Basics of buying shares: lesson 1

How do I begin????? This is a question that gets asked a lot and should be music to the ears of a parent of a young child. I will tell you how I began building my share portfolio and you can use it and improve on it.

The most important thing is to remember that it is like taking up any new challenge. It takes time and commitment! You will feel clumsy at first but the learning curve is steep and pretty soon you will have the basics figured out. Here are the steps:

• Select 20 shares you want to watch. You DO NOT buy them yet!
• Research the chosen shares. (will take weeks if not months)
• Open an account with an Online Stockbroker.
• Run a dummy portfolio for a month.
• Start buying the shares you are sure offer good value.

Things to remember

• Some of your shares will go down before they go up.
• Never get emotional about gains or losses.
• Invest in shares that you want to be a part owner of for the longer term, do not speculate.
• Do not buy and sell often, do not try and time the market. When you believe that a solid company can be bought at a good price, buy it and never sell it. (for now)
• Do not borrow money to invest in shares. This is a long term commitment and you should NEVER be forced to sell.
• Building your own share portfolio keeps you updated with world finance in general. It becomes a hobby that will not only be something you can carry on doing till the day you die, but also something that can become your main source of income and something you can do anywhere in the world with almost no capital outlay!

Think back on something that you wanted to take up 20 years ago but never did. If you did, how good at it would you have been by now?! I always wanted to play guitar and took it up twice but never persevered. If I did I would have been able to play by now and would have been able to do something that would have added a lot of value to my life. 

...........a lot of "would haves"!!!!!

I will take you through the process over the coming weeks and months but to get the show on the road the following homework:

• Download the Equity fund fact sheets of the top 5 unit trust fund managers (called "mutual funds" in the USA) from their web pages and create a spreadsheet of their top 10 share holdings that they have to list on the fact sheet. In SA the fund managers that I rate are Allan Gray, Foord, Coronation, PSG and Prudential.
• Make sure it is the Equity Fund and not the balanced, income, bond, flex etc. (Prudential calls the one I like the Dividend Maximiser Fund).
• Also ensure it is the local equity fund. If you live in SA then go to the "LOCAL EQUITY" section.

This is the first step, go for it!!