To make the most of your money the prudent investor should hold a wide range of investments within any portfolio.

The worlds stockmarkets offer one type of investment which is used to provide medium term capital growth to overcome the damaging effects of inflation on savings.

But how do you start to invest in stocks and shares?

Before making any equity investments it should be remembered that stocks and shares are investments which can lose value as the recent privatisation of Powergen and National Power illustrate. Losses are part and parcel of putting money into shares and any share portfolio should be constructed with a view to providing an acceptable investment return based on holding more successes than failures.

Every investor should be able to calculate their personal risk profile and the acceptable level of investment risk that they find comfortable. Specific investment objectives should also be targeted to maximise returns and satisfy their individual portfolio strategies.

Once your risk level is known you can start looking at shares which fit your profile.

Shares are traded each day on the London Stock Exchange from between the hours of 8.30am to 4.30pm Monday to Friday. During this Trading Day authorised Stockbrokers can provide investors with buying and selling prices with settlements for each transaction normally completed after 10 ten working days.

This service incurs a commission levied by the Broker on every purchase and sale. While the Government imposes a Stamp Duty of 0.5% on every purchase. Other charges can include a PTM Levy for deals over £10,000.

Within 24 hours of arranging a deal the Broker must issue a contract note which will provide the full details of each share transaction including the settlement date and charges.

In the past millions of private investors have purchased shares in UK privatisations, when shares were offered in utility companies such as British Telecom and British Gas. The Capital value of these shares has increased over the years and the dividends paid out to shareholders has provided a steady income comparable to the current rates obtained in Banks and Building Societies.

Investors can take tax free profits of up to the level of the Capital Gains Tax exemption.. The net profit is calculated by deducting dealing costs from the gross, and also allowing for inflation during the period of investment. It is also possible to "net out" gains against losses, thereby reducing any liability further. ( However minimum dealing costs of circa £25 mean that realistic minimum investments should be £500 -£1000 per share).

Several worthwhile information sources are available for the active investor to research possible share selections. The heavyweight daily newspapers can provide regular price information and market comments while television teletext services are also available for the majority of UK shares showing the mid prices ( the average of the bid and offer price), as quoted in the Stockmarket at specific time during the day, together with the current financial news stories.

Having taken this first step there are several computer based portfolio management systems available to monitor your investment performance and even identify investment opportunities.

As a general guide , ordinary shares are perhaps considered a medium risk investment with cash deposits and fixed rate investment such as Government Gilt Stocks normally given a low risk rating with Futures and Option instruments ( derivatives ) carrying the highest investment risks.

In conclusion, Stockmarket investments are volatile an carry a higher investment risk than cash in a Bank, but this higher risk can provide significant Capital Growth over the medium term ( approximately 5 years ) which will compliment your existing cash savings and reduce the harmful effects of inflation.

This outline only provides the basis of any Stockmarket investment plan and further information can be obtained from an authorised Independent Financial Adviser, such as a local Stockbroker, who should undertake a detailed investment audit of your specific requirements before you start regular share trading.

This article reflects my own individual approach to Personal Investments as a SFA Securities Representative authorised to conduct Investment Business in the UK and does not contain any opinions or recommendations of any of the Financial Institutions which I may be associated with either now or in the future.

I would welcome your comments or questions on Equity investment as I believe Personal Finance is often neglected by individuals in the UK and a greater understanding of investment and savings would benefit everyone.

SR Hill

0161 487 4404 or fax 0161 487 4192