investing

Stock  market  

101
Part 3
Before starting to invest in stocks and
shares it is as well to decide why and
how? The right strategy can help investors
through thick and thin because no one said
stock market investing was an easy ride.

I
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why  the  stock  market  exists,  what   VKDUHSULFHULVHV a  few  days,  hours  or  even  minutes  before   LQ%35R\DO%DQNRI6FRWODQG/OR\GV
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about  researching  stocks  and  how  to  get   %XWUHPHPEHU“caveat  emptor”,  the   There  have  also  been  plenty  of  people   NQRZWKLVRQO\WRRZHOO
to  grips  with  some  of  the  key  terms  and   PRWWRRIWKH/RQGRQ6WRFN([FKDQJH ZKRKDYHORVWPRQH\WRR'D\WUDGLQJ
FRQFHSWV%XWZK\LQYHVWDWDOO":KDWLV ±³WKHEX\HUEHZDUH´1HLWKHUWKH is  a  strategy  requiring  great  dedication   Investing  for  income  is  a  valid  strategy  
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A  key  reason  that  investors  have   investment  strategy  to  use  to  lower  the   PD\EHIRU\RXRULWPD\QRW way  to  do  this  is  to  buy  a  tracker  fund,  
returned  to  the  stock  market  after   ULVNDQGRULQFUHDVHWKHUHWXUQ one  that  invests  in  stocks  within  a  
the  crash  of  2008  is  that  leaving  their   INVESTING FOR INCOME particular  stock  market  index  such  as  
money  with  a  bank  or  a  building  society   DAY TRADER Investors  in  search  of  a  steady  stream  of   WKH)76(RUWKH)76($OO6KDUH
\LHOGVWKHPQRWKLQJ,QIDFWZRUVHWKDQ For  some,  stock  market  investing  is  a   income  and  with  less  of  an  appetite  for   A  good,  cheap  way  of  doing  this  is  to  
nothing,  because  even  the  best  savings   VRUWRIVSRUW7KH\HQJDJHLQLWZLWKJUHDW trading  may  choose  to  invest  in  stocks   buy  shares  in  an  exchange  traded  fund  
rates  at  around  3%  produce  a  loss  in   intensity,  prepared  for  the  thrills  and   that  pay  a  steady  half  yearly  or  quarterly   RU(7)7KHVHDUHTXRWHGRQVWRFN
UHDOWHUPVZLWKLQÀDWLRQUXQQLQJDWD VSLOOVRIÀXFWXDWLQJSULFHV6RPHWLPHV GLYLGHQG7KH\DUHQRWNHSWDZDNHDW exchanges  just  like  the  shares  that  these  
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stocks  that  produce  dividend  income  at   are  plenty  of  people  who  claim  to  have   move  against  them  but  they  also  need   WKHSURVSHFWXVIRUWKH(7)\RXDUH
more  than  4%  looks  attractive  and  they   made  money  buying  and  selling  shares   to  be  aware  that  dividends  can  be  cut  or   considering  investing  in,  to  make  sure  

38 market
the market
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 of  its  terms  and  whether  it  provides  
income  or  whether  the  dividends  on  
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can  be  bought  and  sold  at  any  time  
the  market  is  open  and  apart  from  the  
dealing  costs,  there  are  no  other  fees  to  
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They  are  valued  much  less  frequently   “FOR SOME, STOCK MARKET INVESTING
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IS A SORT OF SPORT. THEY ENGAGE IN
DIY OR EMPLOYING IT WITH GREAT INTENSITY, PREPARED
A MANAGER
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FOR THE THRILLS AND SPILLS OF
funds  is  an  important  decision  to  take   FLUCTUATING PRICES.”
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it  might  not  be  better  to  hire  someone   TAX VWRFNVDQGVKDUHV,6$DUUDQJHPHQWV RSHQLQJD6,33EXWMXVWPDNHVXUH\RX
HOVHWRPDQDJH\RXUPRQH\IRU\RX It  is  also  worth  spending  time  thinking   *RWRDFRPSDULVRQZHEVLWHVXFKDV read  the  terms  and  conditions  carefully  
about  how  to  avoid  paying  tax  on  your   ZZZPRQH\VDYLQJH[SHUWFRPRUZZZ so  you  understand  the  restrictions  they  
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advisors  (IFAs),  banks  and  fund   most  people  will  be  investing  income  on   homework  on  terms,  conditions  and   RIIHU7KHLQYHVWPHQWRSWLRQVRIEX\LQJ
managers  offer  such  services  in  one  form   which  they  have  already  paid  income  tax   FRVWV7KHJUHDWWKLQJDERXW,6$VLVWKDW LQGLYLGXDOVWRFNVIXQGV(7)VDQG
RUDQRWKHU6WRFNEURNHUVLQSDUWLFXODU DQGQDWLRQDOLQVXUDQFHFRQWULEXWLRQV you  (and  also  your  partner)  get  a  new   discretionary  investment  services  are  
PD\RIIHU³GLVFUHWLRQDU\´VHUYLFHV,I 6RZKDWDUHWKHRSWLRQVDQGDOORZDQFHV" allowance  every  year  and  they  save  you   XVXDOO\DYDLODEOHWR6,33LQYHVWRUV
they  are  “execution  only”  they  merely   SD\LQJLQFRPHWD[RU&*7RQ\RXUSUR¿WV
carry  out  instructions  that  you  give  them,   Firstly,  remember  that  each  individual   Above  all,  once  you  have  digested  the  
buying,  selling  and  holding  the  stock  for   KDVDFDSLWDOJDLQVWD[&*7DOORZDQFH /DVWO\FRQVLGHUD6,336HOILQYHVWHG possible  choices,  checked  the  prices  and  
\RX$GLVFUHWLRQDU\VHUYLFHLVRQHZKHUH RI…HDFK\HDU6RLI\RXUJDLQV personal  pensions  insulate  you  from   charges  and  considered  your  strategy,  
you  agree  with  the  broker  his  terms  of   from  buying  and  selling  shares  are  lower   WD[HVDQGDOVREHQH¿WIURPUHFHLYLQJ WDNH\RXUWLPH<HV\RXPD\PLVV
reference  –  how  much  discretion  you   WKDQWKLV¿JXUHLQDQ\WD[\HDUWKHQ\RX DFDVKWD[FUHGLWRIRIWKHDPRXQW some  investment  opportunities  but  the  
ZDQWKLPRUKHUWRXVHDQGWKH\UHSRUW FDQDYRLGSD\LQJ&*7 \RXLQYHVW,I\RXDUHDKLJKHUUDWH chances  are  you  will  be  able  to  seize  
back  to  you  periodically  on  the  results   taxpayer  you  will  also  get  an  additional   RWKHUVDVWKH\FRPHDORQJ6RPHRIWKH
they  have  achieved  from  investing  your   6WRFNVDQGVKDUHV,6$VDUHDVHFRQG WD[EUHDNYLD\RXUWD[UHWXUQ most  successful  investors,  such  as  world  
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WKHLUFKDUJHVDQGZKHQWKH\DUHSD\DEOH LV…ZKLFKFDQEHLQYHVWHGLQD 8QOLNH,6$VKRZHYHUDOWKRXJK\RXFDQ and  invest  long  term  in  companies  they  
Inevitably  there  are  able  brokers  and  not   FDVK,6$XSWR…ZLWKWKHEDODQFH WUDGHLQDQGRXWRIVWRFNVZLWKLQD6,33 understand  and  which  have  scope  for  
VRDEOHRQHV,WLVDVZHOOWRUHVHDUFKWKHP LQVWRFNVDQGVKDUHV$OWHUQDWLYHO\WKH you  cannot  take  your  money  out  until   JURZWKRYHUWKHORQJWHUP m

in  advance  by  searching  the  web,  speaking   entire  allowance  can  be  invested  in  stocks   \RXUHWLUH7KHUHDUHDOVRPDQDJHPHQW
to  friends  and  reading  their  prospectuses   DQGVKDUHV$JDLQVWRFNEURNHUVEDQNV and  dealing  charges  to  take  into  
DQGUHSRUWV and  IFAs  will  all  advise  you  or  offer  you   DFFRXQW7KHUHLVDORWWKDWLVJRRGDERXW By Richard Willsher

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