Expert: Paul Henneman - 2/4/2010

Question
I am a student and I just had this idea of investing £1000 of my savings and see what it can give me in a few years to come.What will you advise I invest in,i.e what company or industry would you advise I invest in.I really need help.

Answer
Stone,
   Thank you for your question!
It is unfortunately difficult to invest 1000, due to trading costs. Your best bet is to buy an ETF (exchange traded fund), or mutual fund. They are both very similar, but an ETF usually has lower fees associated with it.
   An ETF can be purchased just like a stock. However, the investment actually represents a basket of stocks, usually based on a market index, sector, or industry. I would suggest you look at an ETF based on a major market index. You are asking about 1,000 pounds, not dollars, so I assume you are not in the US.   I will give an example of a US based ETF, but this could be applied to the London or other markets as well.
   The ticker symbol SPY is an ETF that mirrors the S&P500 index, perhaps the most stable and most suitable index for this type of thing. By purchasing this symbol, it works just like buying an individual stock, you are actually buying an investment that will very closely match the overall performance of the S&P500 index. The main advantage is that you can then hold this for whatever time frame you need, no further trading is required.
   You could try to actively trade, buying and selling stocks on a short term basis to try and dramatically increase your returns. But there are several problems with this. First, it takes alot of time and research to do correctly, and even then it is very difficult. Second, each trade will cost a few dollars or more, so typically unless you have $10,000 or more, the trading costs will out pace any returns you are able to generate.
   One additional word of caution: My company does extensive stock market research on valuengine.com, and we believe that the markets are set for a downturn. No one is ever always right about predicting markets, but we have an excellent track record, and would caution that the timing right now may not be the best. Check out valuengine.com, and click the link for Free Weekly Newsletter to get an email each Friday with write ups from our analysts. You can also view historical issues by clicking that link. I hope it is helpful.
    

I hope this helps! Please do not hesitate to follow up with me if I can be of any additional service, and best of luck to you!