How to trade in shares

The stock market is not in its fundamentals greatly different from the new Covent Garden, Smithfield or Billingsgate markets. Whether you are dealing in turnips, pork or haddock, or the shares of Marks & Spencer, it is just a matter of buyers, sellers, an agreed price, and usually a middleman. And just as the

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When to deal in shares

The obvious answer on ‘when’ questions is to buy when they are cheap and sell when they are dear. Predictably, there are problems involved, including deciding how you define cheap, finding the stock that is cheap and deciding whether it is cheap or just a poor bet. So important is this aspect that experienced

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Analyzing Charts for dealing in shares

Charts are a useful adjunct for the private investor because for once there is parity with the professionals. Both have access to the same infor­mation and it is the skill in interpreting the data that makes the differ­ence. But just as there are swarms of people with their own pet theories on how to

Technical tools for dealing in shares

None of these charts needs be used on its own. A wealth of additional information on the chart will add a level of perspective or even explanation. For instance, adding the movement of an index – whether the FTSE100, the All Share or the sector of that company – can show whether it is

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Sentiment indicators for dealing in shares

Technical analysis is not just about charts. There are hosts of other indi­cators providing additional or alternative pointers to market movements and hence tips on when to trade. Some of them work on indications of general sentiment in the market. One of the difficulties with any of these guides, of course, is that as

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Other indicators for dealing in shares

There are many other systems attempting to predict market movements. Like any other activity in areas dominated by luck and the unpredictable, like fishing and acting for instance, there is quite lot of superstition in­volved. People are ready to grasp at any apparent correlation, no matter how dubious. So there is one theory that

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Selling shares on the stock exchange

It is never wrong to take a profit is one of the ancient rules of stock market investment. Yes, the share price may go on zooming up still further, but your profit is safe. One alternative when winning is to hedge your bets by selling part of the holding to recover the original investment

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Information for shareholder

The information the owners must have includes regular financial facts. Every year the company must produce an account of its finances (the phrasing in law is a little more complicated but that is what the rules amount to) and this must be sent to all registered shareholders. (See Chapter 7 for what the useful

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Annual general meeting

The annual general meeting is a legal obligation and shareholders must be notified in advance. There is, however, no legal insistence that the meeting is held in a convenient spot, so if the directors are feeling bloody- minded they could hold it in the upstairs room of a pub on Stornoway. Curious times and

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Extraordinary general meeting

Shareholders representing at least 10 per cent of the equity may demand the convening of an extraordinary general meeting. Source: Becket Michael (2014), How the Stock Market Works: A Beginner’s Guide to Investment, Kogan Page; Fifth

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Shareholder Consultation

There is a legal obligation to consult shareholders on matters that affect the company’s future. They have the right to vote on major decisions, including actions that may dilute their holdings such as rights issues and employee share options schemes. If they can muster 5 per cent of the company’s equity or 100 shareholders

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Dividends for shareholder

Shareholders are entitled to take part in the company’s success and profits. Normally shareholders participate in the company’s profits by way of dividends, which are usually paid twice a year, but this is not a legal right since a company may decide to reinvest its profits in the business for faster growth. In practice

Scrip issues

This looks like a burst of spontaneous generosity by companies that give investors some extra shares for nothing. Sometimes they are in place of cash dividends and sometimes as a supplement to them. In fact it is a simple bookkeeping exercise that should have no effect on the share price or the value of

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Rights issues

Companies wanting to raise additional capital sometimes turn to exist­ing shareholders first. There are several reasons for this. The first is obvi­ous: shareholders by definition must like the company, so if it says it can see opportunities for useful investment to allow it to grow but needs additional cash, they are more likely to

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Nominee accounts

Many people hold their shares in nominee accounts – for SIPPs and ISAs they have to. These are held in a number of places and are a convenience to prevent shuffling of papers or to speed up the processes of buying and selling. For instance, the dealing stockbroker may hold an account for an

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Regulated markets

In addition to their rights in relation to the company of which they own a piece, investors have a right not to be ripped off by the financial com­munity. This is the part that is mainly watched over by the regulatory authority. It regulates British brokers and dealers, whether they are in a City

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Codes of conduct for shareholder

The apathy of most shareholders has allowed company boards so much latitude that they seemed beyond reasonable control. To fill this vacuum the City has produced a series of codes of conduct to guide directors on best practice. The latest of those, the Hampel Report (following the Cadbury and Greenbury Reports), which is backed

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Shareholders’ Takeovers

Usually, you say thank you very much. Bids for companies are almost invariably well above the price of the shares just before the bid, so shareholders benefit. On the other hand, what may well have tempted a predator is precisely that the price was standing way below any rational basis of valuation, for instance

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Insolvency of shareholder

Investing in shares is risky. There is no way of getting away from this. One of the reasons the stock market produces a higher average return than, say, putting the money into a building society or a bank savings account, is to offset this danger by compensating investors. But note the word ‘average’. Some

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Tax of trading shares on the stock exchange

It is galling that the government takes another slice on dividends and capital gains after it has already charged additional tax on investing taxed income. But reconcile yourself with the thought that at least you have profits to be taxed. Tax is always complicated, and huge manuals have been written on how to cope

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