Direct Equity Investment
For clients who wish to hold direct equities, whether inside or outside of their pensions, we can complete research on shares, market sectors, or both. We can also advise on specific stocks for construction of a basket portfolio of shares.
We will regularly give stock picks in our newsletters, based on what we think are good medium to long term shares.
Current editions of our news letter can be found in the » News Store, near the bottom of the page. You can also join the distribution list of “The Angle”.
What are Equities?
Equities, otherwise known as shares or stocks, are the lifeblood of corporations around the globe. Shares are the main source of capital for growing companies. Capital is used to invest in a company’s growth strategy. When the shares are listed on a publicly quoted exchange (such as the Irish stock exchange) they are traded at a market price. Investors will pay for the share for what they believe they are worth.
The price of a share depends on a number of factors
- Recent company performance – as evidenced in its published financial statements.
- Current performance of the sector – in which the company operates, such as say the food sector. How are the peer companies performing?
- Likely future company performance – as broadcast in company forecasts.
- How the analysts rate the stock – is it rated a buy, a hold or a sell? When local analysts (usually stockbrokers) re-rate a share upwards or downwards this may impact the market price of the share.
- The markets in general – if equity values are declining generally, there may be an exodus into other asset classes, driving share prices down.
- Shocks to the system – shocks such as the terrorist attacks of Sept 11 and Lehman Brothers going bust, have a detrimental impact on stock markets.
- Uncertainty – Markets dislike uncertainty above all else, as was seen during the euro soverign debt crisis in 2011.
Is Direct Equity Investment Better Than a Fund?
Not necessarily. Direct equity investment is not a replacement for investing in funds, which are managed by fund managers. Fund managers are professionals who are motivated financially to outperform the markets and their peer fund managers. Do they always outperform the market indices? No, they don’t. Will they outperform the individual non professional investor, yes they usually will.
But investing in direct equities can be a real experience, bringing joy, sadness and pain. It allows the non professional investor to learn how equities markets work and gives them insights into the events impacting funds aligned to specific sectors or markets. It should certainly be considered as part of a larger investment portfolio, if the investor has the experience, time and interest to self manage their stocks.
Short Term Trading Versus Long Term Investment
There are some investors who love nothing better than buying low and selling high, as frequently as possible. This kind of trading requires a lot of energy and time; researching stocks, scanning markets for value and acting quickly to realise gains. This type of trading can make short term gains, but it can become a time consuming task which needs an investor to be plugged into their portfolio and the markets, on a constant basis. They say the markets never sleep, European stock markets close early evening at 5pm, US markets close in the late evening at around 10pm, then Asian markets open at midnight! Not for the faint hearted, if this is how you try to manage 100% of your investment portfolio.
Longer term investment takes a more medium term view of 12 months or more. Looking for longer term share price growth and following a chosen basket of equities. The advantage of this is that you get to know your shares and your company. There is no problem of replacing an egg or two from your basket each 6 months, if they do not live up to expectation.
We would recommend using an Irish stockbroker. We can recommend Dolmen Securities which is an independent, stock brokerage based in Dublin. Dolmen Securities offers a comprehensive service for investors regardless of the trade size or frequency. Dolmens can access most primary world equity markets.