I should say I don’t currently own any shares other than those in my companies, and although I provide stock market automation software and calculators, I don’t have any direct experience other than selling the shares that I was given when I was younger.
Running a small business and a small family doesn’t leave one with much time to manage a fund and I’m not flush with enough cash to warrant using a broker and I’m not totally comfortable in my own knowledge of the markets to make large investment decisions. However the current interest rate on my personal savings account isn’t the best (2.5% gross) and it looks like there’s no time like the present to continue my financial education by acquiring a few shares.
After a bit of research I found what looks like the best company for making small trades, www.iii.co.uk (thanks to MoneySavingExpert!) who charge £10 per trade (that’s for buying and selling) and no maintenance fees even for ‘inactive’ accounts. They act as your nominee effectively holding the shares in their name which is more convenient for me but might mean I could lose out on some of the shareholder perks that some companies offer their shareholders who have their real names on the certificates.
As far as picking the companies, I like the look of Vodafone stock as a first choice in the ‘no brainer’ category. The share price is currently 145p, up from 135p last month. They’re the UK’s fourth largest company and one of the FTSE 100 (this an index of the top 100 UK companies) highest yielding stocks. In other words, paying out returns higher than my bank does. At 6.1% that’s not a bad yield for a small trade. Vodafone has debts though, lots of it, but it is a relatively stable share that pays out.
Apple on the other hand is a company sitting on a big pile of cash. It is also a steady grower, somewhat faster than Vodafone so on paper it looks like a good investment. However it doesn’t pay out dividends, choosing instead to retain the profit and reinvesting it in the company to fund extravagant and expensive projects. Realising a profit on Apple would mean planning an exit strategy and getting out later. It looks like a good time to get on board with Apple stock given the recent announcement of the iPad (don’t be fooled by the “Big iPod” press – it’s a content distribution platform that will make Apple — and a selection of developers, quite rich). There’s also an OS refresh this year as well as the introduction of the Intels powerhouse Core i3/i5/i7 CPUs into the Macbook range and quite likely a new iPhone, too. As it happens, I’m developing on the Apple technology stack nowadays (more on this later) and from everything I can see, this is a growth market.
I’ve put together a spreadsheet to assist with my calculations. From what I can see, if I purchased 150 AAPL (Apple) stock today at around 209.70, I would have to sell at 223.03 in order to break even on the sale and cover the costs. If I hold the stock over the summer, I think this is likely. There, I’ve said it – Apple stock is going to increase over 13.3 dollars from now to July. Good, except I originally misread Apple stock as 209.70 cents instead of 209.70 dollars, so that’s rather too much money for a junior, inexperienced investor!
I’ve also calculated that if I picked up just 100 Vodafone (VOD) stock, I’d need a rise of 20p on the share to make a profit. And anything that Vodafone pay out between now and sale time will only decrease that margin. Also good.
So what should I do? Put everything into Apple, everything into Vodafone, or split between the two?
And does anyone know a better broker than iii.co.uk for handling these simple first newbie trades for me? I’m new to all of this, so please take my advice with the value that you paid for it 🙂
If you would like to download the spreadsheet I used for these calculations, please click on the image below: