Money: Time to take a plunge into the stock market

In the last in our series of articles by a novice investor, Margaret St John assesses the financial advice available

I HAVE made my mind up. I am taking the plunge. With my pounds 2,000, I hope slowly to build a small portfolio of stocks. I have chosen two companies that I want to invest in, and I'm keen to get going.

What services are available for what is politely known as "the small investor"?

My first stop was my bank, where I have held my account for 13 years. Barclays runs a share-dealing operation offering various levels of service. It produces a snappy little booklet which explains everything and gives a table of charges. You don't have to have an account with Barclays, although it simplifies matters if you do, as dealing is mostly done by telephone.

I then popped into NatWest. Did I have an account with them? No, but my husband did; I was picking up some information for him. "Well, all right," said the sales representative, "but we normally give this information only to account holders." The booklet wasn't available but they gave me a photocopied sheet with the prices.

Abbey National also runs a telephone service and produces a readily available and easy-to-understand brochure. You do not need an account there to benefit from the service but, again, it makes life easier if you have one. Both the Abbey National and the Barclays booklet take the precaution of warning novice investors like me that share values can go down as well as up. They also both state clearly that the basic share-dealing service does not offer any advice to clients.

So how would the share-dealing services work for me and, more important, how much would they cost?

As I have only pounds 2,000 to invest, I need the best deal around. Barclays would charge me 1.5 per cent on the first pounds 5,000, with a minimum pounds 17.50 charge. The small investor has to be very careful with the charges as they are charged on each transaction.

For example, if I want to buy a small number of shares worth pounds 500, I still pay the same pounds 17.50 charge as when I buy pounds 1,500 worth - in the same telephone call.

There is no way around this, which makes dealing in small figures very pricey.

There would be the same minimum charges of pounds 17.50 if and when I sold the shares. Even if you are selling different sets of shares in the same company there are separate minimum charges on each set, which I think is a bit mean.

There is also 0.5 per cent stamp duty on all transactions, making an additional pounds 10 on my pounds 2,000. So there is a minimum pounds 45 (including selling- costs) to consider before I make a penny on any transaction. As the shares I have spotted are only creeping upwards, I need to be prepared to invest for the long term.

NatWest would also charge 1.5 per cent on the first pounds 5,000, but its minimum charge was pounds 20, making it slightly more expensive to deal with. Abbey National charges 1.65 per cent for the first pounds 2,500 and its minimum charge is a beastly pounds 24.50. But for the next pounds 2,500 charges drop to 1.25 per cent (with the same minimum charge).

Abbey's charges for amounts between pounds 5 and pounds 10,000 were a very competitive 0.15 per cent of value, compared to between 1.5 per cent and 0.5 per cent (sliding scale) at NatWest and 0.85 per cent at Barclays. For amounts less than pounds 5,000 Barclays gave the best deal, but for amounts more than pounds 5,000 Abbey National offered a better rate.

You need to be careful of all the documentation because there are nasty charges of at least pounds 10 for reproducing share certificates. If you lose your Abbey National share certificate, there is a whopping pounds 25 charge for the completion of a form of indemnity and undertaking, which permits you to sell your shares in the future.

If and when I make some money, I may look into some of the extra services that the bank and building societies offer which would make life easier, though pricier. You can pay for advice on shares as well as extra help with paperwork facilitating filling in your tax return. Some of these services charge a quarterly fee as well as the transaction charges.

The dream of having my own private broker is a long way off, because experts politely suggest that I need a portfolio of at least pounds 20,000. They warn investors to use their broker as a service, and not to phone for "a chat". A good broker, they tell me, will contact me if something "interesting" comes up. Another way of adding to your knowledge as you gain experience is to use (or buy) a computer and get more information from the Internet.

As I am not a share tipster, I shall not reveal the names of the two companies I want to invest in, but I shall let you know how I get on. Wish me luck.