Only the other day I said that we should all be shareholders. I say that partly because successive governments after Margaret Thatcher’s initial privatisation have promised that everyone can be a shareholder. The reality is that they are not. Depending on which figures you look at, only between 22% and 33% of Brits are direct shareholders.
Another reason we should all be shareholders is because of recent calls to renationalise certain businesses. We were all shareholders once upon a time. Then the businesses were all sold off – telecoms, gas, railways, water, etc. If we missed out on shares because we were not rich enough, too young, etc, then there has never been a better, cheaper time to buy shares. With modern trading apps, you don’t have to pay £25 per trade when you want to top up on Lloyds Bank shares at £0.43 each when you have a spare fiver in your bank. We can now be private investors in firms that were once national, so in a way, you’re taking that back.
The third reason why it makes sense to buy shares is because shareholders take a certain percentage of their investment away in dividends. Let’s say you’ve invested £100 in a well known telecoms provider with a dividend of 5% then you’ll get back 5p for every £1 you invested. That £100 gets you a small dividend of £5, depending on the share price of course. But 5% is better than the 3% you may get in a regular savings account right now. So every time you pay your telecoms bill, or any other bill for that matter, remember that a certain percentage of your spend is earmarked to go straight into the shareholders’ pockets.
Shares as Discounts
The main thrust of this post is that investing in shares is a potential discount on the services you use.
Only yesterday I was singing the praises of having shares. My £100 of telecoms shares has already netted me a small dividend payout of £3.33 – The immediate quip was
“That’s going to pay off your gas bill is it?!”
And they’re absolutely right, £3.33 is not going to make much of a dent in these rising gas bills. Talk of these latest energy caps seems to indicate we could be paying up to £3,500 a year for our energy use.
But the point is this: For every £100 in my telecom shares I get £3.33 back. If I had £1,000 in those same shares, I’d have had £33 back. My mobile phone airtime bill is approximately £30 a month. One payout of £33 means that I get one month’s payment back. So that’s a personal goal – to get £1,000 invested in my telecoms shares so that I can claw back a month’s payment. It’s not much but it’s better than nothing. Keeping that £1,000 investment means a recurring payout every year, if the company continues to perform. That’s 12 months for the price of 11 and £1,000 in the bank for a rainy day.
What if I were lucky enough to have £10,000 invested in that same stock? That would be a £333 payout every year – that’s the equivalent of having that airtime bill paid off. My mobile phone bill would be free. You’ve just earned yourself a 100% discount.
Buy Shares in Everything You Use
For every bill you pay a percentage of your outgoings are heading straight to the shareholders. There’s been a lot of demonisation of shareholders recently, and rightly so. Some privatised industries have been massively overleveraged, and underinvested in, whilst the shareholders make a steady profit from this lack of infrastructure investment.
We all use the same services, so if you’re going to get your money back, get a discount form having shares, then you’ll be wanting to look at these industries:
- Oil and gas – We use natural gas and we burn it to generate electricity. If there are no windfalls, then the profits are going to shareholders, so be an oil and gas investor. BP [£BP] and Shell [£SHEL] are just two to invest in.
- Energy – Your gas and electric bills are going up, so take a stake in Scottish and Southern Electricity [£SSE] or Centrica [£CNA] for starters.
- Water – A human right, we all need access to clean running water, so shares in Severn Trent [£SVT], United Utilities [£UU], or Pennon [£PNN] are worth looking into.
- Banking – You can’t pay your bills unless you have a bank account. Also, the banks are quick to take advantage of interest rate rises but not give that back on your savings, so grab a slice of that by investing in your bank or someone else’s – Barclays [£BARC], Lloyds [£LLOY] and NatWest [£NWG]are just a few.
- Insurance – You can’t get a mortgage without house insurance. You can’t drive a car without motor insurance. We all have to pay their bills, so get stuck in to insurance company shares – Direct Line [£DLG], Aviva [£AV], and Legal & General [£LGEN] are some that spring to mind.
- Telecoms – We all have phones and/or mobile phones, and internet, so have some shares in your comms providers too. BT [£BTA] and Vodafone [£VOD] are just two I can think of.
- Supermarkets – Where else do you get your food and provisions from? Sainsbury’s [£SBRY] and Tesco [£TSCO] are listed on the LSE.
- Technology – Your mobile phone manufacturer makes money from you, so make money from them. So does your browser, your search engine, operating system, and laptop… Look at Apple[$AAPL], Alphabet (Google) [$GOOG], Microsoft [$MSFT] for a start.
- Medical – Michael Stipe once said everybody hurts… sometimes. Medical companies make so much out of all of us, so get some back – Johnson & Johnson [$JNJ] is a biggie and you can buy fractional shares on some apps.
That’s my quick list. Remember – this is not qualified financial advice. The value of stocks and shares can go down as well as up, as can dividends. Also, interest rates have been rising, so there’s merit in comparing dividend yields to interest rates.
My ultimate advice is to diversify your portfolio. By that I mean keep your current account, have your savings accounts, ISAs, premium bonds, silver, gold, crypto etc. But also diversify your stock positions. As above, I mention oil & gas, energy, water, banking, insurance, telecoms, supermarkets… you may want to look at whether you’re spreading your risk/investment across financial, energy, and services sectors just to start with.
We’re apparently approaching a recession in the UK and no amount of tax cuts from Liz Truss will save us from that – tax cuts will only benefit larger companies, so the tax cuts could have a positive impact on your stocks and shares. However, stocks may well fall due to wider pressures on the economy, so be very careful with your investments over the next year or so. The average person on the street will still suffer, but shareholders could potentially benefit, so be prepared for what happens next.