Personal Finance: Fool around on the stock market

IN THIS column we will be looking at the markets each week and offering news and tips for those brave enough to buy individual shares. Many individual investors think the stock market is for the "experts" only. They think they have to leave it to the briefcase-wagging City boys. After all, what hope does little old me have competing against the might of the City and its billions of pounds?

Most people focus on the downside. It is true that you can lose money by investing in the stock market and you often hear anecdotal stories of investors losing their shirts. But, over the very long term, the stock market goes up. Since 1918 it has returned on average 12.2 per cent per annum. That is not stuff of headlines. It is boringly consistent, and over the long term Fools should be very happy to accept boredom at 12.2 per cent per annum.

To put that in some perspective, pounds 10,000 invested at 12.2 per cent per annum compounds to pounds 100,000 in 20 years' time. A nice little retirement nest egg.

If you've got a pension, you are already invested in the market. See, it wasn't that difficult was it? Next step is to consider taking the plunge and plumping for a cheap index-tracking fund. Also consider wrapping that in a PEP (soon to become an ISA) and investing a monthly amount in that fund. Your first steps to being a market expert are easier than you think. And then you may even want to buy some shares using your own judgement. So, to kick off ...

Who said January is the month for abstinence? Last week the FT-SE leading index of 100 shares shot above the psychological 6,000 mark. Buying by institutions, fund managers and (I dare say) individuals helped push the market forward.

The market is being propelled forward on a couple of fronts. The Bank of England chopped another 0.25 per cent off base interest rates on Thursday, in theory making shares more attractive than other forms of investment. Positive corporate news also helped push the market ever higher.

Did you get a mobile phone for Christmas? If you did, you weren't alone, as the UK's four operators connected a stunning 2.5 million new subscribers in the three-month period before Christmas. Vodafone, the market leader, now has almost 5 million UK subscribers and more than 20 per cent of the population are now mobile.

Forecasts of 50 per cent penetration by 2002 are not uncommon, so the growth party for these companies doesn't appear to coming to an end any time soon. The stock market has recognised this, and pushed the shares of Vodafone and fellow operator Orange to record highs. BT and Securicor own Cellnet and Cable & Wireless owns half of One2One and the share prices of those three companies didn't miss out on the action. This is a true growth industry and one in which UK companies lead the world.

Find out more on the Motley Fool website: www.fool.co.uk

ask the fool

Shareholders' salary

Q. What exactly is a dividend? - JO, Sussex

A. A dividend is like a salary paid to shareholders of a company. Twice a year the company takes a share of its profits and distributes them to its shareholders. Some companies like to pay larger dividends than others and some - mainly smaller, but some larger, too - don't pay any at all.

Microsoft, the mammoth American computer company, which is probably the most successful company of the last decade, does not pay any dividends at all. It thinks it can best reward shareholders by keeping hold of all the profits and investing them in the business to make it grow even further.

You can tell how much of a dividend a company pays by looking at its dividend yield. This is often listed in a newspaper's financial pages. It is the dividend, divided by the share price, expressed as a percentage. If it is 5 per cent and the share price is 100p, then you know that shareholders will be receiving 5p for every share they hold as a dividend that year.

Start your day with The Independent, sign up for daily news emails
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Evening Administrator

£8 per hour: Recruitment Genius: This Pension Specialist was established early...

Guru Careers: Executive Assistant / PA

£30 - 35k + Bonus & Benefits: Guru Careers: We are seeking an Executive Assist...

Ashdown Group: Graduate Application Support Analyst

£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

Reach Volunteering: External Finance Trustee Needed!

Voluntary post, reasonable expenses reimbursed: Reach Volunteering: Would you ...

Day In a Page

War with Isis: Iraq's government fights to win back Tikrit from militants - but then what?

Baghdad fights to win back Tikrit from Isis – but then what?

Patrick Cockburn reports from Kirkuk on a conflict which sectarianism has made intractable
Living with Alzheimer's: What is it really like to be diagnosed with early-onset dementia?

What is it like to live with Alzheimer's?

Depicting early-onset Alzheimer's, the film 'Still Alice' had a profound effect on Joy Watson, who lives with the illness. She tells Kate Hilpern how she's coped with the diagnosis
The Internet of Things: Meet the British salesman who gave real-world items a virtual life

Setting in motion the Internet of Things

British salesman Kevin Ashton gave real-world items a virtual life
Election 2015: Latest polling reveals Tories and Labour on course to win the same number of seats - with the SNP holding the balance of power

Election 2015: A dead heat between Mr Bean and Dick Dastardly!

Lord Ashcroft reveals latest polling – and which character voters associate with each leader
Audiences queue up for 'true stories told live' as cult competition The Moth goes global

Cult competition The Moth goes global

The non-profit 'slam storytelling' competition was founded in 1997 by the novelist George Dawes Green and has seen Malcolm Gladwell, Salman Rushdie and Molly Ringwald all take their turn at the mic
Pakistani women come out fighting: A hard-hitting play focuses on female Muslim boxers

Pakistani women come out fighting

Hard-hitting new play 'No Guts, No Heart, No Glory' focuses on female Muslim boxers
Leonora Carrington transcended her stolid background to become an avant garde star

Surreal deal: Leonora Carrington

The artist transcended her stolid background to become an avant garde star
LGBT History Month: Pupils discuss topics from Sappho to same-sex marriage

Education: LGBT History Month

Pupils have been discussing topics from Sappho to same-sex marriage
11 best gel eyeliners

Go bold this season: 11 best gel eyeliners

Use an ink pot eyeliner to go bold on the eyes with this season's feline flicked winged liner
Cricket World Cup 2015: Tournament runs riot to make the event more hit than miss...

Cricket World Cup runs riot to make the event more hit than miss...

The tournament has reached its halfway mark and scores of 300 and amazing catches abound. One thing never changes, though – everyone loves beating England
Katarina Johnson-Thompson: Heptathlete ready to jump at first major title

Katarina Johnson-Thompson: Ready to jump at first major title

After her 2014 was ruined by injury, 21-year-old Briton is leading pentathlete going into this week’s European Indoors. Now she intends to turn form into gold
Syrian conflict is the world's first 'climate change war', say scientists, but it won't be the last one

Climate change key in Syrian conflict

And it will trigger more war in future
How I outwitted the Gestapo

How I outwitted the Gestapo

My life as a Jew in wartime Berlin
The nation's favourite animal revealed

The nation's favourite animal revealed

Women like cuddly creatures whilst men like creepy-crawlies
Is this the way to get young people to vote?

Getting young people to vote

From #VOTESELFISH to Bite the Ballot