Image source: NatWest Group plc
When I was a teenager, the stock market had a curious fascination for me. When I was asked by my teacher which career I wanted to follow, I said I planned be a stockbroker. He laughed.
Later, when we were discussing where I wanted to do my work experience, I told the same teacher that I would love to go to the local stockbrokers. This didn’t happen.
Instead, I spent two weeks at a branch of NatWest Group (LSE:NWG) scanning cheques and changing the foreign currency board each morning. I then became an accountant.
Starting out
My first experience of stocks and shares came later. Soon after I began working and had a bit of spare cash, I opened an investment account. To be honest, I don’t remember my first stock.
Over the years, I’ve seen a few articles referring to ‘beginner’ shares — stocks which are apparently ‘ideal’ for first-time investors. Personally, I find the concept an odd one.
Why would a ‘newbie’ have a different objective to a more experienced investor? Surely, the point of buying shares is to make money? That’s what I was trying to do over 25 years ago. And I have the same goal now.
Top tips
But if I was starting all over again, I would use a Stocks and Shares ISA. This means any dividends and capital gains can be earned tax-free.
Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.
The maximum that can be invested each tax year is £20,000. For most people, I think the best approach is to invest as much as you can afford. Little and often can be an effective strategy.
Also, I believe it’s important to take a long-term view.
Personally, I always reinvest any dividends I receive. This is known as compounding. When combined with an investment horizon of two decades or more, this can have impressive results. For example, £500 invested in a stock offering a 5% dividend would grow to £1,693 after 25 years, assuming all payouts were reinvested.
Finally, I believe it’s important to remember that dividends are never guaranteed. Also, never forget that shares can go down as well as up.
Something to consider
Earlier, I mentioned my work experience at NatWest. And over 30 years later, I think it’s a bank that still has great potential.
However, the banking sector can be volatile. As a result of the 2008 financial crisis, the UK government still retains a 1.98% shareholding.
And with NatWest deriving most of its earnings from the UK, it could suffer if the domestic economy doesn’t grow.
Although falling interest rates could reduce its interest income, lower borrowing costs will reduce the threat of bad loans. Also, a lower interest rate environment could lead to greater demand for mortgage products. With a 12.6% share of the mortgage market — and signs that the housing sector is starting to recover – NatWest could be well placed to benefit.
It’s also more efficient at using its capital than its closest rivals. In 2024, it reported a return on tangible equity of 17.5%. This compares favourably to that of, for example, Lloyds Banking Group (12.3%) and Barclays (10.5%).
In light of this, those wishing to invest in the stock market for the first time – and experienced investors too – could consider taking a position.
