Investing in stocks & shares
Disclaimer: for financial advice finding a financial expert is key!
I took a dive and bought 1 ULVR share and 18 LGEN shares.
It started as a test to see how it would feel to put money into uncertainty.
To be honest, the only thing that has been pulling me back is the fact that instead of going into a savings pot, it would be going to a pot that could potentially mean I would lose it all.
But there’s no reward without risk, and that is a fact. So in 2021 I am going to take more risks, and embrace uncertainty more. One thing 2020 taught us, is that uncertainty can creep in at any moment.
The aim is to set aside between 5% to 10% every month starting from February, and use it to invest in stocks and shares. While this may not be much, this is the amount I am ready to lose at this point in time, it would usually go to work lunches, shopping and miscellaneous but now it will be put to a better use.
Money shouldn’t sit still, the aim is to help it flow and multiply.
Apart from ULVR and LGEN, I am also interested in TSCO and GSK. These will be my 4 investments in 2021, until I am in a position that I am able to increase the investment and have more time to read about others.
To summarise, these are the four I will be digesting the fundamentals of for breakfast, lunch and dinner for the next 28 days:
Supermarket: Tesco PLC — LON: TSCO previous close 239.40 GBX (29.01.2021), a Div yield at 4% with a P/E ratio of 21.15
Consumer goods: Unilever Plc — LON: ULVR previous close 4,240 GBX (29.01.2021), a Div yield at 3% with a P/E ratio of 21.36
Financial Services: Legal & General — LON: LGEN previous close 244 GBC (29.01.2021), a Div yield at 7% with a P/E ratio of 11.78
Pharmaceutical: Glaxo Smith Kline — LON: GSK previous close 1,357 GBX (29.01.2021), a Div yield at 5% with a P/E ratio of 10.72
“You never know what kind of setup market will present to you, your objective should be to find opportunity where risk reward ratio is best.” — Jaymin Shah
Mental and financial preparation:
- My target for February, is to make time to learn more about the companies I have chosen to invest in.
- I am mentally ready to allocate funds every month to those 4 options listed above, these have already been set on my 2021 budget spreadsheet.
- The past doesn't necessarily dictate the future, Covid-19 showed us that, for this reason I want to focus more on the value that each service and / or product has in today’s world, the world post pandemic and base my investment decisions on that.
- I want to invest not only on short term profitable products and services, but on the things I also benefit from on my day to day.
- I need to learn to listen and to trust my sixth sense, and not necessarily follow what everyone recommends as the hottest share in any particular point in time unless my research gives me the confidence to invest.
- I am mentally ready to see the value of my investments fluctuating and potentially going lower than the originally amount investment, and this is because the funds allocated are amounts I am prepared to lose. Well, hopefully that won’t be the case, but it is important to be prepared for the worse, especially as 3 out of the 4 above have gone down in the past month or so.
- Read more books around the subject too, mostly to understand the terminology and learn to read investment tables I am not familiar with.
- I want to take more risks, and learn how to perceive risks differently.
If there’s one thing you should do more of, is read
Read to expand your mind and broaden your horizon
“Know what you own, and know why you own it.” — Peter Lynch
While equity assets are riskier, more liquid than other investments and tend to generate higher returns, this is all new to me.
As I am new to this and require a lot of learning material and time, I have set up a share dealing account with my personal bank, and signed up to a subscription plan which works like a direct debit, every month a set amount is transferred from my day to day account into my share dealing account.
As I will struggle to find time to regularly check the investments, and know when to buy, I have set up an investment plan, with this I have set the frequency, amount to be invested per investment, and the bonus is that instead of spending £12 per trade the commission is capped at £2 as it’s a regular investment.
This is going to be a steep learning curve.
Basics but lessons learned:
- The London Stock Exchange (LSE) trades between 8am and 4:30pm GMT, Monday to Friday, except Bank Holidays.
- Not all companies pay dividends (a % of the company profits) for those who own shares, when choosing your stocks and shares, this is something to be considered.
- Dividend payments can range between every 3, 6 or 12 months, with some companies paying 1 or 2 dividends per annum.
- Companies that don’t pay dividends reinvest internally, which boosts up the share price, if you do receive dividends do the same thing by acquiring more shares.
- To understand what dividend / interest percentage is paid out per share, you need to check the dividend yield of each company. If a dividend yield is 0.02 (two percent 2%), then you will be receiving a two percent interest payment for owning the share when dividends are paid to shareholders.
- It is important to research the company as well as external influences, such as competitors and marked demand for product and / or service.
- There’s no understanding the return without understanding the risk, study both.
- International investments are impacted by price and foreign exchange conversions, for this reason investments are usually based on 90% of the total amount allocated.
- Before investing in U.S. markets the W8-BEN form needs to be completed and returned to the bank, as well as the NYSE Subscriber Agreement form.
If shares are not for you, you can always learn about cash investments, bonds and real estate.
For anyone else also jumping on the stocks and shares world, happy trading.
I’m not following your financial advice, unless I want to trade accounts with you
Adopting the mindset of a millionaire (2)
“If you do choose to invest in a share, invest for the lifetime.” — Sandeeo Sahajpal