Getting Down to It
You’ll need some cash to get started
You will need some ready cash. This must be your own dosh. Don’t even think of borrowing money to do shares.
Mark me well, if you can’t afford to lose it all, wait until you can. If you don’t have the readies ready, save up. Go without a holiday abroad, a new wide-screen telly, a conservatory, new suit or a bigger car. Buy your clothes from charity shops. I still do. Where else can you buy £400 shoes for a fiver like the ones I’m wearing now?
The only time I borrowed money to buy shares ended in disaster. The overall market was flying and my bank, RBS, was happy to make £20,000 available for any new opportunities that came up. The only snag is that I had to lodge many of my existing shares with the bank as security. Of course, the market fell like a conker in September the minute I did that. And I couldn’t get hold of my shares in time to sell them as the bear market took an even stronger hold.
Only trade with your own money, and money you can afford to lose!
Choosing a broker
It’s not possible to contact a person with shares to sell or to find a buyer for yours directly, so you need to go via a broker. You could plump for an advisory broker, one who tells you what companies to buy into and when to sell the shares. But if you do that, you don’t need this book, because you will lose the complete freedom to pick and choose yourself. How’s that for tedium!
So pick an execution-only, internet broker. A quick Google will turn up loads of them. There’s Barclays, Halifax, Hargreaves Lansdown, etc., etc. I’ll tell you the one I use. It’s called Traders Own
(www.tradersown.co.uk) and you earn a share in the company each time you buy or sell. At the moment this is not much of an incentive, but it could be more lucrative later on if Traders Own, which is presently a modest setup, suddenly takes off.
It’s easy to set up an account with an internet broker, but check the terms and conditions carefully before you do.
Look for brokers who do not levy management charges. Also avoid those with inactivity fees. Yes, it’s pretty awful, but some brokers charge extra if you stop trading for a while. They take the cash from your account. You don’t want that. Also check that the broker is registered with the FCA (Financial Conduct Authority), Britain’s financial governing body. Just because it says so on their website, it doesn’t necessarily mean it’s true.
I also advise finding a broker who does not charge extra if you phone in with your trade rather than entering it online. There are some occasions when your connection will be down or you don’t have your mobile handy to buy or sell your shares online.
And one more thing, I have found one or two brokers keep you waiting till the park bench dries before they answer the phone. They’re obviously being miserly with staff. Such a firm should be treated with the contempt with which it treats its customers – and avoided. You should try a broker out by making an exploratory call before you set up an account. The last thing you want when trying to sell a share fast is to be kept hanging about. It’s bad for blood pressure, but worse for your pocket.
Traders Own does not have management or activity fees and it has always answered my phone calls with the speed of light, even at busy periods. Some other brokers I’ve tried have fallen down on all these counts.
A suggestion for your first trades
Once you’ve chosen a broker and set-up an account, with a couple of clicks you’ll have transferred your cash into your account. Why not start with £1000?
Next, my suggestion for your first trades would be to split your starting cash between three shares. Perhaps put £300 each into two companies of your choice and £400 into a third firm.
The first three hopefuls I bought in this way were Southern Television, Marks & Spencer and HBSC. Marks & Sparks rose by 50%, but it took a number of years. The bank rose consistently by about four times, until it was hit by the big 2008 credit crunch. And the television company was soon involved in a takeover story which turned my £300 into £5000. I told you beginners can be lucky.
The speed at which shares can be bought might rattle you a bit. It’s very swift. Once you have clicked to buy a share, the website will give you a countdown, allowing time to change your mind. If you don’t confirm the trade with another click during these 10 or 20 seconds, the sale is aborted.
The countdown is more useful than you might think. I’ve occasionally drawn back at this very advanced stage. It’s funny how late some alarm bells can ring.
Don’t let ’em get you in the spread
You buy shares at a little bit dearer than the sell price – to give the middlemen a commission. This gap between buy and sell prices is known as the spread.
Owing to the spread, you will immediately see a loss in the profit-and-loss column when you first buy a share. This is a skin-prickly time. You automatically think the shares have lost value in a flash. You’ll believe you’ve made a monumental mistake and you’re already on the road to ruin. But this isn’t so.
The share values shown in your account have simply been adjusted for the initial costs of purchase – the spread, the broker’s cut and the stamp duty. If you’ve bought well, following the lessons in this book, this early ‘loss’ will soon be ironed out.
The gap can be negligible in the case of huge companies with household names, such as banks or oil giants. The table below gives some examples of tiny spreads.
| Company | Spread |
| Marks & Spencer (retail) | 0.02% |
| BT (communications) | 0.02% |
| HSBC (banking) | 0.03% |
| GlaxoSmithKline (pharmaceuticals) | 0.03% |
| Lloyds Group (banking) | 0.03% |
| Barclays (banking) | 0.04% |
| BP (oil) | 0.05% |
| RBS (banking) | 0.05% |
| Royal Dutch Shell (oil) | 0.05% |
Yet the spread can be horrendous, especially for some penny share outfits. Here are some companies whose spreads make them unattractive, because you would need a massive share leap just to clear your buying costs and leave you at break-even. This list is just a snapshot I gathered at the time of writing, as spreads can change dramatically on a daily basis.
| Company | Spread |
| Cambria Africa (equity investment) | 63% |
| Regal Petroleum (oil) | 58% |
| Helius Energy (energy) | 57% |
| Pires (real estate investment) | 50% |
| Resource Holdings (media) | 37% |
| Physiomics (healthcare equipment) | 30% |
| TXO (oil producer) | 2... |
