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GAZETTE
' APRIL 1990
Investing on the Stock Market
There need be no greet mystery ebout investing on the stock
market. If you have a few thousand pounds to invest any stock-
broker wou ld be glad to buy shares on your behalf. His charge is
relatively small and the gains can be considerable. But, of course,
you have to pick the right shares and you should know a bit about
what you are doing.
The memory of the stock market
crash of October 1987 is beginning
to fade. It was traumatic for many
at the time. Having soared in value
during the earlier part of that year
shares took a sudden tumble. The
overall value of shares on the
Dublin exchange were nearly
halved in value. But the recovery
got underway quickly enough and
since then those losses have been
recovered. Although some shares
are still below the highs they hit just
before the crash, the overall market
is above its pre-crash level. Dev-
elopments in Eastern Europe have
increased the level of uncertainty
about the future but no-one is
predicting another crash. There is
always some uncertainty, of course,
and some shares are riskier than
others. Shares in either of the main
banks are not likely to fall too
rapidly in value while those in some
of the oil exploration companies
can jump around all over the place
in response to the wildest of
rumours.
Between the two there is a wide
choice offering something for
everyone - whatever their attitude
to risk. There is always some risk,
of course.
But how do you go about it?
It can be argued that the small
investor is better advised to invest
indirectly in the stock market
through unit trusts or equity linked
bonds. That way he gets the
" T h e set up costs of investing
in e unit linked fund ere
considerably higher than the
commission payable on a
share purchase."
benefit of skilled management for
his investment. However, it can be
expensive to invest indirectly. The
set-up costs of investing in a unit
linked fund are considerably higher
than the commission payable on a
share purchase. The funds do pro-
vide a spread of investments, of
course, but it can be interesting to
play the market yourself provided
you appreciate the risks you take
and can afford to accept some
losses.
WHETHER YOU go it alone, or
invest indirectly, some knowledge
of the stock market will not go
amiss. Investing in a company on
the Stock Exchange gives you a
part ownership in the company
concerned. The return on this part
ownership depends on the perform-
ance of the company so, together
with the prospect of a high return,
goes the risk of no return. The
degree of risk varies with the
company.
Buying ordinary shares makes
you a part owner of the company
carrying the full risks of ownership
and the full prospects. If the com-
pany makes no profits, you get no
dividend; if it prospers, you get all
the cream. To the outsider a certain
aura of mystery surrounds the
Stock Exchange, but the fact is that
one can buy shares as easily -
perhaps more easily - than lodging
money in the bank. A number of
stockbrokers now have walk-in
shops where it is possible to buy
shares at the counter - and sell
them just as easily.
The first question which enters
the heads of most potential Stock
Exchange investors is: "How much
do I need?" There is no hard and
fast answer. Some stockbrokers
would put the minimum at about
£1,000, some would accept a lower
figure.
Assuming that you have this
money, how should you go about it?
The person to contact is a stock-
broker. You could use your bank
manager as an intermediary, but it's
probably better to deal direct. A list
of stockbrokers may be obtained
from The General Manager, Irish
Stock Exchange, Anglesea Street,
Dublin 2.
IN ADDITION to buying or selling
your shares for you, the stock-
broker will also give advice on what
and when to buy and sell. His
commission is relatively small -
about one and a half per cent of
sale or purchase price. There is no
fixed commission so it may pay to
shop around. Some brokers charge
a minimum commission as a means
of discouraging the very small in-
vestor. Commissions are often
lower on bigger deals - £10,000 or
£20,000 or more. But the one and
half per cent is about par for
smaller deals, with the minimum
set at around £20. There is also a
Government stamp duty of 1 pc on
all deals.
In order to give you the best
possible advice, the broker will
need to know something of your
income and capital position; your
tax liability and your investment
objectives. Do you want a high
income now? Are you trying to
maintain or increase your capital
against the day when your pension
is worth less in real terms? Brokers
may not get over-enthusiastic
about small investors, but a
potential investor who can give a
brief outline of what he requires will
always get a sympathetic hearing.
With exchange controls eased it
is now possible to buy shares in
foreign companies. Those exchange
controls still apply to putting
money on deposit abroad but you
can buy shares provided the deal is
done through an approved agent -
stockbroker, bank or solicitor -
and a return of the transaction is
made to the Central Bank.
Investing abroad, of course,
brings another risk element into
place. The investment has to be
made in the local currency and
there is always the risk that that
currency will devalue against the
"Wi th exchange controls
eased . . . you can buy shares
[in foreign companies]
. . . through an approved
agent - stockbroker, bank or
solicitor
Irish pound. If that were to happen
investments in British shares would
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