How to Invest in Stocks

Stock Investing

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Stock Investing
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  • Part-ownership of enterprise.
  • Rewards consist of dividends & capital appreciation.
  • Excellent long-term investment
    • During the 20th century stocks returned an average of around 10% per annum!
    • But volatile in the short term.
  • Ordinary stocks / shares offer share of profits + voting rights.
  • Preference shares are paid ahead of ordinary shares but offer reduced rights & fixed returns.
  • Mutual funds/ investment trusts / unit trusts / OEICS -
    allow small investor to spread funds across many stocks / shares arrow risk management.
    • UK: investment trusts are companies whose purpose is to invest money in stocks and shares in a particular sector and/or with particular objective.
    • Investment trusts have a fixed number of shares - unlike unit trusts and OEICS where shares are created and destroyed as they are bought and sold.
    • Many investment trusts offer low cost savings plans making these an excellent vehicle for the small investor to gain exposure to the stock market and to spread risk.
      See the Association of Investment Trust Companies Web site for more info.
  • Online stock trading
    • Internet provides extremely competitive commission charges for small investor.
    • Check whether stocks/shares are registered in your name, or held (on your behalf in a nominee account.
    • If stocks/shares held in a nominee account, check
      • whether a periodic management fee is applied (this can eat away at returns);
      • charges on sales;
      • whether you can receive company reports and voting rights.