a report at least every six months. Fees are around 1 per cent a year.
A cheaper option is to decide on the shares you want to buy, getting as much advice as you want from the broker on particular companies and the state of the market. The firm charges commission on any deals, usually around 1 per cent with a minimum charge of pounds 25 or pounds 30. On top of this, all share purchases are subject to 0.5 per cent stamp duty.
If you feel confident about what you're doing, you can deal cheaply over the phone. You simply tell the operator which shares to buy and sell. A pounds 3,000 share deal made in one of NatWest's branches would cost pounds 45 in broking charges. Make the same transaction by phone and you'll pay just pounds 30.
Then there are specialist execution-only services which will just buy and sell on your behalf, usually costing less than pounds 30 for small deals (see table).
You can now do much of your research, look after your portfolio and even trade on the internet. Infotrade, for example, provides links to several execution-only stockbrokers who will deal online very cheaply. And a number of brokers have their own internet dealing services.
If you haven't used your PEP allowance this year, you can create your own self-select PEP, putting up to pounds 6,000 into your chosen companies and pounds 3,000 into a single-company PEP, free of tax.
Or you could get together with friends and create your own share club (see our feature on page 22). There are now around 3,000 of these clubs in the UK, whose members typically contribute between pounds 20 and pounds 50 a month. Proshare offers information on setting up a share club.
Contact: Proshare, 0171-394 5200; Apcims, 0171-247 7080.
Share dealing on the phone
Basic low-cost deals under pounds 2,000. No advice given
Charles Schwab Market Min pounds 20, max pounds 75; 1% on first
Maker (0121-200 7788) pounds 2,500 + pounds 5 to pounds 30 a quarter
Dealwise (Skipton BS) Min pounds 15; 0.75% on first
(0113-244 4095) pounds 4,000. Life membership pounds 5
Hargreaves Lansdown Min pounds 15; 1% on first pounds 10,000
Investorlink (0800 289600) pounds 15 up to pounds 500, pounds 17 up to
pounds 1,700, then 1% up to pounds 5,000
NatWest Stockbrokers Min pounds 20, 1% on first pounds 4,000
Saga Share Direct (over 50s) Min pounds 12.50, max pounds 27.50 flat- (0800 214834) rate scale up to pounds 10,000
Share Centre (0800 800008) 1%, min pounds 2.50, for FT-SE 100,
or 1.25%, min pounds 2.50 for others
Sharemarket (0161-236 6009) pounds 9 to pounds 1,000 then 0.9%, max pounds 45
Stocktrade (0131-529 0101) 0.75%, min pounds 15, max pounds 60
Yorkshire (01274 736736) Min pounds 14.50, 1% on first pounds 2,000
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