Markets and Indices

Celticheart Investor

A beginner's guide to trading and investing

When it comes to investing one of the most important considerations is which markets do you invest in. By that I mean do you invest in the main stock markets such as the Footsie which tend to be better regulated and more stable or do you invest in one of the smaller markets such as AIM http://www.londonstockexchange.com/companies-and-advisors/aim/aim/aim.htm which is made up of smaller cap companies and is without doubt a more volatile market? Ultimately it comes down to your approach to investment and risk.  

AIM is, at least according to their website, the most successful growth market 
in the world. Since its launch in 1995, over 3,000 companies from around the world have chosen to join AIM. 

There are of course many indices in the UK stock markets: 

• FTSE 100
• FTSE 250
• FTSE 350
• FTSE All-Share
• FTSE AIM All-Share
• FTSE techMARK All-Share
• FTSE SmallCap
• FTSE Eurotop 300
• Ethical Indices

The main markets are more stable with generally a far higher share price, particularly in the Footsie 100, the growth rate might not be spectacular but the risk is generally far less (although nothing is certain in today's market) and you are far more likely to get a dividend paid on your investment.

The added advantage of investing in the main markets is that they are ISA allowable, whereas previously AIM stocks have not been although looks like it is about to change as is explained below: 

During the recent budget announcement, George Osborne announced that from April 14th next year no stamp duty will be payable for shares that are listed on AIM and other so called "growth" markets (currently 0.5% duty on all markets). He also said that he was in consultation over the allowance of AIM shares into stocks and shares ISA, this has now been approved and will become allowable from 5th August this year.

Until now the only AIM stocks that were allowable were those that were dual listed e.g. listed on both AIM and ASX http://www.asx.com.au/ or AIM and ISE http://www.ise.ie/

It is also worth bearing in mind that these share are not subject to inheritance tax, provided they have been held for at least two years.

I am restricting my market listing to those in the UK as, for most small investors in this country that is where they choose to invest, even though the companies they invest in can also be listed on other global markets.

One thing I have noticed is that investors who frequently monitor their holdings rarely seem to look at the overall performance of their Indices. This year I think it is fair to say that the smaller markets have taken a real hammering and have been seen as very Bearish but recently all of the UK Indices Ichimoku Trader on http://www.ichimokutrader.com/ seem to be indicating a Bullish trend or Bull run is imminent. I sincerely hope that they are right.

Footsie 100 (Chart courtesy of amCharts.com)

AIM (Chart courtesy of amCharts.com) 

A cautionary note, trading and investing in shares carries a level of risk, these blogs are only meant as a basic guideline to investing and trading, always do your own research and base your decisions on what you can afford to lose. This blog is not intended to provide financial advice as I am not qualified to do so, it is simply designed to provide information about how the markets work that might be of some help to private investors like myself.

Introduction

Celticheart Investor

A beginner's guide to trading and investing

Whether you see yourself as a mid to long term investor, a short term trader or somewhere in between the markets at first glance can be a daunting place to get involved in.

Many people will use a broker or fund manager invest on their behalf leaving them free to simply add up what profits (or losses) they make for you. If on the other hand, like me you choose to take control of your own investment portfolio then there are a lot of resources out there to help you. 

Whether your interest is in research, fundamental analysis, technical analysis or charting, hopefully this blog will help you make some sense of it. For me it has been a steep learning curve which I would now like to share with you.

My name is Adrian Sleeman, I am a small businessman and an active investor and I would like to explain why I decided to create this blog, which will hopefully be the first of many, subject to anyone actually being interested  enough to read them of course. 
  

For the past 25 years I have run my own consultancy business, specialising in the print and production of corporate literature, financial documents and high quality books. During that time I diligently paid into a private pension fund which I hoped would stand me in good stead as and when I decided to retire. Like most people, I paid little attention to the overall value or how much of an equity it would buy me until recently.

When, last year, one of my pension funds matured I started to explore my various options. I was staggered to find that the amount of annuity I could buy was nowhere near what I was promised when I first took out the policy.

Not being one to take things lying down I decided to explore the alternatives open to me and came across SIPP's (Self Investment Personal Pension) which I had never previously considered.

"A SIPP is one of the most tax efficient ways of saving for your retirement which puts you in control. Before investing you need to be aware of the risks, in particular that investments can go down as well as up in value, especially over the short term.

You also need to remember you cannot normally access your money until at least age 55 and then only subject to the limits applying. Tax rules can change and the exact amount of relief available on contributions depends on your circumstances."

(quote courtesy of Hargreaves Lansdown) http://www.hl.co.uk/

http://en.wikipedia.org/wiki/Self-invested_personal_pension 

I was not new to investing, having bought and sold shares through a broker for a number of years in a very small way but at least I understood the fundamentals of trading. 
Firstly I will stress that this is not for everybody as it does carry certain a amount of risk, how much depends very much on just how much you are prepared to invest in terms of time and effort to do the research. What I strongly advise is that initially, you create a dummy portfolio and work with that for a period of time, not actually risking any money at all until you feel comfortable with your strategy.

There are a number of online sites where you can do this with varying degrees of benefit. Some have live trading figures and some are delayed by 15 minutes. The need for live prices only really applies in my opinion if you are looking to trade short or medium term.

With most of these sites there is the option to upgrade to a full trading portfolio. Even though I now actively trade and have been doing so quite successfully for the past year, 
I still run a dummy portfolio which I use to monitor shares I am not currently invested in, a kind of "watch list".

To get you started I would recommend looking at one of the following sites: 

LSE   http://www.lse.co.uk/ 

Interactive Investor   http://www.iii.co.uk/

Shareprice   http://www.shareprice.co.uk/ 

ADVFN   http://uk.advfn.com/

Each has its own unique way of working so ultimately it is what you feel comfortable with. Another enormous benefit is the ability to either take part in or simply watch the Bulletin Boards with live discussions about all aspects of stock trading. I can't promise you that every posting will be informative but if you pay attention to those that really know their stuff it can be extremely rewarding both in terms of knowledge and ultimately profit.

Since I started to write this blog I have done a considerable amount of research which you can read over the following chapters, it has been as much a learning experience for me as anything else and I hope that by joining me in on that journey you too will learn from it.

I am not professing to be an expert in Technical Analysis but it is a side of investing that has drawn me in the more that I have learned about its various aspects. With its roots set in China several hundred years ago it appeals to my sense of intrigue over something which is predictable and unpredictable in equal measures. Balancing those two qualities can give you an insight into the sentiment of trading but don't expect TA to predict the future for you. It will however give you valuable tools which, when used in conjunction with more conventional research will help you make those all important decisions.

Good luck with your investment strategies and I hope you find this blog of some use.


Next time:  Who and what to believe in small cap investing

A cautionary note, trading and investing in shares carries a level of risk, these blogs are only meant as a basic guideline to investing and trading, always do your own research and base your decisions on what you can afford to lose. This blog is not intended to provide financial advice as I am not qualified to do so, it is simply designed to provide information about how the markets work that might be of some help to private investors like myself.