Any idiot can deal shares; and they often do. And the main reason is because the basics are incredibly simple to understand. In short, when you buy a share you are buying a percentage of that company in the expectation that you will make money on the deal. Of course everybody else is doing this, too, which means that it is hard to pick up on any hidden value that somebody else has missed. In return, though, so long as you stick to main stocks – blue chip companies, FTSE 100s – you should be able to minimise your risk.
When beginning in the share trading life you must also set out what you want to achieve. Do you want to actually own a certain number of shares in a company no matter what? If your father started a company or your local football team has floated on the market you may wish to buy shares in these institutions regardless of economic outlook and profit likelihood. Most people who do this will only ever spend money they can afford to lose or are wealthy enough to own the whole enterprise.
At the other end of the spectrum are the professional portfolio holders – from the small-time investor to the multi-billionaires. These people who buy shares have no emotional attachment to the stock and merely invest to maximise return/minimise their exposure.
Either way no matter who you are you will need a broker on the floor of the stock exchange to make the deal for you. These people don’t care either way if the stock is going up or down – assuming they are not a portfolio holder – as they make their money on commission of a trade.
Any person planning on share dealing must realise a few salient (but easily overlooked facts):
1) The Market is NEVER wrong. You may think that BP shares are worth Ł1000 each – you will not be able to sell them at this price. Ditto, you may think Shell shares are worth 2p each – you will not be able to buy them at this price. At any given time what the market says the share’s price is; is the price at which the share dealing will occur. The FTSE could be worth 6000 points today and 600 tomorrow; both values are right.
2) Every share deal requires a buyer and a seller. The market may be going through the floor but if you cannot find a buyer for your shares you are stuck with them.
3) Never forget why you bought the shares in the first place. If you bought BP shares for the long haul because they are a well run company and you expect to receive good dividends, it doesn’t matter what happens to their price. Unless of course they go bankrupt. Similarly if you bought BP shares to make a quick profit, it doesn’t matter if they are paying a dreadful dividend in 6 months.
4) Whatever happens in the short term invariably evens out over the longer term outlook. (It has done so for the past 200 years). If shares do not behave in this way there will be some major disruption that will distract you away from the failure of the stock market to behave as it always has.
Bear these facts in mind and share dealing should be a financially rewarding way of making money. Share dealing is simply present expenditure for future gain, but it occurs in a market where pointers to future performance are available to all possible traders. In short we would advise all prospective share traders to take any share dealing under advisement.
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