There are a few considerations that you should take before you put your money where your mouth is:

1. Can you afford the investment?

Clear any debt (credit cards, loans, etc) before you consider share trading.  The interest rate on debt is usually high and will cancel out any profits made in the marketplace. Do not use any personal money which you cannot afford to lose.

2. Will your potential rise in investment cover your buying costs?

Brokers charge a fee (usually around £10+) to both buy and sell a set of shares. In addition, there is a 0.5% stamp duty charge by the government on any share purcahse. Any investment amount under at least £500 means that your investment will have to increase substantially in order to return a profit.

On a £500 investment, the shares will need to increase by around 4.5% or £22.50 to break even.

3. What are the impliciations of under-diversification?

Consider the costs of investing with a set of stocks in a single company. If you have no other investments, investing in only one company exposes you to an excessive amount of risk. If your chosen company is another Northern Rock, you could find yourself left with nothing. If you have a small amount of money to invest, a much more efficient portfolio can be constructed by buying into unit trusts or fixed-interest bonds and gilts.

If you’re one of those individuals who did their research and invested in the FTSE techMark Focus index, you probably find yourself feeling rather smug.

The FTSE techMark group of indexes are the the more innovative technology stocks listed in the LSE. Essentially, they offer investors exposure to stocks actively involved in new technologies. The techMark Focus includes most companies inside the techMark All-Share except it only lists those companies under £4bn by full market capitalisation.

Technology is moving at a faster pace now than it ever has before. The introduction of smartphones and tablets has radically reformed the day-to-day lives of their users.

And clearly, the popularity of technology has had a positive effect on new-technology companies. At a low of around 1,908p a share at the end of November, the value of the Focus index has jumped a whopping 23.6% to around 2,358p a share.

The big question remains – when is the incline going to taper off? Well in the short-term, I would be hesitant to buy just for the moment – hold on to any existing investment.

As a long-term investment the techMark Focus is a buy. Since 2002, the index has seen its value almost quadrupled. With the importance of technology increasing, the techMark may be a sound investment.

At one point or another, we’ve all followed a share tip. Tips can originate from a variety of places – a friend at the pub, an Internet forum, or a newspaper/magazine.

Tips can range from the downright ridiculous to the amazingly profitable. What we’ll be focusing on are newspaper and magazine tips – probably one of the most popular tipping mechanisms.

If you are ever find yourself considering a newspaper/magazine tip, make a consideration for the following three points:

Is the tipster an expert?

Never assume that a newspaper tipster knows more than you do. It’s easy to believe that your favorite Sunday newspaper is holding the next big share tip. I’ve often discovered that a supposed financial expert is nothing more than a journalist, not an investor.

Newspapers and magazines are in the industry of publishing interesting content, not sharing trade tips.

Is there an ulterior motive?

An ulterior motive is a motive which is undisclosed or secret, but serves as the actual driver of the behavior. Never suppose that a tipster is attempting to work in your best interests.

Money could be being exchanged to publish a tip to temporarily raise the value of a stock. Likewise, a share tip could be published with its only benefit to sell (quantity) newspapers/magazines. Share traders are in the game of quality, not quantity.

Is it the best time to buy/sell?

Always consider whether a share tip is making the best use of its potential value. If you buy, are you about to catch the last 10% of the upward trend? I’ve heard a number of people suggest that a share price has already climbed over 90% in value before it is tipped in newspapers.

Then consider the probability of every share tip being profitable? Would you share your tips if they were always profitable?

Conclusion

Share tips need careful consideration, but that doesn’t mean that you should never trust them. Let’s not forget that my first trade was based on a newspaper tip.

Never forgo your opportunity to learn. Making your own decisions will build personal confidence in your share-trading ability. Lastly, research, research, and research.

What exactly was my history in trading stocks? None in all honesty. That is unless you consider the semester-long Economics course I took while I studied at University.

With the financial crisis that swept the globe in the late 2000′s, I found my money sitting in a bank account paying a low 1.0% interest rate. In fact, any interest gained was ultimately being lost to inflation.

Instead of sitting back and counting my losses, I made the bold move and placed my bets on the stock market.

Investment in Galliford Try

One Sunday evening in January 2012, I was perusing the newspaper share tips. I ran across a tip that was published to the Internet by Investors Chronicle. The broker was suggesting a buy on Galliford Try (GFRD), one of the largest UK-based housebuilding and construction companies.

The stock tip came a few weeks before Galliford Try were due to release their latest earnings report. The tip highlighted the fact that the company had already delivered impressive performance results in 2011. Some had suggested that Galliford Try’s 2011 performance results were probably the strongest trading statement ever seen in terms of growth in a house building business. What’s more, Galliford Try’s P/E ratio was one-third that of similar companies in the same industry.

On the 27th January, I purchased £584.02 worth of shares (with commission it came to £596.94). Let me tell you, the tip paid off. After only a few days, the price had already climbed a few percent, but it wasn’t until almost a month later when I saw the biggest gains.

On January 22nd, Galliford Try released its year-end financial results. The company’s results were so impressive that the stock jumped almost 10% in a single day. In fact, the company’s shares saw the biggest percentage increases of any other shares in the FTSE that week.

I went on to sell the stock soon after which is when it plateaued, returning a profit of over 24% on the original purchase price.