For example, if the dealing cost is £20 for a £500 parcel, the share has to rise by more than 8 per cent just to break even, bearing in mind the likely dealing spread. That means a share standing at 220p would have to rise by over 18p before the investor saw any benefit. It can happen, but it is just stacking the odds against yourself. However, competition among stockbrokers is increasing with the numbers of sites on the internet growing daily, so the cost could start coming down and with it the minimum economic investment. Mark Twain said there was nothing wrong with putting all your eggs in one basket, but watch that basket. That is unlikely to work for the stock market. Scrutinize a company with all the attention possible, analyse its figures and read all the reports available and, despite all the favourable indications, it can still decline, to general surprise. Sudden external changes can overwhelm sound businesses, and inept managers can so fail to keep track of what is happening under their noses that nobody outside notices either until profit warnings show the depth of the problems, or takeover predators or the liquidator move in. also you can check share market details.
For safety, therefore, one needs to spread the risks over a number of companies. A decent portfolio even for a relatively small investor would contain at least 10 companies. That is the eventual safe haven however, and it does not mean everyone must start with at least £20,000 going spare for it to be worth even thinking about the stock market – it just means these are the sensible requirements to reduce the much-publicized risks. Remember the main aim of investing is to get a decent return for an acceptable risk. With one share the risk is greater, but the more companies’ shares you own the less chance there is of your entire stock market holding suddenly collapsing to nothing. It is possible to build a range of shares over the years; indeed most advisers reckon it is a good idea to keep a little float of available cash to take advantage of opportunities.
That £20,000 may look a formidable sum – especially if one thinks about it as the minimum safe level of holding – but set it against lifetime earnings of over £1 million for even a relatively lowly-paid household and it begins to seem a little more doable.
