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Buying stocks and shares with a credit card?
Posted on | March 3, 2013 | Comments Off
It’s an old adage, speculating to accumulate. Not, however, using a credit card. Yet it’s one of the most common questions asked by wannabe investors looking to make a quick buck or two trading in stocks and shares. The question has a something-for-nothing feel about it, even smacking of desperation, a state of mind hardly conducive to successful trading.
If you can find a stockbroker who’ll allow the use of credit cards then good luck to you. Yes, they’re out there. But wait a moment. Why would you want to? Remember, the value of investments, and any income derived from them, can fall as well as rise, which could quickly wipe out any trading account balance. And you’ll still be saddled with the credit card debt, maybe even for years to come. Not an inviting prospect.
Trading in stocks and shares has never been easier thanks to the Internet. All the major multinational banks provide the service – HSBC, Barclays, Citibank, NatWest, Lloyds, RBS and others. Open a bank account and then a share dealing account with the bank of your choice and away you go. Simple. Deceptively simple. If you’re new to it all then there’s a learning curve to get over. Don’t ignore it. Learn everything you can because knowledge really is power.
So why invest? Who, what, why, where and when just about covers it. According to RBS, deciding to invest and what to invest in is largely dependent upon your personal circumstances. Whilst some investment decisions may be suitable for you, they may not be for someone else. Various factors determine what and where you should invest. These include:
Your attitude to risk - how much risk are you willing to take?
Why you are investing?
How much can you afford to invest?
How long do you want to invest for?
When to invest?
People invest for all sorts of reasons, says the bank, including saving up money to pay for some future event. The return can potentially be so much greater than simply putting money into a savings account, for example.
Yes, that may be true but the return from the savings account, though smaller, is practically guaranteed. Not so with stocks and shares.
Historically, says Barclays, money invested in the stock market over the medium to long term has generated greater returns than cash left in a savings account over the same period, but there can be big drops on the way.
A shares investment of £10,000 in the FTSE All Share index over 25 years would have grown around 11 times the initial value. Cash over the same period would have increased by just over two-and-a-half times its original value.
Barclays adds, “Past performance also can never tell you what might happen in the future. Over time inflation eats away at savings – as it will at investments if they don’t perform well – but if you invest money wisely and with a long-term approach it could deliver potentially greater returns.”
“With savings you’ll always get your starting money back but that’s not the case with investments as their value and any income they produce can go down as well as up.”
In other words, you pays your money and you takes your choice – but not with a credit card!
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