How to buy stocks?
The coronavirus has had and continues to have a strong impact on our daily lives. Confinement, health and safety measures, barrier gestures, remote work, new ways of shopping, communicating… and living !
This is a companion discussion topic for the original entry at https://www.bestbrokers.co.uk/blog/2020/05/19/how-to-buy-stocks/
How to buy stocks? Here’s a quick summary of some key points to follow on from Carlo’s advice.
Do your homework first - don’t jump at the first tempting opportunity - as the saying goes “A fool and his money are soon parted”!
Never ever invest in the stock exchange money which you cannot afford to lose. Money required for a pension is money which you cannot afford to lose.
Maybe even consider trying out one or two stock trading platforms - quite a few have ‘free’ demo areas, just be sure to read all the small print!
Don’t track the FTSE 100 - pointless, you’d have gone net nowhere over last 15-20 years. Track FTSE 250 is a better bet and Nasdaq and a gold tracker that can act as a defensive hedge.
However, for more sophisticated investors high quality active managed funds do outperform trackers in nearly every market except US equity. The key to that statement is ‘high quality’ active funds. Most amateur investors only see the huge multi billion pound funds that charge 1.2% pa and basically track the index anyway.
If things return to normality (and I still feel there is a way to go for that and the real crash is yet to come!) and you want to make a good return invest in stocks from profitable businesses that are small to mid, but most importantly are not traded in ETF’s there are a lot in the UK.
For complete beginners looking for broad exposure to stocks, passive investing is a great place to start.
Passive investing is also a good lifelong strategy to pursue - think tortoise and hair here! Index funds minimise risk of directly investing in a company and almost always produce better returns than professionally or personally picked stocks.