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How-to Guides » Make money from the stock market

Taking the plunge into the stock market isn't for the faint-hearted, but investing can help you achieve your financial goals.

Decide if you’re ready to invest

How-to Guide Tips 6 tips on this task  | 

There's one golden rule of investing you should always remember: never invest money you can't afford to lose.

There are several other factors you should consider before you dip your toes into the stock market waters:

Have you got an emergency cushion?

Do you already have an emergency cash cushion in a savings account? The cushion should be equivalent to at least three months’ salary. This will help you cope financially with any unexpected events. You really need to have some emergency cash available before you consider investing.

Have you got debts?

If you have debts other than your mortgage, it’s unlikely you’ll earn a better return on your shares as a new investor than the interest you're paying on your debts, so clearing your debt first should be your top priority. It’s particularly worth considering offsetting your savings against your mortgage if you are a higher-rate taxpayer, as you’ll save a lot of tax that way.

Are you in it for the long-term?

You need to be prepared to invest for at least five years. Investing in shares is a risky business. Shares can be very volatile, so if you need your money quickly, you may have to sell your shares at a loss. Five years is generally regarded as the minimum appropriate period for stock market investment.

What’s your attitude to risk?

Think about your attitude to risk. If you're really cautious, stock market investing isn't really for you. Remember any money you invest is at risk, and if the shares you choose don't perform well, you will lose out.

Are you happy to pick your own stocks?

Don't forget, you don't have to pick your own stocks. If you're new to investing you could try investing your money in an index-tracking fund first. An index-tracker ‘tracks’ or mirrors the performance of the index it’s based on. If you choose a FTSE 100 tracker, for instance, the fund will be invested in all the top 100 UK companies. Other trackers are available which track other UK indices or markets in other countries.

Trackers are a cheap and easy way to gain exposure to the UK stock market without having to pick the shares yourself.

Have you got time to do research?

If you decide you're ready to take the plunge into the stock market and buy shares yourself, you must do your research first. Buying company shares is a high-risk investment, and shouldn't be done until you've fully checked out the prospects of the company you're interested in.

It makes sense to spend some time learning about the stock market first. Read as much as you can. The Motley Fool is a great place to start. Also look at the Financial Times or any of the ‘quality’ newspapers. The Investor’s Chronicle is worth a look too.

Start a practice portfolio

Pick a few shares and stick them in a portfolio on a site such as Yahoo Finance. Don’t buy the shares with real money. See how the shares perform over six months or a year and you’ll probably learn a lot. You may even decide stock market investing isn’t for you. On the other hand, you might find you have a real knack for investing!

Compare savings account and index trackers at lovemoney.com

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Tips on this task (6)

  • Dan CertPFS
    Love rating 2
    Dan CertPFS said

    Alternatively look at unit trusts and OEIC's as these can offer a cheap entry into the marketplace and can be held in ISA which makes them very tax efficient.

    If you have £250K to invest then a stocks (and bonds) portfolio may do well for you. If you dont then please don't invest directly as you don't have enough to make meaningful returns.

    Report on 06 July 2011  |  Love thisLove  0 love
  • creditguard
    Love rating 0
    creditguard said

    Once all of that is taken concerned of you can start discovering to invest. Research on the internet the distinct kinds of supplies and one time you seem snug that you understand what you’re managing then open up an invest account and begin investing. The charges to invest can get high so if you don’t have much cash to set apart, you can put a little bit of cash into a savings account every month and in a twosome of months make a supply purchase.

    Report on 12 September 2011  |  Love thisLove  0 love
  • trevmarks
    Love rating 0
    trevmarks said

    I've been doing some research into managing my own investments. I have come across various stock market trading platforms or programs that offer everything from a partially automated option through to very in depth and involved trading processes. Some of the standouts appear to be ESL Trading Software and Interactive Brokers.

    Report on 11 November 2011  |  Love thisLove  0 love
  • babyhk
    Love rating 10
    babyhk said

    Trust your instincts as I was tempted by Anthony Boltons Chinese fund especially after his success at Fidelity with the special sits fund . Quoting latest media facts this fund has lost 32% this year so the comment by Dan about having £250k to invest may not be enough as this fund holds about £4.2 million in investments . My advice to invest was by 2 financial advisors and a high street bank manager/ neighbour. To say that investors have to wait a few years to see a return is probably quite an understatement .

    Report on 19 November 2011  |  Love thisLove  0 love
  • JRAY100
    Love rating 67
    JRAY100 said

    After decades of terrible stock picking...

    I make money using ETF's and high beta stocks without the 0.5% stamp duty - it's easier and you can short the markets.

    I mark a £20k deal by only £50, but often gain more, but take the profit within an hour, a day, next day...

    ...it works for me... you have to be dedicated, though!

    ...I no longer trust stocks or the economy... so I prefer to be selling back to cash all the time.

    ...here's a little tip... try a cheeky buy order... with a low price... sometimes it comes off!

    ...I had to pop out to do some paid work (!?) at 15:30 09-01-14, so seeing the market falling I put a couple of buy orders via the JarvisIM's £9.50 a trade web site:

    100 x ETF LUK2 @ <£200.80

    1432 x WPP (no stamp duty on this stock) @ 1335p

    ...Amazingly when I returned there were the two contract notes in my inbox!

    ...Make sure that you get up before the market opens to take positions!

    ...Both positions sold by 08:04 10-01-14!

    £22252.30 - £22087.50 = £164.80

    £19297.44 - £19122.54 = £154.90

    Total gain = £319.70... (tax free in ISA's) not bad for overnight!... makes over a grand for the week!

    I know I would have made nearer £600 than £319 had I sold later on, but remember that the market could have suddenly turned... so £319 in the hand is better than...!

    My motto:


    Here's a useful link:


    I'll short the market when the FTSE100 is ~6760 using SUK2

    Just follow the rules and enjoy the process & make your £1M's!!!


    Report on 10 January 2014  |  Love thisLove  0 love
  • begajol
    Love rating 0
    begajol said

    good luck

    Report on 26 July 2014  |  Love thisLove  0 love

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