A share is basically a part of a business. Shares are often referred to as 'equities' and outside the UK they are often called 'stocks'.
When you buy shares, you are buying ownership of a small part of a company. The price of shares changes constantly. If a company does well, then its shares are likely to rise. Of course, prices can fall as well, so there is a risk. But the fact is that shares have historically performed better over the medium and long term than most alternative investments.
Factors that affect share prices
- Political change.
- Company analysis, results.
- Economic changes.
- Natural disasters.
- Behaviour of investors e.g. people buying shares drives the price up, people selling shares sends the price down. Company mergers and rumours.
You can buy and sell shares through a 'stockbroker,' who is authorised to act as your link to the stock market. Chiefly there are three services to consider.
- Advisory Stockbrokers: The service will cost more, but they will give advice as well as buying and selling on your behalf.
- Execution Only Stockbrokers: No advice given but a cheap and efficient telephone based service once an account has been opened.
- Online Dealing: The cheapest and most efficient way to buy and sell shares.
Our own online dealing service is called ShareCrazy Trader.
click here for more information, or click here to open an account.
Malcolm and the ShareCrazy team always consider the following before buying shares:
- Individual personal financial position.
- Understanding the business we are buying into.
- Spreading risk across several market sectors.
- Researching the business extensively
- Using at least four independent sources of information.
- Taking the long term view, (the market always fluctuates in the short term).
- Buy shares when the market is at the bottom of a bad patch - most people buy shares when they are rising and sell in a panic when they start to fall.
- Look for slow but steady risers which rarely falter.
- Wait for a good success story to meet up with a bargain share price.
- Never buy on a rumour.
- Buy into a company if it's rivals are doing badly.
- Buy firms with a low share price compared to others in the sector.
- When there are conflicting signals, get out.
- Don't be too eager to sell when there's a panic on.
- When hesitating over whether or not to sell a share, ask yourself if you would buy it now. If not - sell.
- Good management is the key.
- Don't take profits too early if the share keeps rising.
- Don't be greedy.
