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Straightforward Publishing - Liam Croft

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76 pages

English

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Description

A Guide to the Stock Market, How the Stock Market Works is a practical guide to the UK stock market, how it operates and what its purpose is. The book explains the different types of stocks in the market and looks at the short and long term benefits of share ownership. The book is ideal for the small investor, and is comprehensive and detailed updated to 2022. The effects of the pandemic are also examined.

Sujets

Gestion et management

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Publié par	Straightforward Publishing
Date de parution	24 février 2022
Nombre de lectures	0
EAN13	9781802361155
Langue	English

Informations légales : prix de location à la page 0,0300€. Cette information est donnée uniquement à titre indicatif conformément à la législation en vigueur.

Extrait

A STRAIGHTFORWARD GUIDE TO THE STOCK MARKET
HOW THE STOCK MARKET WORKS
LIAM CROFT
Editor: Roger Sproston
Straightforward Guides www.straightforwardco.co.uk
Straightforward Guides
Straightforward Co Ltd 2022
All rights reserved. No part of this publication may be reproduced in a retrieval system or transmitted by any means, electronic or mechanical, photocopying or other wise, without the prior permission of the copyright holder.
British Cataloguing in Publication data. A catalogue record is available for this book from the British Library.
ISBN 978-1-80236-027-1 Epub ISBN 978-1-80236-115-5 Kindle ISBN 978-1-80236-108-7
Printed by 4edge www.4edge.co.uk Cover design by BW Studio Derby
Whilst every effort has been made to ensure that the information in this book is accurate at the time of going to print, the author and publisher recognise that the information can become out of date. The book is therefore sold on the understanding that no responsibility for errors and omissions is assumed and no responsibility is held for the information held within.
Contents
Introduction
BREXIT, COVID 19 and the Stock Market
General Points
Section 1
Ch. 1 The Individual Investor
Defining the Investor
Purchasing assets
Hedging and speculation
The speculator
Markets
Ch. 2 The Benefit of Owning Stocks and Shares
Owning Shares in a Company
Long-term investment
Short-term investment
Perks of owning shares
Section 2. Operations of the Stock market and Companies
Ch. 3 The Stock Market and How it Works
What is a stock Exchange?
Companies listing on the Stock market
Main market
The Alternative Investment Market
TechMark
Ofex
SWX Europe
The IPSX
Ch. 4 General points on trading on markets
The basic order types
Market order
Limit order
Marketable limit order
Stop order
Stop limit order
Ch.5 Companies and Financial data-Interpreting Data
Operations of Companies
Company data
Profit and loss
The balance sheet
Cash flow statements
Interpretation of company accounts
Key financial ratios
Gearing
Income gearing
Return on capital employed
Pre-tax profit margin
Ch.6 Companies Raising Finance
Equity
Ordinary shares
Right to vote
Right to receive dividends
Pre-emptive rights
Claims on a company's assets in liquidation
Classification of ordinary shares
Preference shares
Dilution of equity and alternative borrowing
Other types of borrowing
Loan stock and debentures
Warrants
Convertibles
Gilts
Derivatives
Futures
Forward contracts
Options
Covered warrants
Overseas shares
Section 3. Purchasing Shares
Ch.7 Vehicles for Buying Shares and the Costs of
Investing
Buying through investment trusts
Investment trusts
Unit trusts
Tracker funds
Open-ended investment companies
Advantages of pooled investments
Exchange traded funds
Investment clubs
The costs of dealing in shares as an individual
Commissions
The spread
Income tax
Buying shares
Execution only brokers
Advisory brokers
Discretionary brokers
Ch. 8 The Internet
Internet Broking
A selection of share trading apps
Section 4. Interpreting Financial Information
Ch.9 Interpreting Financial Information
Interpreting the markets
Reading the papers
The London Stock Exchange Market information
Interpreting the figures
How to use the information effectively
Evaluation of weekly performance
Other share dealings
Trading volume
Share rises and falls
Highs and lows
Main movers
Indices
Eurotop
Ch.10 Choosing a share
Choosing a Share
Fundamental analysis
Technical analysis
Ethical investments
Sources of information for the small investor
Directors dealings
Using stockbrokers
Taking Advice from a Financial Advisor or Investment Professional
Section 5. Taxation
Ch.11 Shares and taxation
Shares and Taxation
Capital Gains tax
Investment clubs
Dividends
Summary
Devising an investment strategy
Your portfolio
How many funds are too many
The age-adjustment mix
The conservative balanced mix
Glossary of terms
Useful addresses
Index
****
Introduction
It is true to say that, for many years, the ownership of stocks and shares and the workings of the stock exchange were a mystery to most people. Shares and the stock exchange were seen to be a specialist areas dominated by the well heeled and, invariably, the old-school tie network. Times have changed and now share ownership is within everyone s grasp. This has been so because of changes in the ownership of former public utilities and the dispersing of shares to the ordinary person. Alongside that has come an opening up of the whole area of share dealing.
However, over the last few years we have seen some horror stories about the stock market and investors losing a lot of money. Some of these losses have been in mini-bond investments, i.e. the Woodford Funds and also London Capital and Finance and also in assorted other investments. This emphasises the fact that investing in stocks and shares can be very risky indeed and, rather than make money you can also lose money.
Today, following Britain's exit from the EU, The questions are what will happen to sterling; or to the UK economy, rather than the nitty-gritty of corporate activity. BREXIT may have a meaningful effect on the earnings and dividend payments for certain companies that depend on EU markets or supply chains. For others, the currency is a key issue. For dollar earners, a weak sterling flatters their income, while other areas struggle in relative terms because their income is in sterling. However, for most it is a sideshow in the day-to-day running of their businesses. Wait and see.
BREXIT, COVID 19 and the stock market
Over the last two years in the UK, 2020-2022, no two events have had a greater impact on stock market indices, including the FTSE 100, than Brexit and Covid-19. The FTSE 100 has either risen or fallen with almost every new Brexit and Covid-19 development as investors have speculated on what each one could mean for the economy and, most importantly, for their investments.
We need to look deeper into this to understand the swings we see in stock markets whenever there is significant news on either Covid-19 or Brexit.
BREXIT
Stock market indices like the FTSE 100 have shown significant sensitivity to Brexit news and headlines ever since the shock 2016 referendum result. On 24 June 2016, the day that the referendum results were announced, the FTSE 100 fell by 9%. Since then, other Brexit developments have been accompanied by swings in the FTSE 100 and other stock market indices.
For example, on 17 January 2017, when the then Prime Minister Theresa May announced plans for a potential hard Brexit, the FTSE 100 fell by 1.5%. On 20 April 2020, it rose by 0.45% when Brexit talks resumed after a six-week interruption caused by Covid-19.
Most recently, on 15 October 2020, the FTSE 100 fell 1.8%. This was after Boris Johnson expressed disappointment about the progress of Brexit trade deal negotiations during a call with EU leaders. This understandably made investors anxious about the potential for a no-deal Brexit.
A week later, on 23 October, the FTSE 100 rose by 1.3% after talks about the deal resumed. We have now well passed the exit date, which was on 1st January 2021. However, the stock market has had no time to steady as a result of the pandemic.
Covid-19
Over the last two years, the impact of Covid-19 on the stock market has been even greater than that of Brexit. For example, on 12 March 2020, the blue chip index suffered its second biggest one-day crash in history and the largest since 1987 amid concerns over the spread of the virus. It then fell to its lowest value on 23 March 2020.
However, the index soon made a tentative recovery. This was after lockdown measures started to calm investors' concerns about the spread of the virus. More recently, following the second wave, and subsequent lockdown, due to rising Covid-19 cases, the FTSE 100 started to fall again. It ended up hitting a six-month low in late October 2020. But news of two promising vaccines from Pfizer and Moderna saw the FTSE 100 rally once again. It rose by 4.7%, or 276 points, after Pfizer's vaccine news. This, in effect, added close to 70bn to this index s value. The index rose by a further 1.6% after Moderna s announcement of its own vaccine news.
In a nutshell, positive news about Covid-19 usually translates to a gain in the FTSE 100. A vaccine, for example, signals to investors that normality, particularly in the business world, might resume soon. It suggests that companies' earnings could go back to pre-pandemic levels and that's it's therefore worth investing in them.
Conversely, negative news, like a rise in cases, points to an uncertain economic future causing investors to be extremely cautious.
How can stock market investors take advantage of Brexit and Covid-19 news?
Savvy investors know better than to base their investment strategy on trending news and headlines. There will always be forces like these that cause short-term ups and downs in the stock market.
The best approach is sticking to a long-term investment strategy that's based on your preferences and capabilities. Over the long term, the market has an upward bias. Those who are patient are often able to garner good returns from their investments.
With that said, negative reactions to Covid-19 and Brexit developments can provide a great opportunity for smart investors to buy stocks and shares at discounted prices.
While it's up to you to decide whether to pounce on this opportunity, remember the advice of Warren Buffett, one of the world s greatest investors: "Be fearful when others are greedy and greedy when others are fearful."
Short term investment trends-making a quick buck
Another area that has grown is that of the speculative investor looking for quick returns. Unless you really know what you are