With over 2,500 companies listed in the UK you'll be spoilt for choice. There are a number of criteria you might want to consider when making investments. A good place to start is by reading newspapers and magazines. Don't just look at the financial section but look at what's happening in the main news. For example, what products are currently in vogue. Other things to consider are:
- The size of company: Smaller companies represent a higher risk but potentially much higher returns.
- Are you looking for growth or income? Some companies pay dividends which give an income whilst others invest all their profits in growing the company.
- Do you work or have experience of a particular sector of the market? This can give you an advantage as you'll know more about what companies in these sectors do.
Before making real investments it's worth practicing with some 'virtual' money. You can do this by playing the Virtual Trader game at VirtualTrader.co.uk which enables you to invest a virtual £100,000 in the UK market. It's a great way to see how you would have done for real but with out risking any real money. Having built up your confidence you'll feel much happier investing your real money.
How do I pick specific stocks?
Having got some ideas about stocks to invest in it's time to take a closer look. Things which will help you are:
• Company Annual Report: This is not the most up to date information about a company but provides a good starting point. You'll get information about the companies business, developments, future prospects and of course all the current financials.
• Investor Relations Information: Most companies will give information about their company on their website. This information is useful to give you the latest developments but remember this is information from the company so don't expect to see much bad news.
• Research Reports: If you want to get an impartial view on a company there are a number of places where you can get independent research.
Are there any other things I should bare in mind?
• Keep a balanced Portfolio: It's always best to spread your risk over a number of sectors so that if a particular industry experiences a downturn you won't find all your investments following suit.
• Invest a sensible amount of money: It doesn't make sense to invest very small amounts of money since by the time you account for spreads and commission the price will have to move significantly just to get your money back.
• Keep dealing costs to a minimum: It's worth shopping around for the best commission as this can vary quite considerably from one broker to the next. To see some of the best deals in the market at the moment take a look at our investor centre.
• Look for longer term rewards: It's very difficult to make huge profits over night but if you look historically at the performance of shares over a five year period the rewards can be very worthwhile.
• Know when to cut your loses: You can't always pick shares that will go up in price so sometimes you'll have to cut your loses. Make sure you keep a close eye on your investments so you know when is a good time to sell.