The Gazette 1990

GAZETTE

' APRIL 1990

Investing on the Stock Market There need be no greet mystery ebout investing on the stock market. If you have a few thousand pounds to invest any stock- broker wou ld be glad to buy shares on your behalf. His charge is relatively small and the gains can be considerable. But, of course, you have to pick the right shares and you should know a bit about what you are doing. Stock Exchange, Anglesea Street, Dublin 2.

IN ADDITION to buying or selling your shares for you, the stock- broker will also give advice on what and when to buy and sell. His commission is relatively small - about one and a half per cent of sale or purchase price. There is no fixed commission so it may pay to shop around. Some brokers charge a minimum commission as a means of discouraging the very small in- vestor. Commissions are often lower on bigger deals - £10,000 or £20,000 or more. But the one and half per cent is about par for smaller deals, with the minimum set at around £20. There is also a Government stamp duty of 1 pc on all deals. In order to give you the best possible advice, the broker will need to know something of your income and capital position; your tax liability and your investment objectives. Do you want a high income now? Are you trying to maintain or increase your capital against the day when your pension is worth less in real terms? Brokers may not get over-enthusiastic about small investors, but a potential investor who can give a brief outline of what he requires will always get a sympathetic hearing. With exchange controls eased it is now possible to buy shares in foreign companies. Those exchange controls still apply to putting money on deposit abroad but you can buy shares provided the deal is done through an approved agent - stockbroker, bank or solicitor - and a return of the transaction is made to the Central Bank. Investing abroad, of course, brings another risk element into place. The investment has to be made in the local currency and there is always the risk that that currency will devalue against the "Wi th exchange controls eased . . . you can buy shares [in foreign companies] . . . through an approved agent - stockbroker, bank or solicitor Irish pound. If that were to happen investments in British shares would

you appreciate the risks you take and can afford to accept some losses. WHETHER YOU go it alone, or invest indirectly, some knowledge of the stock market will not go amiss. Investing in a company on the Stock Exchange gives you a part ownership in the company concerned. The return on this part ownership depends on the perform- ance of the company so, together

The memory of the stock market crash of October 1987 is beginning to fade. It was traumatic for many at the time. Having soared in value during the earlier part of that year shares took a sudden tumble. The overall value of shares on the Dublin exchange were nearly halved in value. But the recovery got underway quickly enough and since then those losses have been recovered. Although some shares are still below the highs they hit just before the crash, the overall market is above its pre-crash level. Dev- elopments in Eastern Europe have increased the level of uncertainty about the future but no-one is predicting another crash. There is always some uncertainty, of course, and some shares are riskier than others. Shares in either of the main banks are not likely to fall too rapidly in value while those in some of the oil exploration companies can jump around all over the place in response to the wildest of rumours. Between the two there is a wide choice offering something for everyone - whatever their attitude to risk. There is always some risk, of course. But how do you go about it? It can be argued that the small investor is better advised to invest indirectly in the stock market through unit trusts or equity linked bonds. That way he gets the " T h e set up costs of investing in e unit linked fund ere considerably higher than the commission payable on a share purchase." benefit of skilled management for his investment. However, it can be expensive to invest indirectly. The set-up costs of investing in a unit linked fund are considerably higher than the commission payable on a share purchase. The funds do pro- vide a spread of investments, of course, but it can be interesting to play the market yourself provided

with the prospect of a high return, goes the risk of no return. The degree of risk varies with the company. Buying ordinary shares makes you a part owner of the company carrying the full risks of ownership and the full prospects. If the com- pany makes no profits, you get no dividend; if it prospers, you get all the cream. To the outsider a certain aura of mystery surrounds the Stock Exchange, but the fact is that one can buy shares as easily - perhaps more easily - than lodging money in the bank. A number of stockbrokers now have walk-in shops where it is possible to buy shares at the counter - and sell them just as easily. The first question which enters the heads of most potential Stock Exchange investors is: "How much do I need?" There is no hard and fast answer. Some stockbrokers would put the minimum at about £1,000, some would accept a lower figure. Assuming that you have this money, how should you go about it? The person to contact is a stock- broker. You could use your bank manager as an intermediary, but it's probably better to deal direct. A list of stockbrokers may be obtained from The General Manager, Irish

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