Making Money From Stocks and Shares
Unless you have pots of cash, you cannot make a living by dealing in shares, however you can make a small amount of money into a great deal of money and even more(Stocks & Shares). When it comes to massive amounts of money and buying & selling, nothing reaches the enormous volumes of money that is moved around the world everyday, between the stock markets.
Even the wealth generated by oil is dwarfed by share dealings. Many billionaires have made their massive amounts of cash through stock market dealings. Although we hear lots about these successful entrepreneurs, such as, Warren Buffet, and Donald Trump, the greatest amount of shares are, by far, owned by insurance, and investment companies.
These organisations have large computers set to monitor any movements, up or down, and programmed to buy or sell shares that have moved. This monitoring means that large investors all over the world react in seconds or minutes to any larger than normal movement.
This has two affects. Because of the rapid reactions of these computers, the percentage of profit or loss can be limited. or exaggerated By this, I mean, if a share rises by 1 penny, this can mean a huge profit for someone who owns millions of these shares, and, trigger an action.
So, a computer somewhere in the world sells some of these same shares, bringing the price by around the same amount that it gained ie: 1 penny. On the other hand, this close monitoring can have the opposite effect. Do not, even in your wildest fantasies, believe that share prices have any connection with logic.
The world stockmarkets are ruled by emotion, faith, and the herd mentality.
This means that if a large fund manager gets it into his head that the current price of shares has topped out, and begins to sell big to close his position, and limit his vulnerability to the market, this can trigger all the other computers to follow suit. Now, for no ‘real’ reason, we have a collapse in confidence, and a corresponding collapse in world markets. Obviously this can work in reverse.
None of this is real. The current world recession is blamed on over speculation in the American sub-prime market. This was the institutions that loaned money in the form of a mortgage to people who didn’t normally fit the earnings criteria to obtain a normal mortgage.
These institutions limited their loss potential by reselling the debt onto other over confident greedy investors, mainly British and European banks. Some of the original mortgagees began to fail to meet their repayments (surprise, surprise) and the shot was fired, one steer jumped, and the whole herd stampeded.
I say it’s not real because, the houses and land that were used as collateral, are still there. The money that was in circulation hasn’t been burned, so where have all these billions gone that the banks lost?
Investors, large or small, buy a certain share in the belief that other people will also want to buy the same share, and thereby drive up the price. Just as we discussed, right at the top of this ‘make money’ section, people are fickle.
The same herd mentality that compels us to go to already busy pubs or restaurants, also draws us to buy the same as others buy…safety in numbers. As a small investor, we also, naturally assume, that the big boys know what they are doing…w-r-o-n-g!
In a nutshell, what this means, is that you have the same chance to make or lose money from shares as anyone else. It is real easy. The simplest way is to join an on-line brokers, such as ‘Shareprice.co.uk’ (£10 flat fee for real-time UK trades - No inactivity or management fees). This gives you virtually instant access to your shares or portfolio (a collection of 2 or more different shares).
When you go on to a brokers site, you will be reminded many times that, you can lose a lot of money through all the different types of dealing. One important point to remember is that, investing on the stockmarket, is not the same as betting on a horse.
If your horse goes down or loses, you lose everything. The difference with shares is that, if the share price goes down, you don’t lose any money unless you sell them at this lower price.
The lower price may have nothing to do with the companies performance, but, more to do with a large institution taking some profit, or that particular share, or section (mining, oil, pharmaceuticals, etc) has temporarily fallen out of favour.
Unless, you are a gambler or just love the thrill of trying to outguess the big boys, buy shares for the long term.
It doesn’t hurt to do your research and monitor all the press reports, and study all the free company reports. Make the financial news your bible. Study all the Google and Bloomberg financial reports. Alternatively, leave it to me, and contact me for my thoughts on your ideas. I make no charge or make any money from my advice. I promise to be as frank and truthful as is humanly possible.
It is difficult to beat the big boys because, as they say, they all pee in the same pot. They often know what is happening before the newspapers do. This doesn’t stop you from making a bit of cash on the side.
Copy Warren Buffet. Find solid stocks, not too highly priced, and build a virtual portfolio. Occasionally make a well researched speculation on a rapidly rising share, such as Borders & Southern Petroleum when they rose from 20p to 47p in two days in after discovering oil offshore in the Falkslands in August this year, or UK Coal when they rose from 4p to 8p in one day after getting planning permission to build 1200 houses by Doncaster Councils, again in August this year. I made thousands of £’s on these two. I still believe that Borders & Southern Petroleum are going to make me many more thousands of pounds this year. I suggest a buy at any price under 30p. See below for greater detail.
Most on-line brokers have the facility to monitor your real or proposed portfolio, and graph their movements up and down. What you need are shares that are frequently and widely traded in. Obviously you would prefer a share that is on the slow upward climb but, equally importantly is that it fluctuates a lot whether going up or down.
A small fluctuation each week can bring you a bit of extra cash. It may be as small as 2% but, when you consider that banks are only paying around 3% per annum, 2% in a week = over 100% per annum.
For example: you buy £3,000 worth of shares @ 60p each = 5,000 shares. The broker will charge you a fee for buying, and a fee for selling, let’s say £10 for each transaction, = £20 plus the government wants its share, this is a half of 1% on the purchase price only.
Therefore your total expenditure will be £3,000+£20+£15 =£3,035.This means that you only need an increase in the share of around 1.5% to be in profit.
There is one more factor to take into consideration when calculating your potential profit or loss, and that is the brokers spread.
This is how the broker makes his living. I stated a buying price of 60p, but, this is the ‘mid’ price and, you must understand that, you would not have received that price if you were selling.
This would possibly be 59p or 59.75p Yes, they work on a hundredth of a penny sometimes, if it is a frequently traded share.
The price that you see on TV or in the press or the internet, is usually the ‘mid’ price. Ie: 60p would be 60.25 to buy and 59.75 to sell, or possibly 60.50 to buy and 59.50 to sell.
When dealing on the internet, the brokers will quote both prices. With this additional fact, we must make a fresh profit or loss calculation.
Let us now assume a quoted mid price of 60p. Now, let us assume a poorer scenario of a 1p spread, which would give a selling price of 59.5p and a buying price of 60.5p. At this price, our original purchase of £3,000 of shares will cost us, 3,000 divided by 60.5p = 4958 shares. £3000 + brokers buying & selling commission 2X£10=£20, and the government stamp duty on share purchases, of .5% = £15 totaling £3035, plus the 1p spread 4958 X 1p = £49.58 giving us a total of £3084.58
We take this figure and divide it by the number of shares and, this gives the break -even selling price of 62.21p meaning that a selling price of 62.5 would give a small profit.
Or, another way of saying it, is to say a 3% increase on the buying price is the break-even price. A 4% increase gives a price of 62.92p.
As I said earlier, the spread could easily be only .25p or less each side, making these calculations more favourable. I have no wish to burst your bubble but, always remember that they can go down just as fast.
I don’t recommend a particular share But, I declare a former interest in UK Coal (remember to refresh the page).
I chose this share because it satisfied all the criteria I search for in a company. This company, as indicated by its name is Britains biggest coal mining company.
This may seem to be a dinosaur in todays eco minded world but, the reality is that, whatever your views, it will take many years before there is a viable alternative.
For every con there is a pro. When balancing all the different ways of generating electricity, coal is always claimed to be the most environmentally unfriendly.
On the other hand, it isn’t imported, it provides employment for British workers, the by-products are used in many building products such as cement, blocks, and other environmentally useful landfills.
Plus, all the profit and taxes stays here for our benefit, not some Arab or Russian. Most of the coal mined in the UK is used for the generation of electricity.
In 2008, the UK consumed an estimated 50 million tonnes mainly for electricity generation, resulting in coal generating about one-third of Britain’s electricity.
UK COAL supplied almost 8 million tonnes, the remainder being supplied by other companies. Off my soap box and, back to UK Coal.
The coal mining is only a part of the reason for choosing them. With all my years of interest in property redevelopment, you will not be surprised to hear that there is a development side to UK Coal.
Harworth Estates is a wholly owned subsidiary of UK COAL PLC and is the business division responsible for managing the Company’s extensive portfolio of land throughout the UK.
The estate extends to in excess of 43,500 acres and consists of a substantial number of short, medium and long term development opportunities and a major agricultural estate.
The Harworth Estates corporate objectives include aggressively growing shareholder value through its wide ranging initiative, Project Worth.
In addition to growing the asset value of the portfolio, the team focuses on growing net rental income from its increasing first generation business park portfolio and its agricultural estate.
To me, it seemed the ideal blend, mining and selling coal for a steady income, and the property side for asset growth.
Over the past year, the share price has varied between 3.9p to 55p with many up and downs in between the difference. Buying at the bottom of these dips, and selling at the peak is where you make your profit.
At the present time, 24th Sept 2012 the mid price is 6.8p. over the past few weeks the price has fluctuated from 3.98p to 8.2p and back to 6.8p. The Spanish crisis gave all the markets the willies and they dropped to 3.8p for a short time before shooting up to 8.2p you have really got to have your finger on the button.
In mid March 2012 the company decided that one of its major mines was never going to return to full profitability and closed it. The full story is a bit more complex than this, but suffice it to say, the stock market did not like the news and dropped the share price to 18p. It very quickly rallied back up to 23p, and then slid back to the 18p – 19p. I bought back into the share on Friday 15th June 2012at 9.46p. These peak and troughs are excellent for making profits.
I personally made more money in 3 weeks than I would have made in a high interest account in 4 years. In my opinion, up to and including 6p is a very good time to buy, with a target sell price of 8.5p- to sell.
Don’t be greedy, and don’t beat yourself up if you don’t hit exactly on the lowest price of the dip, or sell right at the tip of the peak.
A £3,000 investment at 6p would get you 44,166 shares ( this is after deducting broker’s and government commissions.
If You sell at 8p this would give you over £800 profit . In a ISA of 3.5% this would take over 7 years. This fluctuation usually occurs around 4-8 weeks.
Don’t spend the profit, wait for the price to drop, and re-invest your 3,800 This way, your profit will rise exponentially.
If we take a poor scenario with a similar profit occurring only 4 times a year. You would have a total asset of around £8,000. A potential profit of £5,000 a little bit better than the £175 from an ISA. This is very very unlikely, but doubling your money is more than possible. I have achieved this and better.
Before returning to Borders & Southern Petroleum let me explain that All shares quoted on the LSE London stock Exchange or any other stock market of the world, have an abbreviation known as a ticker code.
Their’s is ‘bor’. From information I had received from emails and other news sources, I had begun to watch this ‘bor’. I made a smal profit when they were in the 60p range, but suddenly they dropped when they stopped their Falkland isles offshore drilling.
They dropped to around 18p. I watched and patiently waited. An email came saying that one of the boreholes had discovered high grade oil. This was the key. I bought £10,000 worth as quickly as possible.
On the first day I made £800. Two days later I made £5,000 when they rose to 47p. Slowly they dropped back to 25p.
They hovered unnaturally they kept within a narrow band. before dropping to 23p and hovering in the same manner. I was suspicious. By carefully monitoring the volume (the number of shares bought and sold) I noticed a pattern that kept the share price steady.
My assumption was that some very wealthy organisation was controlling the price. I was not surprised, when on the 21st September I received a notification from the LSE advising that Lansdowne Holdings had increased its share holding from 10% to 11.2% an increase of 5,000,000 yes, 5 million shares.
It makes me wonder what they know, that I don’t!! Since ‘bor’ discovered oil they have been looking for a partner to extract it. Once they make it public the shares will rocket. I am already increasing my holding before it’s too late. If it is good enough for Lansdowne, and Capital, it is good enough for me. I would strongly suggest you make a calculated investment. For any further info do your own research or contact me direct.
Another one to watch Flklands Oil & Gas Ltd (fogl) and for a steady weekly up and down Evraz (evr)
Any questions or comments, please contact me via the “Contact Tab” I will always do my up most to answer all your queries regarding any of the subjects above.
My current portfolio September 2012 includes Darty (drty) Borders and Southern (bor) Ocado (ocdo) These are not recommendations, simply for your information to enable you to monitor their movements. Here’s hoping…
The value of your investments can go down as well as up. You may not get back all the funds you invest.
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