I want some shares that will pay me a good dividend and increase in value. I have £20000 to invest. Any suggestions please?
Stock specific advice is the realm of licensed stock brokers. Financial advisers like myself advise on collective or 'packaged' investments. The argument for collective investing is that if you wish to buy a sufficiently diversified portfolio of stocks then you need at least ten such holdings. Also to be meaningful you need at least ten different stocks - and not all gathered from the same sector of the market like pharmaceuticals, telecoms or banks.
A 'meaningful holding' is deemed to be at least £10,000 worth as even doubling your money on £5,000 will 'only' generate £5,000 before taxes. This is certainly not enough to retire. Then there is the risk that you are analysing and selecting the stocks yourself and won't have the research resources available to you which larger organisations do. This applies not just to buying but to trying to identify the best time to sell.
Seeking out income, as you are, do you know whether a particular stock is trading with a good dividend yield because its price is simply depressed by general market conditions - or is it symptomatic of a business which is in deeper troubles of its own - and its price may never recover?
Concentrating all your money in one or two stocks is higher risk than investing in a wider spread of ten or more holdings. Such a concentrated strategy may of course provide added rewards - or it may dig you deeper in losses if those you select disappoint!
These arguments explain why most people choose to invest by pooling their money together with lots of others in the charge of a professional fund manager and his or her team. The professionals then select in the order of forty or more underlying companies in which to invest the pooled funds. Importantly they then watch, monitor and adjust underlying stocks as required. Sure this extra tier of fund management brings an added cost which you will not face if you buy a mix of stocks directly yourself - but then you do not need to know nearly so much about what is going on, worry about being well diversified or having to do the legwork yourself.
Finally do not aim too high. A 5% yield is much more realistic and sustainable than a 7% yield and will be achievable at lower risk. Naturally enough higher returns typically come at higher risks. Where you do not need to squeeze out as much income as possible look to Equity income funds for more sustainable medium to longer term returns. These could be UK based, Overseas orientated or a combination – again all thanks to the well diversified nature and buying power of larger collectively pooled funds.
However where income NOW is an overriding priority some higher yielding fixed interest corporate bonds may be worth considering. However such are less likely to produce growing medium to longer term returns and the better the yield the greater the risk is likely to be to achieve it.
Amongst the most successful, proven medium to longer term income generating equity income collective funds are those run by Neil Woodford at Invesco Perpetual, and rivals at Artemis, Threadneedle, M&G and Newton.
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