# 5k to invest, shares worthwhile?



## Eager (18 Mar 2010)

Hi , 

I have a 5k sum to invest. I'm 26, I have a pension that I started when I was 21, with a regular contribution spread across a few funds. I'm reluctant to simply top up the pension as I would like relatively easy access - as in not have to wait until im silver haired....

England have those easy access cash isa's , do we have anything similar in ireland? is 5k worth putting into 3-4 single stocks , or would the fees negate any profit? I want to spread the risk but id like to be able to cash out if i needed to so I'm averse to an index linked fund.

I have quite a high risk profile, i wouldnt mind losing all of it and stocks are appealing but they seem to require such a high buy in.

any advice? something i've not considered.
i'm resident & earning in uk, but the cash is in euro's in ireland.


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## GSheehy (18 Mar 2010)

What term are you intending to save/invest for?



Eager said:


> I want to spread the risk but id like to be able to cash out if i needed to so I'm averse to an index linked fund.


 
Not sure what you mean by this ?



GS


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## tenchi-fan (18 Mar 2010)

Eager said:


> Hi ,
> 
> I have a 5k sum to invest. I'm 26, I have a pension that I started when I was 21, with a regular contribution spread across a few funds. I'm reluctant to simply top up the pension as I would like relatively easy access - as in not have to wait until im silver haired....
> 
> ...


Hi, at 26 I think it would be daft to sink that much money into your pension. If you're already paying into a pension you might not even get tax relief on it. A better idea is to enter riskier funds with your pension in the hope that they'll make more over the long term. If the funds bomb they might recover or you could increase your contributions when you are older.

We had the SSIA back in the day but at the moment the government wants people spending money - not saving - so there's no incentives for saving at the moment. Besides, if you're resident in the UK you would not have been eligible for the SSIA. Are you sure you're not eligible for the ISAs?

You said you don't want an index-linked fund because you might want to cash in. Not all life assurance companies charge you entry or exit costs or early encashment penalties. You might consider Quinn Life .. at the moment they are not even passing the government levy on to customers (although you might not have to pay this anyway if you are not resident).

Buying 3-4 types of shares, especially only Irish Shares, is a very high-risk strategy and unfortunately you missed the hugh opportunities over the past year. Having said that if you pick the right shares you could still be lucky. 5k isn't exactly a small amount of money so I'm sure a stock broker would be happy to pick a few shares for you. If you want a chance to make some good money over a relatively short period of time and you're not afraid of losing a lot this is probably your best bet.


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## Eager (18 Mar 2010)

stock may be the way to go . Pick 5 and sit for a year.

Gsheehy, I meant I would like to claw back the cash relatively easily without a penalty. Granted, with stock the price may be low when i need to cash but at least i wont pay a early withdrawal penalty - if there is an ETF out there that has no penalties if i withdraw early then that may be ideal because I can diversify more through a fund that simply individually picking one or stocks. 

I have a high risk profile, but diversification would be nice .

About a stockbroker, I'd like to research and pick 5 myself so it is my own fault if things go pearshaped.Any discount broker that will let me trade 1000 into 5 separate companies for around 1% - 50 euro or so or less ?


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## Daytrader (18 Mar 2010)

Picking stocks even with a high risk profile is a poor investment strategy. You are basically concentrating all your risk in just 4 stocks which leads to a very high possibility a negative return on any one stock will hamper any other gains you make. *Always diversify*. ETFs trade like shares. No penalties for selling.


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## tenchi-fan (18 Mar 2010)

what about tdwaterhouse for online trading?


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## Eager (18 Mar 2010)

Ok , since ETF trade like stock, that seems the way to go. ~Thanks for the help ; new to this .


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## galwegian44 (18 Mar 2010)

Stock Diversification is great when you actually have a sizeable amount to invest but remember that diversification doesn't just mean "invest in 5 stocks instead of just 1".

To truly diversify you would need to invest your 5K into various different asset classes with a percentage going into stocks according to your risk profile. You mention that "you wouldnt mind losing all of it and stocks are appealing" so let's say for argument's sake that you will forego the more conservative classes and focus just on stocks.

Even then, to truly diversify you should be spreading the risk across different segments of equities ranging from blue-chip (lower return) to high-risk with a potentially high return. Assuming that you still don't mind "losing all of it" I'm guessing that you would favour high-risk equities.

If this is the case then you really are not looking to be diversified and there is minimal benefit in investing in 5 high-risk companies versus 1 high-risk company. 

If you are not interested in getting independent advice and want to do this alone then I would suggest that you do your due diligence in detail on a range of companies and focus your attention on one. Remember that if you choose to go it alone and want to minimise the risk to your investment there is a LOT of work involved in safeguarding that investment. Having said that it may be an exciting introduction to a long term love affair with managing your own investments, something that we should all aspire to.

Good luck.

P.S. First thing I would do is change the mindset that you "wouldnt mind losing all of it ". Rather, think about how long it takes for you to earn 5K in disposable income from your job and try to associate some value to this money. All the best.



Eager said:


> Hi ,
> 
> I have a 5k sum to invest. I'm 26, I have a pension that I started when I was 21, with a regular contribution spread across a few funds. I'm reluctant to simply top up the pension as I would like relatively easy access - as in not have to wait until im silver haired....
> 
> ...


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## Eager (18 Mar 2010)

Cheers, of course I know its value - I meant I want to simply make it work as hard as possible and I'm comfortable with the risk involved in that - i could gain 30% or lose 30%. Thank for the advice.


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## PMU (18 Mar 2010)

Assuming you do not top up your pension (say in a fund that is not correlated to your current allocations) you should buy one stock. Trading costs will just eat into your returns if you invest less than that amount in a single stock.  
  You are UK based, and should look at UK sources such as Investors Chronicle and the financial pages of the UK Times and the Telegraph for candidate stocks.  As you have a higher capital gains allowance and a lower capital gains tax in the UK, and as you are UK resident, you should trade there rather than IE.  Also as GBP is currently down relative to the EUR it probably makes sense to change your EUR to GBP, even though you’ll pay a conversion charge.  (Although you might be able to find a broker who’ll give you the spot rate on the conversion if you look like a potential long term client.)  I’m not certain of the tax treatment in the UK of ETFs but, IMHO, they are more for building up asset class allocations than individual trading.  [Disclaimer: The above is comment / observation and is not a recommendation to follow any particular investment strategy or to buy / not buy any particular fund or stock.]


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## Daytrader (18 Mar 2010)

A couple of points here..

1. Whether you are trading or investing, putting all your money into 1 to 5 stocks is bad money management. One of the basic rules in trading is only allocate a small proportion of your capital to a trade. This helps to avoid (or in some cases delay) you blowing your account out. 
2. Ask yourself, can you pick 1 to 5 stocks that will return more than the market (sp500 for example) over the course of the year. 
3. If you want to beat the return the main markets are offering, you will probably need to look at gaining exposure to small cap companies, commodities or emerging markets for example. ETFs are an option here. You get exposure to a basket of shares or commodities with an ETF. 
4. It doesn't matter if you are based in the UK and trade in the US. All that matters is where your are resident for Tax purposes. That is where you will pay the capital gains tax.
All of the above is just fodder for thought. Always do your own research



PMU said:


> Assuming you do not top up your pension (say in a fund that is not correlated to your current allocations) you should buy one stock. Trading costs will just eat into your returns if you invest less than that amount in a single stock.
> You are UK based, and should look at UK sources such as Investors Chronicle and the financial pages of the UK Times and the Telegraph for candidate stocks. As you have a higher capital gains allowance and a lower capital gains tax in the UK, and as you are UK resident, you should trade there rather than IE. Also as GBP is currently down relative to the EUR it probably makes sense to change your EUR to GBP, even though you’ll pay a conversion charge. (Although you might be able to find a broker who’ll give you the spot rate on the conversion if you look like a potential long term client.) I’m not certain of the tax treatment in the UK of ETFs but, IMHO, they are more for building up asset class allocations than individual trading. [Disclaimer: The above is comment / observation and is not a recommendation to follow any particular investment strategy or to buy / not buy any particular fund or stock.]


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## Matsugawa (23 Mar 2010)

I started investing in stocks when I was about 26 - 10 years ago - and some things I've learned that might help.

1. Learn how to do your own research. I always thought fool.co.uk has good FREE advise but they're in the business of selling it now. Be your own counsel.
2. Use an execution only-broker for a flat fee. Don't take tips from brokers, they want you to trade as often as you can. It's how they make their commission. 
3. Tradings fees should be about <1% of your investment. If you investing 2,500 euro your fee needs to be 25 euro or less. Remember you need to sell too to realise a profit so it'll be actually 2%. So any gain you make is -2% of your initial lump sum. 
3. If you are investing outside of Ireland (UK or US) be aware of currency trends - you can't guess with certainty but be aware of it. It's a double edged sword.
4. Consider joining an investment club - that's what I did when I was 26 and it was a great learning experience (see #1). Looking back we were clueless! But we still made  profit between 1999 and 2003 (when the .com bubble burst).


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## tenchi-fan (23 Mar 2010)

Hi Eager. 
I already replied but here's another! You're only 26 so if you're on good money you probably should invest in something risky .. you have plenty of time to invest more if you make a loss, and hopefully your losses will recover over time.
Just don't throw your money into one big thing that could crash spectacularly


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## Dmitri (24 Mar 2010)

Why not investing in a Rabodirect fund?
Just pick one or two that you like, the best one I picked
was linked to Latin America and has lower commission
as it is a "fund of the year".

With only 5k I would not buy shares directly,
the commissions will easily eat up your gains.


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## Matsugawa (24 Mar 2010)

Just be aware there are fees on funds too - check the rabodirect website

Every year they will take between 0.7-2% of your capital - the entry/exit fee is a % too and not a flat fee. 

IMHO you're paying fees for monkeys throwing darts - the geniuses managing a fund of mine managed to lose 40% of it's value. It's still not recovered - and they get their fees every year win or lose.


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## Anfear (30 Mar 2010)

Great to be starting investing at a young age! My advice would be to spend some time investigating & building knowledge on investment portfolio strategy first. I think the first & most important thing is to get the foundation (your strategy) right, & then get into all the technicalities. A common approach is the investment "pyramid", in 5 layers.

The base, or "almost zero" risk layer is Cash & near-cash investments. Layer 2 is Income-generating investments such as gov & corp bonds. Layer 3 is Growth/Income (bonds/bond funds/high-yield equities). Layer 4 is Growth (typically high-growth equities that don't pay dividends but plough it all back into business development, ie a co like Vodafone, if they still don't pay divs. Layer 5 would be "Aggressive Growth" equities, such as Elan or Tullow Oil. Companies like this might not even be making a profit and are normally at an early stage in their development. The risk increases (exponentially!) the higher up the pyramid you go.

And - bear in mind the Irish equity market is way too narrow to achieve any reasonable level of diversification!

An operation I was once involved with recommended a pyramid as follows for "The Early Investment Years": Cash/Near Cash 3-7%, Income 5-15%, Growth & Income 29-39%, Growth 39-49%, Aggressive Growth 5-9%. They had a good long-term advice record. But there is a lot to investment portfolio building & in my opinion taking "spurious investment pot-shots" is a recipe for long-term frustration & failure.

In my opinion it is well worth studying & developing your craft & the rewards will come! Best of luck!


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## boomslang (1 Apr 2010)

If you're new to shares why don't you try paper trading by researching and picking a few stocks and "pretending" to buy and sell them with your 5k over a period of a few moths? This will hone your research skills, allow you to identify key mistakes which can be corrected before you start trading for real, and give you an idea of the impact of commission, CGT etc on your investments? If it doesn't work out you've lost nothing and you can try other options.


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## manachan (14 Apr 2010)

I am also considering investing online. I have reviewed the following two online brokers / service providers:

TDWaterhouse and Interactive Brokers

TdWaterhouse charge €20 per trade plus annual account fees of approx €72 incl. VAT. 

Interactive Brokers - Most trades cost $1, thou you require a minimum opening balance of €10,000

TDWaterhouse is more expensive but seems to be more geared towards the Irish market

Has anyone any experience with either of these (positive or negative)?

Or can you recommend any other online broker / service provider that has competitive fees?

Any advice appreciated.


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## mtk (15 Apr 2010)

with 5k its hardly worth bothering with putting into individual shares as cannot get much diversification 
better off with a tracking equity unit fund


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## PeterBrennan (17 Apr 2010)

It is my view you should not speculate in shares unless you are a professional or are willing to put in a lot of time and effort to become a semi-pro. 

Otherwise you are effectively gambling with your money. The markets are a treacherous place. I do this for a living and I know how difficult it is to make money trading/investing.


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## PeterBrennan (17 Apr 2010)

Manachan,

IB is what most of the pro' use. But you will need a good charting platform such as Tradestation for charts etc. Spreadbetting has advantages also as its tax free. 

However, please bear my point in mind above.


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