This is the first blog, that will start to look into a building block of Asset Allocation in more detail. This will be exciting series that will cover bonds, equity, alternatives, funds, etc.
Please keep in mind that blog is about investing and not trading. We aim to buy low (or when the price is going down) and sell high (or when the price is going up). Opposite to trading, where you buy when the price increase and sell when the price goes down.
From previous blogs, you may have decided, how much you would like to invest in stock, but before you start, we should understand these a little better.
You may have heard before that when you buy a share, you buy part of the company. Easy to remember, no? Of course, it is a quite small part in the beginning. But why do companies sell their shares? Well, it is all to do with the capital structure of the company, they do not want to take more debt and could raise funds by offering part of the company to the public. This is also what is called IPS (Initial public offering). Companies’ usually use funds for expansion or paying back some debt. In UK, companies are broadly classed as Limited (Ltd) or Public (PLC). Both can sell shares to investors, but as retail investors, we are interested in PLCs, these companies offer their share via the stock exchange, which is called London Stock Exchange. For the reader, who is not in UK structures are still very similar.
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After I have created my blog and started writing about investment, I, also, started investigated what else is available on the internet. Pages like Investopedia, which is a great source. Also, I come about the same name book as my blog, with some great short videos from the author. Therefore, I have decided to share these with you.
Have fun watching. This will help you better understand subjects we will review in the future blogs. Also, keep your mind open there isn’t just one investment strategy. Continue reading →
Here we go my first blog, where I will be providing some useful information on how to start investing! We will touch on bonds, stocks and exchange traded products. This particular Blog will be very efficient and practical. Multiple subjects will be mentioned without expanding for now. Thought I will prepare linked blogs to expand these.
So shall we make some investment! What will we need to create our first investment portfolio?!?
Ingredient 1: Savings:
No way around it. You need to start saving. You cannot invest safely without any initial capital, even if this is just minimal. If you have any debt, you should pay it back first as debt is outflow with certainty in your life. Make sure you have sufficient cash flow after paying your debt & other expenses. When all is considered you start saving and can start allocating residual to your investment portfolio.
So how much cash flow we will need to start? Well as little as £20 pounds a month will do in the beginning. However, more you save higher your portfolio in the future as all powerful cumulative interest will kick in. Also, your transaction cost will be the lower percentage of the overall portfolio. I would recommend saving anywhere from few hundreds (100,200 etc.) to few thousands a month.
Simple example on Cumulative interest rate:
Save £20 a month with the annual return of 5%, time period 5 years.
>>> After five-year: Portfolio Value £1,385.79, Profit £185.79.
Save £500 a month with the annual return of 5%, time period 5 years.
>>> After five-year: Portfolio Value £34,644.72, Profit £4,644.72.
Ingredient 2: Portfolio allocation decision: Continue reading →