Investing for beginners!

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      May4th on 06/12/2013 - 13:16

      it's funny they were the hottest stocks back in the 60s with everyone expecting their revenue to grow immensely. it did indeed - but not profitability. that's what happens when you get caught in a hype, question all assumptions and never put your eggs in one basket

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  Gomo on 06/12/2013 - 11:37

  I'm 24 and I had played in the share market for just over 2 years before getting out :)

  I had a spare $10k to use and see if I could get it working harder for me then a term deposit or high interest account, it did! I made at least $300 from my shares but over a 2 year time frame.. so no real win there!

  I just finished selling all my shares today my last one was with a company GNC "Grain Corp" who recently got knocked back from selling there shares.. to a private company ADM!

  It was because of this I lost over $200 from my total shares in this company ($600) 50 unit's of shares.

  It is fun to play in and watch your shares on a daily basis but since purchasing a new house I needed the funds back :)

  Also ComSec offer share packs so they are like bundled with companies that are suggested to invest in

  Good luck!

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    cloudy on 06/12/2013 - 11:58

    wow, im super surprised to hear someone investing with just a spare 10k.

    just a point of advice i have for anyone, if ur brokage is taking anything more than 1% to get in and out, u dont have enough money to buy shares.

    brokerage will knock you out! unless ur a long term investor, but still, i dont think buying small 1k lots of shares is nearly enough.

    most brokerage costs are around $20, so $40 for a buy and sell. this means u need 4k to invest in the 1 stock, and studies has shown u need around 30 stocks to get adequate diversifcation (if u want it!)

    so u do the maths, if u have the cash!

    if u dont, buy an index fund, like many people have noted.

    or go buffett style, be a expect in 1 share, and swing hard when u swing.

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      mskeggs on 10/12/2013 - 13:34

      True, except you can buy ETFs like ASX:VAS to get the diversification. I tend to agree on the big swing strategy though.

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  MementoMori on 06/12/2013 - 13:53

  +1

  I would suggest looking into buying a cheap-ish investment property with at least a neutral cashflow and also start regular contributions into two low cost index funds, say 50% Australian shares, 50% International.

  Time is on your side so you want to focus on growth assets and use leverage (which property is far better at giving you, you can own $300k of property for as little as $15k deposit and the same again in transaction costs). You will have some maintence but also some great tax deductions.

  IMO Investing in smaller stocks directly is speculation or trading, not really 'investing'. Any other types of 'active' funds you're paying high fees for the high salary fund managers and are better off in the long term on average with a low cost index fund (see Warren Buffet's long bet). For me, I have decided my super is enough here.

  Slow and steady wins the race.

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    cloudy on 06/12/2013 - 16:40

    The difference between investing and speculating isn't a matter of size of the stock. Its all about the knowledge of the individual.

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      May4th on 06/12/2013 - 17:33

      +1

      when investing if you are concerned whether price reflects the true value of a company and its growth prospects. in speculation you are primarily concerned with what other people will pay for it. i'd say knowledge has as little and as much to do with it in both of these cases.

      interestingly there are stats which show the majority of professional traders struggle to make profits above overall market movements, ie. the same gains if you invested in index funds.

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        MementoMori on 06/12/2013 - 19:29

        Exactly… I agree with Buffet, the average investor is better off with an index fund.

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        cloudy on 06/12/2013 - 21:25

        Partially correct, the notion that there is a true value, and hence a non-true or false value is incorrect, there is a always a guesstimate of value in every valuation, different assumptions of discount and growth are the key dividers between different valuations. The closest to the correct value is of a person who is most knowledge about the company, and also the head or tail wind of macro economics. Knowledge is everything, those who know more, can calculate value with the greatest confidence and hence the smallest margin of error, and also hence needs the smallest margin of safety before he or she can spot value.

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        May4th on 06/12/2013 - 22:07

        i'm not sure what point you are making. knowledge is irrelevant to the distinction between speculation and investing and of course your judgment of value will always be subjective at the time of investing.

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        cloudy on 08/12/2013 - 09:25

        When warren buffet was asked what makes him a great investor he pointed to a pile of industry reports and annual reports, and he said read 500 pages of those every day and you'll do just fine.

        Not sure if u have ever attend any of his gatherings in march each year…but his point is, knowledge is everything in investing. It is knowledge that makes him the investor he is. Not anything you have said to be honest.

        Though you don't have to agree with him, but Bloomberg recently had a story that he is deemed the worlds best investor, lowest sharpe ratio manager ever lived.

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        May4th on 08/12/2013 - 17:41

        uh.. i never said you don't need knowledge to succeed in investing, i was merely clarifying the difference between speculation and investment, at which point you came into the discussion and raised another completely non-related issue and claimed it as a rebuttal to the original comment.

        and fyi i didn't give anyone any tips about how to be, or what makes a successful investor

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      tomleonhart on 06/12/2013 - 20:27

      -4

      Any investment option that returns negative return is speculation. EG.. negative gearing.

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  lonehuon on 06/12/2013 - 14:06

  Shares are the way to go if you are looking to invest long term. Go with one of the free brokerage offers, I think Commsec has one on at the moment and buy a number of shares in an ETF such as Vanguard or STW. An ETF is a collection of shares in proportion to the top 300 (Vanguard) or top 200 (STW) companies on the market. They charge very little fees, 0.15% to 0.3% and essentially mean that as long as the market rises, the value of your shares will rise also.

  However although they allow you to hedge against the failure of specific companies if the market goes down the value of the shares will go down as well. This means that if your not willing to invest for 5-10 years then you bear the risk of a drop in the market or worse a crash (GFC). If you are willing to invest long term (10-20 years) then shares will always give larger returns than other investments, except maybe property in very specific circumstances.

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  Waldo000000 on 06/12/2013 - 14:37

  If you are willing to invest long term (10-20 years) then shares will always give larger returns than other investments

  Never say "always"…For example, the STW index fund you mentioned provided an annualized rate of return of only 1.06% between Feb 2002 and 2012! ((38.85-35.14)/35.14/10*100) That's far less than cash rates. So between 2002 and 2012, STW could only have given greater returns than cash if significant dividends were paid during that time (and I don't personally know what dividends were paid).

  Of course, different past time frames show various rates of return. And we should rightly expect that future time frames (even long time frames like the 10-20 years you suggest) will likewise show various rates of return. If only we could predict the future…

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    lonehuon on 06/12/2013 - 14:54

    Perhaps I should have limited the criteria to 20 years, in the extreme long term (50 years+) shares have given a better return than any other invest, of course if you highlight the decade with a worldwide recession in the middle it won't show a great return. However dividends have been quite strong in the past decade so STW has still achieved a total annualized return of ~8% over the past decade.Far, far from 1.06%.

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      Waldo000000 on 06/12/2013 - 15:05

      +1

      Thanks for pointing out the rate that includes dividends - that's much more accurate :)

      Nevertheless, whatever the performance was over the past 10, or 20 or 50 years, we cannot extrapolate forward, and we cannot avoid the fact that there is a higher degree of risk involved with investing in shares compared to cash, and I think it is not only healthy but imperative for OP to acknowledge that before making a decision.

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        lonehuon on 06/12/2013 - 15:11

        Very true, there is no free lunch. Each investment is priced based on risk but if you are young, thinking long term and want an easy way to get into shares. I don't think there is an investment that offers a better risk/return balance.

        8% is actually a lot higher than I expected the return to be, that is surprisingly respectable considering the last decade.

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      elektrobargain on 07/12/2013 - 23:59

      Previously I had been with a couple of managed funds, but after a while you just realise the management fees are eating half your earnings away.

      So I would also suggest looking at the STW exchange traded fund. I've been invested in it for years, and it's given me a good return - also pays a good dividend. It's quite popular - $2.5 billion dollars invested in it, and the management fees are super low compared to a managed fund.

      Also if you're going to invest directly in shares, take a look at http://www.shortman.com.au/top where you will see a list of "shorted" stocks (or search for one at the top right). Basically the bigger the percentage, the more people are betting that the stock will go down in price - if the stock you want to buy is high in the list and you don't know why then it's a good indicator that people might know something you don't.

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  lonepine on 06/12/2013 - 17:20

  Index funds/ETFs are the way to go. Will beat active traders and you"ll sleep well at night.
  Buy and hold unless you need the cash. You can't time the market.

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  mr_asstight on 06/12/2013 - 17:48

  Put a bit in penny stocks as the gains can be incredible. Biotech sector is booming at the moment on the back of a declining mining industry.

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  TheNewTightArse on 06/12/2013 - 18:50

  You cant go wrong with a couple of prosties

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  YadaYadaYada on 06/12/2013 - 21:41

  Scoopon are doing a deal on a property investment magazine if you're keen entering property investment.

  https://www.scoopon.com.au/deals/51105/delivered-investment-…

  A friend recommended I read this and API to get a feel for buying property.

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  CI on 07/12/2013 - 00:57

  -3

  Invest in precious metals man. Gold is only ever going to go up. Buy a kilo, keep it for few years. You are almost guaranteed to double it.

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    SpaceNinja on 07/12/2013 - 06:26

    -1

    going up? http://s23.postimg.org/ac26l6295/gold.png

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    wa01 on 07/12/2013 - 06:45

    -1

    Got to agree with SpaceNinja.
    Didn't Gold peak at ~ $2000 and is now $1200ish.
    As its rise from under $500 was supposedly due to risk aversion. Seriously it could fall a long way longterm, like oil will I think.

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  wa01 on 07/12/2013 - 06:38

  I agree with the bank account option many suggested above.

  Seriously consider at-call and term deposit bank account interest.
  Longterm average for Oz is about 6 or 6 1/2% I think. Compounded over decades the results are decent.
  Risk virtually zero, and you control your funds. Little effort/stress in the longterm.

  I traded stocks etc for 15 years and there are many unseen risks and pitfalls. And sharks are too common.

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  worlds_most_wanted on 07/12/2013 - 15:50

  +2

  Best investment is in yourself.

  Start up a small/micro business (with no or minimum overheads) that you can run on the side of your regular job or partner up with someone who can help run it. You can easily surpass the 5-10% returns you would get investing in the financial sector.

  Not only does it take the boredom out of investing, the potential growth is there to surpass any fixed return companies may offer you.

  There's no decent money to be made in stocks/currency unless you are day trading with leverage, which is way too risky for a novice.

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