Share Dealing For The Novice
Share dealing is certainly complex and does require confidence and patience, but needn’t be the exclusive domain of professional traders.With practice and research, almost anyone can deal in shares.In these straightened financial times with very low interest rates for savers, share dealing can help rebuild the economy and supply a greater return than almost any other investment vehicle.While the returns are potentially large, the risks are equally large, so you’ve got to have strategies to minimise possible losses.Share dealing on your own is riskier than buying shares through unit trusts and investment trustsas these mechanisms “pool” your savings with other savers in many companies.
This approach does spread and dilute the reward but equally importantly is also spreads and minimises the risk. If you do trade for yourself, you can limit your risks by setting a “limit order “on the price at which you buy or sell shares. These can run for up to 90-days or for the very risk-averse you can instigate a “stop loss” order which triggers an automatic sale if the share price drops below a specified level and your shares are then sold at the next available price. If you feel confident about making the decisions, then look at execution-only dealing, where you buy shares online or get a broker to carry out your instructions without giving you advice.Most brokers offering execution –only dealing also supply software tools so you can check your portfolio at any time.
The other common method of electronic dealing is through nominee accounts, where you have an account with a broker who is listed as the legal owner ofthe shares but holds them in trust for you.These approaches offer the lowest cost share dealing, services, but if you are not that confident look at broker services that give you access to professional advisors or managers, but at a price of course. Share dealing could be for you if you have a mortgage but no other major debts, life insurance to protect any dependants, participate in an employer’s pension scheme or have your own pension plan and are covered by an income protection policy. Ideally, you should also have between three and six months’ savings available to cover you in the event of redundancy or job loss.
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