Hi, I'm Simon and thanks for stopping by! I started StockBlog to share my personal experiences with investing in stocks and shares. My goal is to show that getting started doesn’t have to be complicated, expensive, or intimidating - anyone can do it with the right mindset and a bit of patience.
Just to be clear: I’m not a financial advisor. Everything I share here is based on my own journey, successes, and mistakes. If you choose to follow any of my ideas, you do so at your own risk - always do your own research.
Since I started investing, there have been several things I haven’t fully understood. One area that confused me was the difference between a stock’s price return and its total return.
Share prices of stocks always change, they can go up or down, and the difference is the capital gain / loss. Some stocks also pay dividends, and over the long term these can actually amount to much more than the capital gains.
So put simply the price return is the annual capital gain of the share, expressed as a percentage of the purchase price.
The dividend yield of a share is the total annual amount of dividends paid from that share, again expressed as a percentage of the purchase price.
The total return is the sum of the price return and the dividend yield. Understanding this is crucial when assessing the performance of different stocks.
It’s important to bear in mind, though, that if you calculate a yearly total return before the year ends, the capital gain or loss percentage may still change before the year is over, meaning the figure wouldn’t be accurate.
I’ve spoken a lot about the benefits of owning a well-diversified and safe portfolio, but there’s one part I haven’t really covered. These portfolios often contain a combination of both growth and income stocks.
Growth stocks are companies that reinvest most of their profits in order to expand rapidly rather than paying high dividends. They generally offer strong levels of earnings growth, high return on equity (ROE) and are often overvalued, causing price‐to‐earnings (P/E) ratios normally above 30.
The appeal is the potential for large capital gains over time. However, the risk is that these growth projections can fail, and high valuations can make investors less confident.
Income (dividend) stocks on the other hand provide more predictable cash returns and pay dividends regularly. The advantages include reliable income streams and sometimes lower volatility. Disadvantages include weaker growth, the potential for dividend cuts in downturns, and sometimes lower total returns if the share price growth slows.
The key then is diversification. It’s a good idea to spread exposure across growth and income stocks and across different sectors. This mix can help to level out returns, reducing risk if one sector falters and provide both income and growth potential – giving a passive income and a potential pension pot as well.
Combining growth and income stocks can help an investor balance risk and reward. Income stocks can help lower levels of volatility in a portfolio and provide cash flows even when growth rates slow. Meanwhile growth stocks can drive portfolio returns when they perform well.
Investors should think about the level of risk they want to take, how long they want to be invested for and also whether they want income or growth or a combination. When picking stocks, always check the financial health of a company, growth potential and valuation to help find some great opportunities. For more information on this, look back at my post on 22nd August on how I decide which companies to invest in.
A well‐diversified portfolio that includes both income and growth stocks across all sectors can help smooth returns while taking advantage of opportunities. Therefore, this is something I pay close attention to in my own portfolio, as I try to keep it balanced in order to align with my own goals.
A colleague recently asked me to help him start investing his savings into stocks and shares, so he could take advantage of the higher returns available compared with a standard savings account.
First, we had to decide which investing account and platform would be most suitable. As we both already had Trading 212 accounts, it made sense to use their Stocks and Shares ISA.
He said he wanted to invest using the safest strategy possible, with minimal risk. We discussed the different options and decided on a range of investment trusts.
I suggested this approach because they generally deliver fairly high average annual returns (AAR), with consistent growth year on year. Many of these trusts invest in between 60 and 100 different companies — some focused mainly on UK businesses, some on US companies, and others on Far Eastern markets, including emerging economies.
This high level of diversification on multiple levels makes it a great, safe investment option that should also generate excellent returns.
Using the ‘rule of 72’ (dividing 72 by the AAR), I worked out how long it should take for the investment to double in value — and it’s expected to do so in just five years. By the end of 2030, he should have double what he invested today.
He should be very happy with this — not only because of the capital gains, but also because a couple of the trusts provide a healthy dividend yield, giving him a nice passive income stream going forward as well.
The stock market is currently performing exceptionally well, with the FTSE 100 recently reaching a record high. This milestone reflects growing investor confidence and strong performance from major UK companies. It’s a positive sign for the economy, but as always, it’s important to stay informed and aware of the risks involved in investing.
I’ve always followed the advice of successful investors who share their knowledge and experience. Warren Buffett is one in particular I’ve learnt a great deal from. He has a few key principles for becoming a successful investor, and one of his quotes seems very relevant right now: “Be fearful when others are greedy, and greedy when others are fearful.”
This quote encourages investors to go against the crowd – to buy when markets are down and people are panicking (creating an opportunity to buy at low prices), and to be cautious when markets are booming and everyone is overly confident (risking overvaluation and a potential crash).
I reckon that’s exactly what he’s thinking now. Over the past year, Buffett has been selling some of his Apple shares to raise cash, ready to invest when the next market downturn comes. Incredibly, Buffett’s company, Berkshire Hathaway, now holds $344 billion in cash, waiting for the right moment to invest it.
Back in 2001, Buffett introduced an indicator – now known as the Buffett Indicator – which he described as “probably the best single measure of where valuations stand at any given moment.” He warned that when it approaches 200%, investors are “playing with fire.” In the US, it’s currently sitting at 214%.
So, with all this in mind, I’m being very cautious about buying any new shares right now. I’m focusing instead on building up my cash reserves, ready to invest if a market crash does happen. We don’t know exactly when it will happen, but I want to be prepared for when it does.
Although stocks are a great investment and can offer strong returns through capital gains and passive income, they also come with risk. Investing in individual companies gives you full exposure to that company, which means your investment can lose value if that single company performs poorly.
For this reason, I believe it's wise to include some safer investments in your portfolio - those that are less likely to suffer significant losses during market downturns. An experienced investor recently shared with me a helpful structure - allocate 40% of your portfolio to individual stocks in great companies, another 40% to investment trusts, and the remaining 20% to gilts.
Gilts are essentially government bonds - where you lend money to the government (similar to a loan) and receive interest on that amount (known as a coupon). Once the bond matures, your original investment is returned. This is considered an almost risk-free investment
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Personally, I don’t invest in bonds, as they don’t suit my investment strategy. Instead, I keep some savings in a regular cash ISA, where I earn tax-free interest.
My plan is to maintain 50% to 60% of my portfolio in individual stocks, with the remaining 40% to 50% allocated to investment trusts and thematic ETFs (Exchange Traded Funds). These ETFs are focused on specific sectors or niche areas, offering exposure to an entire sector rather than just a single company. I’ll cover this in more detail in a future post.
I had invested in a large number of individual stocks before receiving this advice - so I’m now working towards this more balanced ratio, primarily to reduce the overall risk in my portfolio through increased diversification. But this change could take a few years to happen as I don’t want to sell any of the individual stocks I hold, so will just have to increase my holdings in investment trusts and ETFs instead.
I spoke briefly last time about how I decide which companies to invest in, so here I’ve explained the main factors that I consider when making that decision.
1. Share Price Forecast
Is the share price expected to grow at a rate that you’re comfortable with? I aim for an increase of around 10%–15% per year, following the thinking of Warren Buffett.
2. Dividend Yield and Forecast
Has the company set out a plan for its dividend? I aim to invest in companies that will hopefully increase their dividend, or at the very least maintain it. I would definitely avoid investing in a company that is planning to decrease its dividend yield, or where there is a high risk of that happening.
3. Only Invest in Companies You Understand
It’s important to understand how the business operates and how it generates its revenue. This helps you keep track of performance and developments going forward.
4. Companies with a Strong Competitive Advantage
I look for businesses with a durable competitive edge - something that allows them to maintain leadership / advantage in their sector and continue earning sustainably over time.
5. Strong Management
Has the leadership shown a good track record of growing the business and navigating difficult periods? Do you agree with their vision and plans for the future?
6. Financials
I look for companies with strong, growing, and predictable earnings. It’s also important to consider whether their income is diversified, which typically makes it a safer and more stable revenue stream.
7. Is the Company Trading at a Good Valuation?
Are the shares trading at a discount to their fair value? You can assess this by researching a discounted cash flow (DCF) analysis. Once that’s done, I aim to invest if the shares are at or below their fair value.
8. Long-Term Holding Potential
Ask yourself: Are you happy to own this company for a very long time? Possibly even forever?
9. Debt
I really try and avoid companies with very high levels of debt, and a company with no debt is obviously much better. I look for businesses where debt levels are decreasing year on year - at least moving in the right direction. I also prefer companies with enough cash or liquid assets to almost cover their debt if needed.
10. Price-to-Earnings Ratio (P/E)
Some people pay close attention to the P/E ratio (price to earnings ratio) - a measure of how much investors are willing to pay for every £1 of a company’s earnings. It’s a useful tool for valuing a company’s shares. I keep an eye on this, as I believe it’s a good indicator of whether a company is overvalued. Most of the companies I invest in tend to have a low P/E ratio, but I’m also happy to invest in some with higher P/E ratios if they are high-quality businesses.
Investment Trusts
Investment trusts can sometimes tick all of these boxes. I like them for all the reasons listed above, but mainly because they often offer good growth potential and have, in most cases, a strong, diversified income stream, which makes them a safer investment option. Occasionally, you can also find investment trusts trading at a discount to their net asset value (NAV) - meaning you can buy them for less than they are actually worth.
Final Thoughts
By taking these factors into account, you should be able to identify some great businesses to invest in - without relying on the opinions of others. The goal is to meet as many of these criteria as possible, though that may not always be easy. Don’t worry if some of this information doesn’t make sense, I’ll cover more of it in future blogs.
I mentioned in the last post that I started off investing with as little as a pound, then ended up selling whenever I felt I’d lost too much money – even though that usually meant just 20p. It was harmless, of course, but those early experiences taught me some really valuable lessons.
One of the biggest things I learned was not to panic. When you panic, you don’t make logical decisions. Imagine one of your stocks drops 20%, and you react by quickly selling to protect the rest of your money. Yes, you’ve taken your money out, but you’ve also locked in that 20% loss – removing any chance for it to recover, and potentially even grow beyond where it was before. This is just market volatility. In the short term, it can feel painful, but over the long run, it often sorts itself out.
Another thing it taught me is not to buy shares in companies just because you like them. This was a trap I definitely fell into when I started. A lot of the money I invested went into companies I genuinely loved – simply for the sake of being able to say I owned a tiny little part of them. Annoyingly, some of those companies have actually done really well since then, but that was just luck – shame I sold when I did then really! While those investments may have turned out fine, liking a company doesn’t necessarily make it a good investment.
Instead, it makes more sense to look for companies that actually fit in with your personal goals. Whether that’s building long-term wealth or building a passive income. For example, companies that are expecting their share price to grow over the next 10 years may be a great way to build long-term wealth, or companies that have a dividend yield set to increase over the next five, may be great for building a passive income. Of course there are other factors that need to be considered, but I’ll cover that in a future post.
I began investing in October 2024, but I’d been thinking about it for months before I actually started. Trading 212 kept popping up in my social media feeds, and after seeing lots of positive reviews, I decided to go with them - without really looking into any other platforms. I was keen to get started and didn’t want to get stuck in research mode forever.
At the time, I opened a standard investing account without giving much thought to other options. ISAs felt confusing and overwhelming, and I just wanted to get started. Even at this early stage, there was already so much to learn, and I decided I’d work out the rest as I went.
In the beginning, I wasn’t sure how things would go, so I played it safe by experimenting with very small amounts. I even started by investing as little as £1. One of the things I liked most about Trading 212 was the ability to buy fractional shares - meaning I didn’t need to buy a whole share to get started. This made it possible for me to invest in companies with high share prices that would’ve otherwise been out of reach.
After a few months, I started to get the hang of things and realised I was ready to invest more seriously. That’s when I understood the downside of using a standard investing account: once your profits grow, you could end up paying capital gains tax or income tax on dividends. This didn't make sense to me.
So, I made the switch. I sold all my shares and moved everything into a Stocks & Shares ISA with Trading 212. It meant rebuying my investments, but it was worth it. Since changing to an ISA, my profits have really increased, and it's now all tax-free.
So, I'd recommend setting up a stocks and shares ISA to start off with to avoid paying tax on your income and the potential hassle of transferring shares between accounts.
Hi, I'm Simon (22) and thanks for stopping by! I started StockBlog to share my personal experiences with investing in stocks and shares. My goal is to show that getting started doesn’t have to be complicated, expensive, or intimidating - anyone can do it with the right mindset and a bit of patience.
Just to be clear: I’m not a financial advisor. Everything I share here is based on my own journey, successes, and mistakes. If you choose to follow any of my ideas, you do so at your own risk - always do your own research.
I began investing in November 2024, initially opening a standard investment account (not the best move in hindsight – more on that later). My motivation was simple: build savings for the future, take advantage of capital gains and dividend income, and eventually create a source of passive income.
In the first 9 months, I’ve seen a total return of 16%. I’ve kept things simple, followed clear strategies, and learned from other investors along the way.
On this blog, I’ll walk you through what worked for me, what didn’t, and everything in between - with full transparency. Whether you're just starting or already investing, I hope you’ll find something useful here.