A Virgin Trader

Now before I start I know it sounds as if I am about to tell you how to tie your shoelaces but, as a virgin trader, it is important to do it properly from the off.

So go and get a cup of coffee and a biscuit – I like those ginger ones best (oops going off on a tangent already) and I will go through the process as I see it.

Buying shares online

As I have mentioned in previous posts, if you’re in a mind to do your own research which, as far I can see is half the fun of investing (the other half is a no brainer – making money of course), the first place to start is to find an online (execution only) broker. There are lots out there and all are much of a muchness. By ‘execution-only’ I mean that the broker will simply take your order and execute it for you, no advice on what to buy or when, no hand holding; you are on your own.

There are a few things to consider when deciding on a broker such as; the quality of the site, the range of markets available – UK and foreign, the speed at which your order is completed etc but at the end of the day it basically comes down to cost.

Most online brokers offer a basic share dealing account as well as DIY or ’self select’ trading ISA’s. You can usually set up an account online followed up by the usual drill – digging out those utility bills that are always missing and posting them off. Once that’s sorted you’re on your way.

Once your account is set up you can begin to trade shares and the process is very easy (too easy in fact) so be very careful.

First;

• Type in the name of the company you want to buy shares in or, if you know it, the code or symbol, for example; “RBS” for Royal Bank, of Scotland, or “LLOY” for Lloyds Bank.
• Select how many shares you want to buy, taking note of the bid and offer prices:

Bid price – the price you can sell your shares at.

Offer price – the price you can buy the shares at.

Spread – the difference between the bid and offer price.

Now this is the first very important lesson.  The spread is the first of several costs involved in trading shares. There is basically a cost to buying a share and a cost to selling at share and these costs can be significant.

• Select how many shares you want to purchase or sell then hit the buy/sell, confirm or next button depending on the website. You are then presented with a price followed by a 15 second countdown box to accept the price/transaction.
• Press the accept button and it is a done deal, you are now the owner o those shares.

See what I mean by ‘too easy’? For heaven’s sake don’t press the button until you are absolutely sure you want to go ahead. Don’t let the 15-second countdown stress you out, you can always select it again if it lapses.

Whether you’re buying or selling the process is the same. Luckily most online broker sites allow you to setup a dummy/paper trading account so you can practise (a lot) before you press the button for real.

Finally, and again it sounds like a no brainer but, as the process is virtually the same whether buying or selling, make sure you don’t accidentally select the wrong option. I break out in a sweat at the thought of, in the excitement of the moment, hitting sell instead of buy… cool, calm and collected is the virgin trader way.

Virgin

Tags: How to buy and sell shares

September is here once again, and yesterday equities on both sides of the Atlantic fell sharply but, as it is my first, what does it mean for the virgin trader. Should I jump in with both feet or sit cautiously on the side and see how the chips fall?

From everything I have read about the stock market it seems that, historically speaking, September is a **** time to dip your virgin toe into the markets.

If we take any notice of history as a guide to the future, then September is traditionally the worst month of the year on the stock market and has been since England last won the World Cup back in 1966.  ‘Did England ever win the World Cup’ I hear you say. I am not so sure anymore, it seems like a hell of a long time ago. But, I digress. Is it the dark nights drawing in and the barbecues being packed away? Or maybe it’s just post holiday blues? Who knows? This week already seems to be following in the tradition. Apparently the market has taken a September dive 21 times since 1966.

Chris Dillow writing in the FT who is obviously a better man for historical market data than me (perhaps he should be a stock broker) says, “Even if we exclude the three worst Septembers – 1974, 1981 and 2008 – the average return in the month has been just 0.16 per cent. That’s still worse than any other month bar June”.

On the upside September is a good month for shorting, or so I am told. As a virgin I can’t help but suspect there may be more to this September than the usual end of summer blues. Could it be the summer rally is about to hit the buffers? According to chief investment officer for global equities at BlackRock. “There is a growing perception that equities have become overbought and are expensive at current valuations. Many observers have been pointing to the extreme run-up in equity prices over the last six months as a sign that stocks may have come too far, too fast.”

So when is a good time to buy and sell?

December – January

Once again, using history as our guide, December seems to be one of the best months of the year along with January.  The strongest week is – wait for it – week 51! Aren’t statistics amazing?  There has been only one real decline of any note in the markets at this time since 1981.

And apparently, April is the best month of all!

Virgin

Tags: buying or selling shares