David Stevenson gives the lowdown on The Motley Fool Sharedealing Service.
I used to deal in shares for a living. On behalf of financial institutions like banks and insurance companies. Of course it wasn't my own cash I was investing, so the profits went to the pension funds and unit trusts whose money I looked after.
But I loved the job of weighing up all the evidence and opinions about a company and forming my own view. Then if I reckoned the company's share price would rise faster than the overall market, I'd buy some shares for the funds I was managing.
I know that many Fools like to do the same thing and run their own portfolios. They don't want to pay fees to professional managers because they believe they can do just as well, if not better, on their own account. What's more, they know that shares have historically performed very well over the long term.
Consider these figures from the Barclays Equity Gilt Study 2007. Since 1956, UK shares have racked up a compound annual ‘real' return of 7.1%, in other words have gone up by an average 7.1% a year on top of inflation. Over the same period cash has only delivered a real return of 2.0% a year.
Over twenty years the numbers are only slightly lower, at 6.9% year-on-year. So £100 invested in 1986 would now have grown to £382 after inflation by the end of December 2006.
Sounds pretty good to me! Though there's one crucial caveat. To get the full benefit of stock market investing, you need to reinvest any dividends you receive from companies.
Dividends make a huge difference. Here's another example from Barclays. If your grandfather had bought £100 in shares in 1899, and the dividends received had been re-invested in more shares, the pot would now be worth £25,022, adjusted for inflation. But without dividends, that original £100 investment would now only be worth just £213 in real terms.
Of course, there's no certainty that shares will perform as well in the long-term future...that's where the risk comes in. If you don't want to take that risk, then consider a table-topping savings account instead.
But if you are tempted to invest in the stock market, and you want to run your own show, you'll want to keep your expenses down, and minimise the admin hassle.
Cue the Fool. There are three ways you can start the ball rolling...
- Our online ‘real time' share dealing service costs just £10 per trade for UK stocks and £17.50 for international issues. You can deal whenever you want, twenty-four hours a day, seven days a week.
- There's an even cheaper way to invest if you're happy to deal on a set day, four times a month. The Motley Fool ShareBuilder cost just £1.50 per trade, and you can start or stop trading whenever you want.
Even better, until 31 December 2007 all ShareBuilder purchases are absolutely commission-free! With low expenses you can invest in small chunks and drip feed your money into the market. You could arrange to buy £20 of shares in a particular company each month until you cancel the order.
- For those who like the idea of making profits completely free from Capital Gains Tax, here's another option: open a self-select ISA via The Fool.
And here's how the admin works:
Alongside your trading account, we open up a cash management account. All your shares are held electronically and there are no annual charges or inactivity fees.
We'll collect your dividends and hold them in your cash management account. Or, if you like, we can automatically re-invest them into eligible shares via the UK CREST system.
So take a look at The Motley Fool Share Dealing Service now!
