We are bombarded with information on making money on the stock market. So how easy is it? Patrick Collinson ticks off the key pointers for safe investments

Saturday November 4, 2006
The Guardian

Millions of us dream of making easy money on the stock market. We've seen the adverts, watched the telly programmes, listened to the pundits. But how can you turn it into reality? How do you start investing? And how can you do it safely? Our beginner's guide - in association with "Investing for Dummies" by Guardian Money's Tony Levene, will help you take the first few steps.
Are you really an investor? Only if you can answer yes to:

· You have spare cash

· You have an emergency fund if the roof falls down, or the car collapses

· You want more than a savings account offers

· You can face up to bad days on investment markets without worry

· You can afford to lock away your spare cash for five years at the least

· You are prepared to lose money occasionally

Get informed

Scores of websites will help you make decisions about investments.

· For basic information try: http://www.fsa.gov.uk is the Financial Services Authority's website; click "consumer information" in the right-hand corner and you'll find page after page on types of investment, how to shop around, consumer rights, plus some "top tips'. www.Londonstockexchange.com has a great education centre for novices; just click under "investor centre". www.Investmentuk.org is the unit trust industry's website, run by the Investment Management Association. Click on "investors" for a handy pocket guide for first-timers, plus lots of factsheets. Theaic.co.uk is run by the Association of Investment Companies, and focuses on investment trusts. www.guardianbookshop.co.uk/BerteShopWeb/home.do where you can click on "Isas and investments" for factsheets on investing, live share prices and regularly updated news articles. Plus the best free news archive on the web.

· More experienced investors try: citywire.co.uk is a quality, well- resourced news site for the more professional investor; share prices, fund performance, top fund managers, directors dealings, news archives, etc.

The catch? You'll have to pay a £99-a-year subscription (although some parts of the site can be accessed for free). www.advfn.com is popular with day-traders and focuses on stocks rather than funds, with real-time prices, busy investor bulletin boards, spread betting, derivatives and so on. Free for one month then £11.75 plus VAT a month.

· But information alone often isn't enough - talking to like-minded individuals and sharing ideas can be a powerful way to start investing.

Like book clubs, investment clubs bring together people who want to begin investing.

Try proshareclubs.co.uk for information on clubs in your area. Don't be tempted by "free" investment seminars promising easy money from stock markets. You'll be pushed into paying £3,000-plus for information you can find elsewhere on the web for free.

Make your choice - and sidestep the charges

Buying a fund is easy, but, sadly, it's also easy to waste money on unnecessary charges. The number one rule is: don't buy directly from fund provider firms.

They will charge an "initial fee" of up to 5.5% of the sum you're investing. If you put £5,000 in, say, the UK's biggest fund, Invesco Perpetual High Income, then £250 will go out the door in initial charges, plus another 1.5% of the value of the fund every year in annual management charges.

But you can cut costs to virtually zero by using a "discount broker". Try hargreaveslansdown.co.uk or www.chelseafs.co.uk - both allow you to buy on-line or by phone, rebating all the initial charge on a wide range of funds, plus a portion of the annual charge (usually 0.25%).

Discount brokers are able to cut charges because they rebate some or all of the commission that is paid by the fund provider.

But remember, when you are investing through a discount broker you are doing so without advice - and can't complain later if things go wrong.

The fund supermarkets are increasingly popular. Fundsnetwork.co.uk (run by Fidelity) will discount most funds to just 0%-1.25% initial charge.

Monitor and move

Fund supermarkets and some of the discount brokers will let you monitor the hour-by-hour performance of your fund(s) on-line.

You can also switch cheaply (0%-0.25% on fundsnetwork) to another fund if performance is drooping.

Alternatively, you can set up and watch your portfolio on a very easy-to-use website www.trustnet.co.uk which has performance details on practically every fund in the UK. You can also try www.morningstar.co.uk or www.funds-sp.com from Standard & Poor's, although this is more for the professional investor.

If DIY is not for you

Get an independent financial adviser. Best option is always to obtain a recommendation from a friend.

Alternatively, go to IFA Promotion at unbiased.co.uk which recommends independents in your area, or call it free on 0800 085 3250.

· Investing for Dummies by Tony Levene is published by John Wiley at £14.99. To order a copy for £13.99 with free UK p&p go to www.guardianbookshop.co.uk/BerteShopWeb/home.do or call 0870 836 0875

---