Do you remember when so many UK service were run by the state?
I remember the gradual drip-drip sale of services, starting from the time of Margaret Thatcher’s election in 1979. It grew in the 1980s under “Thatcherism” and continued with her successor John Major, even when Tony Blair was PM from 1997 to 2007. There is very little left now under state control, as far as I can recall, with The National Grid being the most recent piece of critical infrastructure management being sold off.
I wasn’t old enough nor attentive enough to understand the situation back in the early days of state sell-offs, but by the time of the British Gas sale in 1986, privatisation seemed like a way to take a stake in a once-state run company and make money from it. Prior to that individuals never made any money from state-run businesses, but this was changing under privatisation.
The British Gas ads were memorable; “If you see Sid, tell him!” they said. The premise seemed to be that EVERYBODY could take a stake in the country’s gas supplier. Regular citizens of the UK could invest any spare money they could afford into national services.
Only in it for a Quick Buck
What seemed to happen was that people who could afford shares brought them and sold them when they’d made a profit.They were no longer shareholders, but had a little bit more money than when they started. And that was that, they never invested again.
I’ve seen it time and time again, first at Sun Microsystem, and most recently with Royal Mail. But then maybe I’ve only been hanging around with the sort of people who don’t trade shares.
Longer Term Traders
My father was one to hold on to stocks – He made good money when he worked in aerospace, defence, and software. I know he invested but never knew how much. He must have had British Gas shares, and I know he held Christian Salvesen shares once upon a time. He even had one share, of which company I don’t know, in a frame in his downstairs toilet to show how little the particular stocks had fallen, way down from a lofty high.
I was interested when I had a BBC Microcomputer in my mid teens – there was as a game called Stock Market, funnily enough, and I was quite good at it. Then I studied Economics at school, and Business Studies at college. Around that time I visited the London Stock Exchange, but I was not enamoured by the floor traders and so I switched off again for a few years.
Just One Share
Then one day in the 1990s or 2000s I was so upset with the way my beloved West Ham United was run that I brought a solitary single share so that I could be party to shareholders’ meetings and communications. That single share was worth sod all and I paid more to simply buy it. Eventually the club went private and so my share was worthless again. But at least I had insights into boardroom comms whilst I was a shareholder.
The price of trading was the thing that put me off. Having little money anyway, just to pay £25 every time I wanted to buy or sell shares was the clincher. I needed to have made enough to justify these trading fees and so share trading was once again off the agenda.
Roll on 2021
Then one day last year I read a story on the BBC. It was about small investors now being able to invest in shares through apps on their phones. I looked into the Freetrade app, downloaded it, put a tenner in my account, and waited a week…
I already had a copy of Robbie Burns’ The Naked Trader. It’s a well-known book, having been in print for a few years now, but a friend had recommended it. So I grabbed the audio version as well and had a listen. Funnily enough I brought it and started listening just two weeks before I set up my Freetrade account.
My First Trades
Having just read The Naked Trader, and with an almost lifelong interest in shares, I was finally in a position to “get my feet wet”. With £10 in the app, I did some homework and purchased £8.80 worth of shares in early July 2021. Two months later I received my first dividend. A meagre 22p. However, in just two months, I’d already seen what was effectively a 2.5% return on my investment.
I know that the period was just two months, and shares can go down as well as up. But a year later and the share price has dipped just over 11%. I’ve picked up some more of the same stock and now own just £26.41 but have had a second dividend of £1.05 – My original shares have gone down in value, but I’ve picked up more, and in just over a year I’ve had a 4,8% return on that investment.
And that’s just one company.
I’ve since invested in additional companies, now with a tiny portfolio of just over £300. Of course, had I put away a pound a day for the past year, I’d have more money, but that’s not as much fun. My current account offers 5%, but that’s on cash that gets spent on bills etc. My best savings account offers 2.5% even though the Bank of England has hiked interest rates by .75% since then (Where’s my 3.25% you tight bankers?!)
My Shares Philosophy
This is my philosophy for shareholding.
- I do my homework. I look at the historical data, keep an eye on the markets, an eye on the news, and I invest only in shares that I believe will give me a long-term return.
- I understand that trading shares is akin to gambling – investments can go down as well as up. However, unlike gambling, if I haven’t immediately won, I still have “skin in the game”. I’ve still got my shares to sell and, playing the long game, I can keep earning dividends.
- I’m not in it to be a day trader.
- Shareholders get a bad rep in the media. If the government will not implement a windfall tax on unexpected and excessive profits, then shareholders get the benefits. We can either sit there and moan about them or play them at their own game. I don’t earn millions, thousands, nor even hundreds from this, but the satisfaction of getting even a little of that back is good. I know not everyone can afford to play the shareholder game, and some won’t find my behaviour entirely ethical, but I’m a good guy.
- Companies take money off you every day, every week, every year. Companies need to make a profit, but some of that goes to shareholders. I see having shares in the companies that take money from me as a way of clawing some of that back, a small discount if you like. It’s not enough now, but with time and the compound effect, it will gather pace and become ever more useful, with greater dividends, paybacks, or discounts. So I have invested in:
- Banking – They charge more interest than they pay out, so I’m getting cashback on my mortgage and my credit card here.
- Energy – We all use gas, electricity, and fuel our cars. Having shares in energy companies is getting some of that expenditure back, right?
- Telecoms – Using the internet, landlines, or mobile phones, we pay them all the time. Shares in providers is more money back.
- Insurance – You can’t drive a car without insurance, nor get a mortgage without it. So investing in insurance companies is my discount there.
- Groceries – We all have to eat, so having money in the supermarkets is good.
- Don’t Panic! Written in big letters on the cover of the book… I’ve done my homework, and am in for the long-term, so small dips are OK and there is a sensible threshold at which I will sell.
- Keep your head when all about are losing theirs – Or as Warren Buffett says “Be fearful when others are greedy, and greedy when others are fearful”. I’m not into greed, but you get the point.
The biggest part of my personal shares philosophy is to invest in those who take money from me. After all, if say 5% of a share’s worth is a dividend, then that’s being paid for by the consumer. We’re all consumers, so a proportion of what we’re paying for goods and services goes to shareholders. So you might as well be a shareholder yourself.
As I mention, it’s like getting a discount or clawing back some of your own money. At my low level of investment it’s really not much but it’s better than nothing. Being just a consumer it’s just give, give, give. By being a shareholder as well, you can take some of that back.
So here’s a good example:
I just looked on my banking app at how much I spend with a particular supermarket. I’ve spent £1,700 over the last 6 months, on food, clothes, household products, and fuel.
I also looked at how much my loyalty points with that same supermarket are worth – about £11 in the same 6 month period.
Doing the maths, that’s a 0.64% return on investment.
The bank interest rate is currently 1.75%
My best savings account offers 2.5% (But should be 3.25%)
I have a small number of shares in the supermarket I shop in. I’ve already had dividends of around 4.49%
AND I still have my shares. Sure, they’re down, and I have to consider that in the long run, but I could buy now, if they’re at the bottom of the curve, and make even better returns in the long run.
I’m just a little guy in a big pond, dabbling in shares and seeing the majority of my investments slowly go up. I reinvest my earnings back into shares.
I don’t have a lot of money. I use my banking app’s “impulse saver” function to put away any spare change into an online holding account. When that account has sufficient cash for a decent trade, I’ll purchase more shares. That amounts now to just a few hundred quid.
I’m not expecting to be mega rich, but it’s better to invest than not at all. Plus, companies are taking from us all the time, let’s take some of that back. The satisfaction of knowing I’m in the game, am making good decisions, and getting payback is brilliant. It can only get better.
Of course, there may be a recession soon, the last quarter of 2022, or into next year. Inflation is 10.1% right now, gas is up, electricity is up, food’s up, fuel’s up, mortgages are up… all of us regular people are haemorrhaging cash, so this is a flow in the other direction.
Yes, interest rates earned on savings are not catching up with what we’re paying, but they could and should do. What then? At least we all have a diverse portfolio by having money in shares.
I am not a professional investor, and all the above are simply my opinions, so this is not financial advice. But I must being doing something right. Right?
If you want to join the app I use, then hit me up and I can share an affiliate link – we’ll both receive a random, free share in a company when you’ve made your first trade,
[…] the other day I said that we should all be shareholders. I say that partly because successive governments after Margaret Thatcher’s initial […]