A good friend of mine loves going on cruise holidays a couple of times a year, specifically in this region, using Royal Caribbean Cruise lines. He’s never been much into investing in stocks or shares, but asked me about the benefits of holding their stock, using their benefits, and whether it would work out favourably for him. What he would get for holding a minimum of 100 shares would be anything from US$50 to $250 credit on the ship depending on how long the voyage was for. The kicker is, the shares are valued at roughly $77 each at the time of writing.

Let’s say he could take two cruises, twice a year, for over 14 days at a time, getting him the maximum benefit of $250 each holiday. This means that he would have to hold the shares for 15-and-a-half years to get his money back. That is, if they continue to pay a dividend, and that he used that to pay the fees for holding them.

This way is not direct investing, it is a method of long term borrowing to purchase stocks, and carries the inherent risks similar to borrowing (leveraging) money from a bank, let alone, a bank loan for 15 years that holds you to using the same company for some of your biggest annual expenditure.

If it is your first time purchasing shares, it is always good to buy something that you know about or enjoy, because you will not make money from it. But, it will let you understand the process behind how to buy shares and how they are held by you or someone else, and then how to sell them or swap them. In the same way you take your first bet on the horses, going on the name of a horse or the colour of the jockey’s silks, only gamble with what you can afford to lose.

Stay away from personal bias if you want your portfolio to work as it should. If I didn’t take that on board, my portfolio would be heavily balanced in the favour of BARR (A.G.) PLC (makers of IrnBru), Yildiz Holdings (makers of McVities Chocolate Digestives) and SABMillar (makers of Nastro Azzurro beer). If you do hold shares, have a look at the company’s investors website. There may be some benefits that you do not know about, especially if you hold shares in certain insurance or leisure companies..

Paul McLardie is a partner at Total Wealth Management. Contact him at Paul.mclardie@t-wm.com