StockMarket Help

[Equus]

Hi!
I recently won a lump sum of money on a Tatt's scratchy and after paying off substantial debt, eg. HECS and phone bill, I'm left with $10k.
Now I intend to invest in the stock market. I don't have a single clue on how to actually start trading. I've been told to join CommSec or whatever, but in terms of trading strategies and stuff, I'm clueless! Dividents? PE ratio? What are all these mumbo-jumbo?

So if anyone is willing to advise me on the best tip and best strategy on how to trade on the stock market, please share with me! I'm not asking for stock tips on what to buy and what to sell, but general advice on how to make a reasonable amount of money.

Thanks

Eq

 

[bullish23]

Wait 6 months at least. Brave man to jump in at this point in time.

 

[Equus]

But If i jump in now, can i still snare bargain shares?
But when is the best time to enter the market?

 

[Moo]

But If i jump in now, can i still snare bargain shares?
But when is the best time to enter the market?

Go to the ASX website - they have an excellent range of online tutorials on investing.

The only advice I would give is look to past performance as to a guide of what to expect in the future .....Wesfarmers or CBA is unlikely to drop to nothing overnight but Centro could. However WF/CBA are not going to double in price overnight where Centro may ...it is a risk return thang.

If individual stocks are your thing - open a trading account with an online trader and use their research tools to pick something you like. Research it and use it as a learning experience. My advice is look at a sector eg retail or banking and compare the soild performers within it.

The most important factors I look at (IMHO) and yes, yes I am not a fin adviser/do your own research etc is that shares factor in growth. Growth is driven by expansion ...a company that is expanding its services is good - especially if you can see that in EPS (Earnings Per Share) basically the money the company makes divided by shares out there. ROIC (Return on investment Capital) is another good one to look at ....if it is going up (IMHO) it means not only is the company growing but they are smart about where they are putting their cash. Sales/earnings etc - just have a basic look and go to google finance and see any announcements and what other media sources are saying. You can't just say a PE of 5 is good (PE basically means how many years will it take until earnings are equal to price). PE's are driven by the type of market sector - if you have massive growth potential ...a PE of 15 or 20 might be reasonable ...compare industry PE's if you are unsure.

Dividends may or may not be a factor for you ...if they are a divvy rate of between 3 - 5 % is considered reasonable and you then decide if you keep it or re-invest. You may prefer a company that gives limited divies but has a more agressive growth plan.

If I had only 10K - I would still only invest 5K until I became comfortable with the market ...throw the other 5K in a TD for a few months (get used to not ahving access to it).

BTW - The best time to enter the market is just before the share you are going to purchase moves up. I still think it is a mugs game trying to pick the dips ...just try to get a good base - buy a nice solid Aussie bank and hold on. Nothing like having cash in the market to tweak your interest in how the whole share game works.

 

[Equus]

Fantastic Moo!
Now I have a better grasp of it!
Thanks

 

[blues2010]

I think it depends on your timeframe. If you want to buy and let it grow over 5 to 7 years then buy blue chip maybe 10 @ $500 each then when your more comfortable put the rest in. If you are just trying to save a little bit for a home deposit then I think you might be best investing in ING maximum saver or something similar that you know will pay around 8% and let it grow slowly until you need it

 

[James23]

1. dont enter the stock market atm.. dangerous times.

2. if you insist, speak to a stockbroker

 

[TheBigUnit]

Whatever you do don't get a broker to trade for you, they just want their commissions by getting you to trade (buy or sell) as many times as possible. There are some good brokers but the overwhelming majority are crap.

Don't jump into the market straight away, as the old saying goes "the market will wait for you" (there'll always be opportunities), take time to get educated first and foremost if you want to be successful in the long run. There's no one strategy that'll make you rich - people make money trading/investing with lots of different strategies - the best strategy for you will depend on various factors e.g. your personality and how much time you are willing to spend looking at the market etc.

After learning about the basics of how the market works and the main investment vehicles, I would start learning about technical and/or fundamental analysis (how to pick stocks and other investment vehicles). There's heaps of good free info out there i.e. investopedia.com, finance.yahoo.com/education and plenty of books which won't cost you much/that you can loan from the library, for technical analysis: I'd recommend starting with books by Chris Tate (Art of Trading is a good starting pt) and Louise Bedford (Charting Secrets and Trading Secrets are a good starting pt) - both are Aussie authors, home traders and excellent writers. http://www.moneybags.com.au/ gives an excellent database of books with reviews/ratings/guides for a range of other books that you'll want to look at. Also for technical analysis you'll need charting software, most software companies offer trials so you can get a feel for which ones you like, but for free charts I like www.bigcharts.com - easy to use, gives you access to charts all around the world, data is only slightly delayed (I think) - but if you get serious you'll eventually want to purchase a software package.

Once you have a reasonable level of education (never stop reading and learning though), start backtesting (using past data) and/or virtual/paper trading (using current data) to test out different strategies/methodologies and develop your own trading plan/strategy - making sure you document details. When you feel comfortable with your trading plan/strategy you can enter the market with real money (small amounts at first) and start trading.

 

[juzza316]

Hi!
I recently won a lump sum of money on a Tatt's scratchy and after paying off substantial debt, eg. HECS and phone bill, I'm left with $10k.
Now I intend to invest in the stock market. I don't have a single clue on how to actually start trading. I've been told to join CommSec or whatever, but in terms of trading strategies and stuff, I'm clueless! Dividents? PE ratio? What are all these mumbo-jumbo?

So if anyone is willing to advise me on the best tip and best strategy on how to trade on the stock market, please share with me! I'm not asking for stock tips on what to buy and what to sell, but general advice on how to make a reasonable amount of money.

Thanks

Eq

Wow, im assuming you won around $50k then. Never thought anyone won anything off scratchies!!

 

[daddy_4_eyes]

1. dont enter the stock market atm.. dangerous times.

2. if you insist, speak to a stockbroker

1. Bullshit. Lots of bargains can be bought now. Its not like the market will drop to zero. Diversify & stagger your entry into the market & you can't go wrong over the long term.

2. Don't bother. With $10k to spend, and employing a buy & hold strategy, might as well just go through CommSec.

 

[James23]

1. Bullshit. Lots of bargains can be bought now. Its not like the market will drop to zero. Diversify & stagger your entry into the market & you can't go wrong over the long term.

2. Don't bother. With $10k to spend, and employing a buy & hold strategy, might as well just go through CommSec.

yeh thatd be a good idea.. an inexperienced trader with no background in trading or investing in shares blindly throws his money into a troubled market without seeking the opinion of professionals. great way to riches that .

 

[Godfrey Jones]

guys, thanks for the posts - some good tips here that others can also use.

 

[cancat]

Learn how to make money when the market is going down. Much easier to trade in the direction of the prevailing market.

Currently you could -
Sell short i.e. sell the share first and buy at a lower price.
Buy gold.
Buy oil.
Buy put options.

Also learn to read charts. Shares move in trends. 'The trend is your friend' is an old saying. Even if decide that fundamentals such as p/e ratio are more important it will help with deciding when to buy and sell or picking between two similar shares.

Money management is key. Know how much you are risking when you enter a trade. Only risk a small % of your capital on each position. Keep your losses small and let your winners run.

Diversify. Don't put all your eggs in one basket.

You will probably lose money at first, don't give up, think of it as an education.

 

[Scratcher Gillespie]

The first thing I would do would be to ignore all 'advice', 'tips' or 'comments' written on this forum. It is notorious for people who have no idea what they are talking about.

Firstly - accept that you will not be able to time the market. Maybe it will fall further, maybe a recession is already priced in, regardless, people who advise you to stay out after a 25% fall have no idea. Jump in, but bear in mind you need to be able to accept a fall in up to 50% of the capital value once you put it in. In the long term, you can expect a return of say 10 - 12% long term.

Second - trading as a strategy simply doesn't work, especially at your level of assets. This market is outrageously volatile, and what earnings you make taht aren't eaten up in broker fees will be hammered because of tax. See here for more detail. I'm yet to see an outrageously wealthy trader in the Buffett mould, it is an insult to common sense that it could be more succesful.

You probably want to stay out of picking stocks for the time being. I'd be much more inclined to invest in a diversified index managed fund via Vanguard. Alternatively, you can opt for a proper diversified portfolio including international shares, property, and fixed interest. Depending on how much you could handle losing, over the long term you obviously want a higher growth option. You can access cheaper wholesale fees via Etrade etc. This is extremely important. A 1% difference in fees over the long term chews up around 30 - 40% of your investment.

If you want to start stock picking, Ben Graham's 'The Intelligent Investor' is widely recognised as the best book on individual stock picking ever written. You want to be widely read before you start picking individual stocks - it is an exceedingly hard game to beat the market - most professional fund managers aren't able to.

Remember the share market isn't a get-rich quick scheme. A proper diversified portfolio will return on average around 10% (Though there are strong arguments for this to fall in the future.) Diversify, reduce costs, if you have spare cash dollar cost average or value average into the market on an ongoing basis.

Hope that helps Equus.

 

[Equus]

The first thing I would do would be to ignore all 'advice', 'tips' or 'comments' written on this forum. It is notorious for people who have no idea what they are talking about.

Firstly - accept that you will not be able to time the market. Maybe it will fall further, maybe a recession is already priced in, regardless, people who advise you to stay out after a 25% fall have no idea. Jump in, but bear in mind you need to be able to accept a fall in up to 50% of the capital value once you put it in. In the long term, you can expect a return of say 10 - 12% long term.

Second - trading as a strategy simply doesn't work, especially at your level of assets. This market is outrageously volatile, and what earnings you make taht aren't eaten up in broker fees will be hammered because of tax. See here for more detail. I'm yet to see an outrageously wealthy trader in the Buffett mould, it is an insult to common sense that it could be more succesful.

You probably want to stay out of picking stocks for the time being. I'd be much more inclined to invest in a diversified index managed fund via Vanguard. Alternatively, you can opt for a proper diversified portfolio including international shares, property, and fixed interest. Depending on how much you could handle losing, over the long term you obviously want a higher growth option. You can access cheaper wholesale fees via Etrade etc. This is extremely important. A 1% difference in fees over the long term chews up around 30 - 40% of your investment.

If you want to start stock picking, Ben Graham's 'The Intelligent Investor' is widely recognised as the best book on individual stock picking ever written. You want to be widely read before you start picking individual stocks - it is an exceedingly hard game to beat the market - most professional fund managers aren't able to.

Remember the share market isn't a get-rich quick scheme. A proper diversified portfolio will return on average around 10% (Though there are strong arguments for this to fall in the future.) Diversify, reduce costs, if you have spare cash dollar cost average or value average into the market on an ongoing basis.

Hope that helps Equus.

Actually it did reaffirm the position that I am in at the moment.

I'm currently reading up on a lot and a lot of stock market books and all. It's all pretty interesting and gives me a broader understanding of it all.

However, there is one book that I am reading called "The Little Book of Common Sense Investing", it says something about index investing. And how it'll gradually make me a rich person over a long period of time. Is it ok to join this instead of DIY share investing? Are there any financial company that does Index Investing?

Oh well, I'll probably will invest $8000 or so into Index investing and use a small paltry amount to play with the stocks.

Thank you everyone for your help. Fell free to keep on contributing as it is helpful for a lot of other people who are n00biez in the stock market.

 

[Scratcher Gillespie]

Actually it did reaffirm the position that I am in at the moment.

I'm currently reading up on a lot and a lot of stock market books and all. It's all pretty interesting and gives me a broader understanding of it all.

However, there is one book that I am reading called "The Little Book of Common Sense Investing", it says something about index investing. And how it'll gradually make me a rich person over a long period of time. Is it ok to join this instead of DIY share investing? Are there any financial company that does Index Investing?

Oh well, I'll probably will invest $8000 or so into Index investing and use a small paltry amount to play with the stocks.

Thank you everyone for your help. Fell free to keep on contributing as it is helpful for a lot of other people who are n00biez in the stock market.

Ah, 'The Little Book of Common Sense Investing' - fantastic book for someone starting out - can't recommend it highly enough. Once you have a grasp on basic indexing, try 'The Four Pillars of Investing' by William Bernstein. These two are two shining lights of the funds management industry.

Your decision to go 80/20 into index funds/stock picks is also commendable. Good on you Equus, you are on the right track.

Edit - In answer to your question, it is absolutely ok to invest in an indexed managed fund rather than direct, for the reason that it will be difficult to get sufficient diversification with $10k. Vanguard Australia www.vanguard.com.au are the kings of this style (John Bogle, author of The Little Book of Common Sense Investing) is the founder of the group. As discussed in my reply, best to purchase via an Etrade (or the like) account to take advantage of wholesale fees. The difference can be quite significant.

 

[nokiacasio]

Now I intend to invest in the stock market. I don't have a single clue on how to actually start trading. I've been told to join CommSec or whatever, but in terms of trading strategies and stuff, I'm clueless! Dividents? PE ratio? What are all these mumbo-jumbo?

So if anyone is willing to advise me on the best tip and best strategy on how to trade on the stock market, please share with me! I'm not asking for stock tips on what to buy and what to sell, but general advice on how to make a reasonable amount of money.

Just sign up for Commsec. It's free. If you think a company is going to do well, then buy its stocks. Fill in the buy order to do this. Dividends are profits of the company given to shareholders. PE ratio is price-to-earnings ratio. The lower the better because you are getting more earnings/dividends for a lower price.

Ah, 'The Little Book of Common Sense Investing' - fantastic book for someone starting out - can't recommend it highly enough. Once you have a grasp on basic indexing, try 'The Four Pillars of Investing' by William Bernstein. These two are two shining lights of the funds management industry.

You can index through Commsec by buying ETFs (exchange traded funds) on the ASX. The fees are lower on ETFs than on traditional mutual funds. However, if you plan to dollar-cost average then brokerage fees will mean ETFs are not profitable. If you have a lump sum of more than $10,000 to invest at once then ETFs are better.

Buying an index ETF that tracks the ASX200 is officially indexing but in my opinion is not really indexing because you are putting all your eggs in one country and you are thus open to political risk and exchange rate risk.

Because indexing basically copies the market, it intensifies bubble formation.

As discussed in my reply, best to purchase via an Etrade (or the like) account to take advantage of wholesale fees. The difference can be quite significant.

I heard that E-Trade charges an extra annual 0.66% "portfolio fee" for managed fund investments. A friend warned me he found it after reading the fine print.

 

[Sloth]

Don't join Comsec it sucks, join eTrade or Westpac Broking. Don't put your 10k all on one share, get two or three at least.