Investing in the stock market
Some resources for how to get started investing in stocks and shares. This is NOT financial advice. I cannot express this enough!
A few weeks ago a group of strangers, connected via the Internet, met at an office on a Saturday morning to talk about stock market investing.
Some context
I started Money Brunch last year to create a space where women can come together and learn from each other about the principles of personal finance, but also how they can use different tools and *actually* get started.
Why the name? For too long personal finance has been associated with suits, seminar rooms and jargon. You might smile and nod but leave having made very little progression towards a brighter financial future.
My vision was to not only share knowledge about the concepts, but more importantly highlight pathways for implementation.
Typically we learn through applied knowledge - case studies, real world examples and visual learning. A big part of this is understanding how other people have made decisions - from both similar and different backgrounds to our own.
So this session was an opportunity to do just that.
Investing
Questions about investing - getting started, investing better - are the most common ones we get. When anyone joins the group, they’re asked what they’re most interested in - and it’s investing. Sometimes it’s about up-skilling in investing, but it’s most commonly ‘how do I get started?’
And we have mixed feelings about investing — simultaneously positive and negative.
Investing in property is a lot easier to get our heads around; it’s (pun intended) concrete. By contrast, the stock market is a lot messier.
How the stock market works
Companies need capital to reinvest into growth, so they list on a stock exchange. The first sale of their shares is on the ‘primary market,’ and this is when the IPO happens. You could be the first owner of one of the shares at that stage.
But once that’s done, the shares can now be traded on the ‘secondary market.’ It’s where you can decide to sell your shares for a higher value (this happens when the company valuation goes up). And then someone else will buy them, and so the cycle continues.
There are multiple stock exchanges around - the big ones include the New York Stock Exchange, London Stock Exchange, Nasdaq, Japan Exchange Group, Shanghai Stock Exchange and Euronext.
Given where you are in the world, and the platforms (“brokerages”) available to you, you can buy and sell shares on different exchanges.
How do you buy a stock?
You need to create an account on a brokerage platform. You transfer money in and can then pick stocks to buy.
What is a fractional share?
The price of shares can be high. Right now, one Apple stock is priced at $229. You might not have that much that you can or want to put into Apple, but you still want a bite (ed: stop it…) of it.
You can - with a fractional share. You can choose to put, say £100 into Apple, and this will mean that you own around half of one Apple share. As you put more money into the company over time, your holding of Apple shares will grow.
Fractional shares have made the stock market more accessible. Which is great!
How do I pick a stock?
There are different approaches.
You can be a big fan of a company, and since you believe it’s great, you think the market will also value it highly. So you buy stocks based on your view:
I did this with Oatly. I thought it was a sure thing; it’s everywhere in the UK! It was a bad move. It was not a high-performing company. I sold my holding and reinvested in a tech company.
You’ve seen everyone hyping it up so you buy into it - think Tesla, Nvidia (AI computing), Eli Lilly (Ozempic manufacturer):
But it’s advised you do your own research too.
You can see what professional fund managers are betting on, and follow their lead. You can see what different fund holdings look like, and then invest in those stocks accordingly (click on ‘Holdings’ inside each fund listing).
Other things to consider:
Do you want the value of your stocks to grow (accumulation) and/or do you want to build a portfolio so you can earn passive income (via dividends)?
You need to look at accumulation and dividend earning stocks accordingly - again look at holdings in accumulation and dividend ETFs to pick your stocks.
How involved do you want to be in managing your portfolio?
If you like tracking companies you believe in, you can be more hands on and look to short-term trading to make more gains.
Or you can take a more long-term view, and review every six months or so, to check that things are moving in a direction you’re happy with.
What are your values?
An example - I will never, ever buy shares in Amazon or Tesla.
What if I don’t want to pick particular stocks?
There are mutual funds and ETFs which broadly do the same thing as each other. They’re a bundle of stocks and you buy into that fund. That means that your £100 is split across the split of the stocks in that basket.
For example, if you’re invested in the Vanguard S&P 500 ETF, you’ll have about £7 in Apple, £6 in Microsoft, 2% in Alphabet, and then smaller amounts across around 500 other holdings.
For any ETF, you can have a look on VettaFi’s ETF screener, to see the performance and the holdings.
Which platform should I use?
I’ve used Nutmeg for 4 years; they manage my investments for me, but charge higher fees.
This year, I’ve been exploring self-managed options, so tried out a few:
Vanguard - it’s not pretty, and feels quite ‘grown up’. Fees are low, but the opportunities to invest in US stocks (if you would like to) are low, and you can’t pick your own stocks. So it’s good if you are happy investing in funds and are comfortable figuring terminology out.
Hargreaves Lansdown - similar to Vanguard. But WAY harder to navigate.
Trading212 - the design is gross, but it works. You can watch particular stocks you’re interested in, and invest small amounts over time. So far, I am enjoying it!
ISA, ISA, ISA!
There are more platforms around, but not all of them offer an ISA.
If you haven’t used up your annual ISA allowance (£20,000 total across cash and stocks & shares ISAs), you want to put your investments in an ISA wrapper.
Why? Because any gains you make will be exempt from tax.
Money you make on investments is subject to capital gains tax — if you make above £3,000 in one tax year, you have to pay tax on anything above that amount.
So the platforms I’ve outlined above offer stocks and shares ISAs for you to put your investments into.
Other platforms include Freetrade, interactive investor and InvestEngine.
When you’re looking for a financial product, I will always recommend looking at MoneySavingExpert.
You can also invest in the stock market without buying or selling stocks
Instead, you can make bets that the price of a stock will or won’t hit a certain level in a certain period of time. This takes us into the world of options trading, which is more complex.
Just something to be aware of :)
Other considerations and things we discussed
When investing, make sure you’re OK with the prospect of losing all the money you’re putting in.
Investing is about deferred gratification (you need patience and be in it for the long haul).
For each investment, know your why and your goal (returns, other values) and what your exit strategy is:
If you’ve bought a stock, it’s not going to go up in value everyday, forever.
Know what value you’re prepared to cash out (unless you believe it will go up over time, across the duration of your holding that investment).
Learn about the different investment opportunities and options open to you - but you don’t need to know everything before starting - there is merit in learning by doing
One thing I love about Trading212 is that you can open a practice account, and get familiar with how trading works.
Diversify! Even if you’re feeling really strongly about a sector (e.g. tech) or market (e.g. US), you don’t want all your holdings in one place - diversification will help you weather downturns.
Think about how much time and energy you want to invest, alongside your money.
Only take money out if you have a plan for it - don’t just keep it sitting in a current account.
Trust your instincts!!
Closing thoughts
Women invest less than men. They’re also likely to be better investors. While we can’t do much about the income gap, we can do something about the investment gap.
Investing is a journey, and you’ll learn more as you go along. I look back to four years ago when I started, and I’ve come a massively long way since then.
Once you realise that it’s a game, you just have to start playing (responsibly, of course).
Thank you to Zinc!
I would also like to thank Ella Goldner and the Zinc team for sponsoring this event! Finding a quiet space in central London is one of the hardest things to do, and I cannot thank Zinc enough for providing a wonderful space.
If you are interested in improving the health of people and the planet, through founding a startup, I highly recommend applying to Zinc’s programme. The deadline for the next cohort is next Thursday 28 November.