The founder of a new investment company, Invest Like the Best, says everyone can trade in shares, writes Claire Shoesmith
What is it about the stock market that makes it seem like a dangerous place to put your savings? Could it be the fact that the Irish market, the Iseq, rose 26 per cent last year and would have added another quarter to the value of your savings had you invested in the overall market? Hang on a minute: Why should that put you off? That's a positive return on your investment.
The reason most people are put off investing their hard-earned cash in the stock market is fear of the unknown and the automatic assumption that they are going to lose money, says Rory Gillen, a founding director of Merrion Capital, who last month set up a new company, Invest Like the Best (ILTB), aimed at wiping out the myth that share trading is only for financially trained individuals or people with a lot of money to lose.
The main problem, he says, is that people do not know enough about it and are therefore nervous. They only recall the horror stories of people losing large percentages of their investment when a particular stock plunges and wipes out a substantial proportion, or in some cases all, of their investment, and are naturally concerned about using such a mechanism to take care of their savings.
"What we're about, is taking the fear out of the idea of investing and giving people the means to do it themselves," says Gillen. "We want to show them that trading shares is not reserved for a specific few, but is something anyone can do."
Between 9 and 11 per cent of Irish people currently invest in the stock market, compared with 27 per cent in the UK and 40 per cent in the US. Gillen attributes the low take-up in Ireland to lack of information on how to go about investing. "The key thing is to remove the fear and get people started," he says. "I am not claiming I can make people a fortune, I am just showing them how to do something that can even end up being fun."
Investing for the common man, as Mr Gillen's new venture could perhaps be seen, is not a new scenario. Investment clubs have been around for decades, and in fact the first Irish one was set up in Donegal in 1997. Since then, more than 300 have sprung up over Ireland with more than 6,000 members. Still, their prevalence is much more talked about in the UK and the US, where the high cost of trading through a broker has increased their popularity. In the UK, the number has grown from 300 in 1996 to more than 12,000 by 2002, according to Pro-share, a group that promotes share ownership in the UK, while in the US, the number in operation has doubled to 60,000 over the past three years.
"Our aim is to eradicate financial illiteracy," says Owen O'Malley, who founded the Investment Club Network (TICN), to which all the Irish clubs are affiliated. "So many people do not know anything about the stock market, but it's because they have never been taught." O'Malley claims the investment methods taught on his courses and promoted at his clubs can generate much higher returns than those being taught by Gillen, and a look at TICN's web site, www.ticn.com, does in fact show pretty healthy returns. Its top-performing fund, the Sperrin Gold Investment Club, is currently making more than 73 per cent profit on its investment.
From the end of this month, ILTB is offering a series of one-day courses on how to invest in the stock market, advising potential investors how to build a portfolio, place their buy and sell orders via the internet and profit from any gains to be made.
The company uses a series of numerical strategies that ignore external events such as the effect the rise or fall in the price of oil may have on the company, and focus on details such as potential earnings growth, debt profile and dividend yields.
Gillen recommends investing your money in a variety of stocks for a one-year period, allowing you to minimise your risk portfolio by spreading out your investment and to change your share make-up after one year if your combination has not made the desired returns. ILTB has strategies for investing in the Irish, UK and US markets.
While this may sound like hard work, Gillen insists that once you have been on the course, it can take up as little as 10 minutes of your time and €100 of your money each month.
Following the course, ILTB is also offering investment clubs, not linked to those run by TICN, to help people put into practice what they have learnt in the company of like-minded novice investors. It has also set up a trading system, to be known as "armchair investing", which will allow members to select and track stocks which match ILTB's investment approaches on its website www.investlikethebest.com.
Gillen also points out that now is a good time to promote stock market trading, with the release of €15 billion in SSIA savings into the market slated for the next two years. He also points out that the fact that 20 per cent of SSIA holders chose equity-based products at the start of their investment proves that many Irish people are keen to invest in the market but perhaps lack the knowledge to do so confidently. "We will be urging people to continue saving now they have got into the habit of doing it with their SSIAs," says Gillen, who believes there is no reason why the monthly contribution to SSIA accounts, which averages about €180, cannot be put into the stock market instead, once the SSIA saving has finished.
So, if you find the idea of investing in the stock market both tempting and petrifying at the same time, now is your chance to give it a go. ILTB is offering one-hour free trial sessions this month at various Dublin locations (see the web site for more details), followed by a series of one-day courses around the country.
Meanwhile TICN is probably already operating a club somewhere near you (also see the website for details) and has courses which can be adapted to suit your requirements.
As Gillen says, there is no guarantee you will make yourself a fortune, but as long as you are not losing money and are having fun, then what does it matter?
