Beginners' Portfolio: First Purchase

Published in Investing on 18 May 2012

In our series on investing for beginners, we add our first share to the portfolio.

We've been through the mechanics of getting a broker's account set up and making share purchases, and we have also briefly considered strategies and how to find ideas for shares to buy.

So we'll move on now and start to build a beginner's portfolio, holding around half a dozen shares in top quality companies. This is illustrative only, so we won't be investing real money -- but we hope our shares will do well over the long term, and we'll keep an eye on performance.

But our main purpose is to show how we might build a real portfolio in practice, and think about how we might watch over it. So over the next few weeks, we'll 'buy' our shares. And then we'll keep an eye on news releases from our companies, or news about our companies, as and when it comes along, and we'll do a review here from time to time.

The first purchase

The first share we're going to buy is Vodafone (LSE: VOD). Why? Well, it's a solid company in an international market that is still very much expanding, and I expect it to be still around in a couple more decades' time.

But also of importance, I think it's pretty good value right now, especially as forecasts suggest a very good dividend of 7.4% for this year, rising to 7.7% next and 8.4% the year after. The shares are on a modest price-to-earnings (P/E) ratio of just over 10, too, which is cheaper than the market average of about 14.

And earlier this week, I had a look at how well Vodafone's dividends have rewarded shareholders during the past few years when the FTSE 100 has been struggling. The total returns have been pretty good, and getting more than 7% a year for the next few years will do me just fine, even if the share price goes nowhere.

Let's do it

So, we made our purchase earlier this week using the Motley Fool ShareDealing service, and we invested the £500 that I think makes a sensible minimum investment amount. It looked like this...

Image 1

As you can see, we got 289 Vodafone shares for 168.537p apiece, paid a fixed commission of £10 and stamp duty of £2.44, for a grand total of £499.51.

So that's our portfolio started, and we'll get looking for our next investment now. The next one will probably be another FTSE 100 share, and I already have a few pretty strong ideas -- but we're open to suggestions, so please feel free to offer your ideas, below.

Want to learn more about shares, but not sure where to start? Download our latest guide -- "What Every New Investor Needs To Know" -- it's free. The Motley Fool is helping Britain invest. Better.

More in this series:

> Alan does not own any shares mentioned in this article.

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Comments

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CunningCliff 18 May 2012 , 12:05pm

Hi Alan,

My suggestion would be GSK, as it is the "Vodafone of pharmaceuticals"! ;0)

Cliff

rigbyf 18 May 2012 , 1:47pm

Hi, who is this portfolio aimed at? Is it for income or growth or both?

I am 47 and already hold funds etc but now want to start buying individual shares for growth.

Would this be suitable for an investor like me?

Thanks

Fifi

MetricInvestor 18 May 2012 , 2:50pm

I must say £10 broker charge is hefty these days.....Traders Own charge a flat £6 online or phone.

wjs501 18 May 2012 , 3:18pm

My Portfolio started off like this. Started last year got about 5grand in so far. Mainly in 500 pound chunks.

Vodafone was my second share purchase after Greggs. Other purchases include Tescos, and City of London Investment Trust, BP and ARM.

Mixed results so far, but I'm learning alot . Everything in the red now, but I'm in for the long term so I'm not too worried. Will take the oppurtunity of the current crisis to buy more shares I think.

apprenticeDRL 18 May 2012 , 3:43pm

wjs501 I wouldnt worry I think a lot of poeple are in the red at the moment. The market will bounce back and in the meantime dividends will help to offset the drops

mrburns2050 18 May 2012 , 7:39pm

I own Vod and GSK, started same as rigbyf. bought funds for a while then began to realise all income funds seem to invest most in the same 10-15 companies. So i now purchase or add to my holdings when I believe the time is right then holding for the dividends to reinvest and compound. Plan on waiting to see if the ftse goes below 5000.

Am still weighing up options on who i will be investing in. Am looking toward BLT (want some exposure to mining time might be right now.), RB or Unilever, SSE or CNA or NG (want more exposure to utilities)

Any Views?

DirtyDollie 20 May 2012 , 9:57am

> Alan does not own any shares mentioned in this article.

Shouldn't the disclaimer read:
> Alan owns (virtual) shares in Vodaphone

We don't want you being accused of manipulating the market in order to gain a virtual profit!

TMFTigger 21 May 2012 , 1:47pm

Hi rigbyf

This is more of a demo portfolio, showing how you can build up your own collection of shares. It's not really a list of recommended shares to buy. Here are all the articles in the series so far...
http://www.fool.co.uk/tags/hub.aspx?tag=Investment%20for%20Beginners%20series

merchantprince00 21 May 2012 , 2:37pm

Hi,
I also own Vodafone in a published portfolio that I diary my thoughts about at:
http://adventuresinequities.blogspot.co.uk/2012/05/april-2012-portfolio-update.html

It does appear that the company is turning into a basic holding in many portfolios for many of the reasons discussed.

I also hold them in a virtual portfolio who's strategy is to select 3 companies from the largest sector weightings in the top 10 of Neil Woodford's High Income funds (Glaxo and BAT's being the other 2):
http://adventuresinequities.blogspot.co.uk/2012/05/new-investment-strategy-3-ways-to.html

It also seems an opportune time to top up with tomorrow's update forecast to be positive. However, although I entirely agree with the writers view of Vodafone still being around for a couple of decades to come, I find that this kind horizon does not suit everybody (despite "Im in it for the long term) and in the present there are headwinds in the form of its European business and the controversial actions of the Indian Govt as they attempt to retroactively apply tax on Vodafone's Indian acquisition.

On the plus side is Verizon's potential to pay significant dividends to its parent company's going forward.

best regard

Pinchthepennies 21 May 2012 , 10:26pm

Hi everyone,
I just opened my account last week and started investing but via the TMF Sharebuilder so there's only £2 commission to pay for buying the shares.

I can live with there being only 4 investment days per month, at least for the time being. ;)

The first 2 companies I bought were Tesco and Vodafone and I am currently looking at some 10 - 12 other companies, e.g. CLIG, UU., Pru, GSK, DGE, ULVR...

The only non-FTSE100 I am considering buying at the moment is PFD (PremierFoods).

I thought about buying funds but have decided against it for the time being - maybe later.

TMFBoing 23 May 2012 , 10:21am

Hi folks,

Thanks for all the feedback.

who is this portfolio aimed at? Is it for income or growth or both?

It's not specifically aimed at either - it's really aimed at picking a handful of solid companies that should do well over the long term. As it happens, with share prices being depressed at the moment, but plenty of businesses performing well, I think it's pretty much inevitable that most of the companies chosen will be paying decent dividends.

Also bear in mind that this is meant to be educational above everything, so we'll be choosing companies that are also prolific in their news releases, to give us plenty to comment on in the future - and that would not normally be amongst the selection criteria in a portfolio.

So do remember to do your own research and make your own decisions, because our aims here are not necessarily maximum profits - but education.

Shouldn't the disclaimer read:
> Alan owns (virtual) shares in Vodaphone

We don't want you being accused of manipulating the market in order to gain a virtual profit!


Ah, if only you knew the virtual millions I've made and lost!

Foolish best,
Alan
TMFBoing

TMFBoing 23 May 2012 , 10:27am

I just opened my account last week and started investing but via the TMF Sharebuilder so there's only £2 commission to pay for buying the shares.

I can live with there being only 4 investment days per month, at least for the time being. ;)


Nice move :-)

If you're investing for the long term and not worrying over day-to-day fluctuations (or if you recongise that, like the great majority of us, you're no good at short term timing anyway), that approach makes a lot of sense.

Foolish best,
Alan
TMFBoing

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