Want to invest in the stockmarket

[investor2009]

Hi!

I was watching a story this morning about a couple in England who just won the lottery. Prize was One hundered and one million dollars. It triggered something inside that said: Either I buy a lottery ticket every week and have a very slim chance of winning anything at all, or I could invest in the stockmarket and win at least half of the time, AND receive dividends.

I've looked into the market before but always decided against it, but this time I'm hoping to get started. Thing is: I know next to nothing about it . .

I am heavily geared in property and the majority of my take home wage goes toward interest only mortgages of loans totalling $1.5M with a portfolio worth around $1.8M

I only have a few thousand cash to get started, and would be willing to tip in a hundred bucks cash a week or so to keep me moving. Is it even worth my while with such little funds to contribute? My aim is optional retirement and debt reduction within 5-10 years time. I plan to sell our old PPOR to pay out our new home once values lift to the extent that would allow us to do this. By then we should have a $1M home paid off, and a further million from the other two properties, but things change over time and we could have more by that time. We plan to live off equity for a short time to watch values rise and reassess from there. So. Is it worth investing in the stockmarket and if so, which one!?
How do I get started?

 

[devank]

Thing is: I know next to nothing about it . .

To be honest I don't think anyone has any! Have you listen to those market experts lately?

I am heavily geared in property and the majority of my take home wage goes toward interest only mortgages of loans totalling $1.5M with a portfolio worth around $1.8M

Is that including your own home? Otherwise I would consider as too much risk. I hope you have enough buffer.

How do I get started?

You can sign up with commsec or maq prime or E-trader or any other similar. I used commsec before but I'm with maq prime now.
I would suggest start with few ASX top 20 and wait for the right time. That should help you to get familiar with the whole thing.

I'm also new (2 years) to shares. I bought one or two Top20 initially. After that only I started tuning myself to stock related information. It is very hard to learn something unless you are in it.

 

[investor2009]

Thanks Dev, I've got plenty of buffer and am used to debt so thats no worry for me. Oh and yes, it includes our current home.

Cool, so I can start with the ASX's top twenty and trade myself, with such little cash? What could I expect to make over time with only a few thou coumpounding? I expect I could place in $10,000 per year if that helps.

 

[Aaron_C]

I used to trade the stock market all the time on significant leverage. But it's not easy to invest in the market especially in these times - you have to keep a constant eye on your portfolio and it's hard to stomach the daily gyrations without wanting out.

 

[VYBerlinaV8]

I buy using a relative low cost fund, with both borrowed $ and my own $ each month.

I'm planning to have about 25% of my net equity in shares by the time I hit retirement (10-12 years from now).

 

[investor2009]

Thanks everyone. So I can start trading for free, without the use of a broker through online outlets. I buy top 20 stocks and wait 10 years. Is this about right? I get this from the ASX website.

 

[Aaron_C]

Thanks everyone. So I can start trading for free, without the use of a broker through online outlets. I buy top 20 stocks and wait 10 years. Is this about right? I get this from the ASX website.

lol that is a terrible strategy...you might as well stick your money in a term deposit for 10 years.

 

[investor2009]

Hmmm. But didn't Warren Buffet say "When I invest in stocks, I buy them pretending that the market is closing and will not re-open for 10 years" Or something similar?

So Stocks are a short term investment? For cash flow?
No-one is helping me very much here.

 

[devank]

I said pick one or two from the Top20 to learn the system. Not buy all of them and hold them for 10 years. Even though they claim that shares do better in long term.

 

[Aaron_C]

Hmmm. But didn't Warren Buffet say "When I invest in stocks, I buy them pretending that the market is closing and will not re-open for 10 years" Or something similar?

So Stocks are a short term investment? For cash flow?
No-one is helping me very much here.

No they are not a short term investment per se. You can't take Warren Buffett literally...I've read many books about him and the basic underlying principle is this:

Warren Buffett does buy and sell stocks on a regularly basis. He doesn't sell certain stocks like Coca-Cola etc because he believes they are good, long-term investment that will do good for the next 30 years. But he knows (or thinks, rather) that they will be good investments because he does his own research into the company, its industry, its competitors and so on. He doesn't simply buy it because it's a big company (as that's stupid). He does sell stocks if he thinks that the company is going to do badly or is facing headwinds to long-term future growth. For example, he has reduced his stakes in ConocoPhillips etc over the years.

My point is - you need to do your own research into why a particular company is good/bad/ugly. If you think that based on your analysis, the current share price is 'cheap', then you might purchase it and hold it to make money. The ASX20 is a good place to start to look for such companies, but it is not the exhaustive list. Nor does it mean you should buy anything from the ASX20 - it's all up to your own due diligence.

 

[Intrinsic_Value]

I am heavily geared in property and the majority of my take home wage goes toward interest only mortgages of loans totalling $1.5M with a portfolio worth around $1.8M

I only have a few thousand cash to get started,How do I get started?

a friendly opinion:
You have made a decision to invest heavily in property. Your gearing is quite high for this level of the cycle and most of your spare income is going into servicing the loans.

Therefore i humbly suggest concentrating on your day job and getting a promotion (which will increase your income), and concentrate on paying down those loans.

You dont need the distraction.

If you want to learn about share market, buy the 'sharemarket for dummies' or a name similar to that, 'the dummies' line of books covers all soughts of topics and are designed for someone with no knowledge. Theres 'windows for dummies', 'investing in property for dummies' etc etc.

This book should give you some basic understanding from which you can basically determine how you want to invest/trade in the stockmarket. Once you have determined how you want to make money from the stockmarket, then buy more specific books and continue to learn.

Do all of this without actually putting any money in.

One day in the future you will be in a better situation to actually put cash into the stock market and by that time you will have a better understanding of it.

 

[Player]

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What IV said. Enough on your plate for now. Improve income, increase buffers and get some basic knowledge. Even using the ASX free online tutorials are a start. The stock market is no magic bullet right now where the BHP strategy (Buy, Hope, Pray) won't cut it.

Those who bought and put away in the draw (without reassessing holdings even sporadically) have essentially had little or no growth over the past six or seven years.

 

[wobbycarly]

If you want market exposure, but don't have the time/inclination/knowledge to to your own research, managed funds could be a good way to go.

Something LIKE this product from ANZ could be suitable for you.

http://www.anz.com.au/personal/investments-advice/shares-managed-funds/online-investment-account/

Depends if you want to trade, invest in specific companies, or simply gain exposure to the ASX.

Thanks everyone. So I can start trading for free, without the use of a broker through online outlets. I buy top 20 stocks and wait 10 years. Is this about right? I get this from the ASX website.

Nothing's free in this world! With the likes of commsec or ETrade you are paying something like $20-$30 per trade.

 

[Aaron_C]

Managed funds are a waste of money. You might as well buy BHP, RIO and the big 4 banks in equal shares.

 

[Aaron Sice]

I used to trade the stock market all the time on significant leverage. But it's not easy to invest in the market especially in these times - you have to keep a constant eye on your portfolio and it's hard to stomach the daily gyrations without wanting out.

quoted for truth.

there's a reason why traders burn out - i'm no exception.

 

[wobbycarly]

Managed funds are a waste of money. You might as well buy BHP, RIO and the big 4 banks in equal shares.

Are they? And everyone has the same objectives and goals?

$10,000/6 = $1,667
Less brokerage, would leave say, $1,600 per parcel.

Closing prices today
BHP = $37.08 = 43 shares
RIO = $67.46 = 24 shares
CBA = $47.46 = 34 shares
NAB = $24.20 = 66 shares
ANZ = $21.08 = 76 shares
WBC = $21.63 = 74 shares

And the OP only quoted "a few thou" - I've been generous with the $10k starting figure. And if the OP can contribute $10k pa to their share portfolio, would we be looking at spending $100 per parcel every month, accounting for the $120-$180 brokerage charge?

A managed fund can be started with "a few thou" and can be added to at very low cost over time (dollar average in.) In the meantime, a beginner in share investing, can be paper-trading, while still having exposure to the market.

No, I don't sell managed funds, and I'm not a managed fund champion, but I'm simply challenging your view that they don't have a place.

 

[VYBerlinaV8]

Are they? And everyone has the same objectives and goals?

$10,000/6 = $1,667
Less brokerage, would leave say, $1,600 per parcel.

Closing prices today
BHP = $37.08 = 43 shares
RIO = $67.46 = 24 shares
CBA = $47.46 = 34 shares
NAB = $24.20 = 66 shares
ANZ = $21.08 = 76 shares
WBC = $21.63 = 74 shares

And the OP only quoted "a few thou" - I've been generous with the $10k starting figure. And if the OP can contribute $10k pa to their share portfolio, would we be looking at spending $100 per parcel every month, accounting for the $120-$180 brokerage charge?

A managed fund can be started with "a few thou" and can be added to at very low cost over time (dollar average in.) In the meantime, a beginner in share investing, can be paper-trading, while still having exposure to the market.

No, I don't sell managed funds, and I'm not a managed fund champion, but I'm simply challenging your view that they don't have a place.

FWIW, I'm quite happy with my managed fund. I'm not trying to boil the ocean here.

 

[Intrinsic_Value]

A managed fund can be started with "a few thou" and can be added to at very low cost over time (dollar average in.) In the meantime, a beginner in share investing, can be paper-trading, while still having exposure to the market.

No, I don't sell managed funds, and I'm not a managed fund champion, but I'm simply challenging your view that they don't have a place.

Yes totally agree in principle as part of a diversifed get rich slowly scheme over decades.
But
(a) this guys wants to learn about the stockmarket specifically, investing in managed funds is a cop out
(b) this guy has chosen to run a 'concentrated' portfolio by putting the vast majority of his assets in residential property and then geared it quite heavily.

Get that debt down, equity funds should have a minimum time horizon of 7 years, that money in managed funds wont be much good if one needs access to that money and at the same time the fund prices are being belted.

 

[Aaron_C]

Are they? And everyone has the same objectives and goals?

Yes, not to mention the:

Management Fee - This is a percentage (1-2%) that is paid to the fund manager each year for the 'expertise' of buying the above-mentioned shares at a significant brokerage discount and putting little/no thought into it. I just told you what they do, and I did it for free! Unless of course you'd like to pay me a 2% commission for it, and I would gladly accept it if you did.

Exit Fee - This is another fee paid to the fund manager for them to return your money back to you. Let's not forget that under most managed investment scheme trust deeds the right of withdrawal gives them 30-60 days to return your money - this is despite the fact that the underlying assets (the shares) can be sold and cashed out instantly.

As we saw in the GFC - if the market tanks badly over a short period of time, and you want out - you have to wait 30 days at least to get your money out. But what if they only sell within those 30 days at much lower prices when you instructed them to sell? You lose even more money!

Trust me - it's a bad way to 'build wealth' - unless of course you mean building the wealth of the fund 'manager'.

 

[wobbycarly]

Yes totally agree in principle as part of a diversifed get rich slowly scheme over decades.
But
(a) this guys wants to learn about the stockmarket specifically, investing in managed funds is a cop out
(b) this guy has chosen to run a 'concentrated' portfolio by putting the vast majority of his assets in residential property and then geared it quite heavily.

Get that debt down, equity funds should have a minimum time horizon of 7 years, that money in managed funds wont be much good if one needs access to that money and at the same time the fund prices are being belted.

Excellent point about having ready access - especially if that access is required during a downturn. I know you often talk about "return of capital".

Yes, not to mention the:

Management Fee - This is a percentage (1-2%) that is paid to the fund manager each year for the 'expertise' of buying the above-mentioned shares at a significant brokerage discount and putting little/no thought into it. I just told you what they do, and I did it for free! Unless of course you'd like to pay me a 2% commission for it, and I would gladly accept it if you did.

Exit Fee - This is another fee paid to the fund manager for them to return your money back to you. Let's not forget that under most managed investment scheme trust deeds the right of withdrawal gives them 30-60 days to return your money - this is despite the fact that the underlying assets (the shares) can be sold and cashed out instantly.

As we saw in the GFC - if the market tanks badly over a short period of time, and you want out - you have to wait 30 days at least to get your money out. But what if they only sell within those 30 days at much lower prices when you instructed them to sell? You lose even more money!

Trust me - it's a bad way to 'build wealth' - unless of course you mean building the wealth of the fund 'manager'.

Yes there are fees to consider. The same way brokerage fees are part of purchasing direct shares. That particular ANZ product I mentioned earlier has the following fees.

Account Establishment - NIL
Brokerage - NIL
Entry Fees - NIL
Exit Fees - NIL
Commissions - NIL
Management Fees - 1%pa of your average account balance
Transaction Cost - 0.25% per transaction

(I know Commission = Management and Brokerage = Txn costs, but it looks good in the brochure! )

And you have access to your money in 24hrs.

I'm not saying this is a GREAT product, simply trying to help educate the OP that managed funds MAY be worth considering, if one is simply looking for exposure to the market, without having to learn all the intricacies. Yes, of course, there is a cost for this convenience, but having responses like "Managed funds are cr@p - stay clear" is not much different from "Commercial property is risky - stay clear".

We should share information and experiences, and let people make their own decisions based on their own expertise, risk profile, etc. Sure we can point out the risks and benefits, but let's do it based on fact, and not with statements like "Trust me - it's a bad way to 'build wealth' ".

Trust you? Why?