Want to invest in the stockmarket

[Aaron_C]

I think it is a major cop-out to talk-up managed funds and try to question my credentials in this area. I have made lots of money from the sharemarket and the only fund manager was me, myself. Managed funds are terrible 'investment' vehicles - why try to be politically correct about it and say that 'it depends on your circumstances blah blah'?

No one gets wealthy from investing in them - you are giving people your money with no correlation to performance. If you want to be informative - then help the OP understand that the sharemarket is all about investing in the right companies, at the right time, at the right price. It is NOT about 'oh buy some managed funds and dollar-cost average and you'll be right'. That's just BS and you know it.

 

[wobbycarly]

I think it is a major cop-out to talk-up managed funds and try to question my credentials in this area.

I'm not talking up managed funds. And why shouldn't I "question your credentials?" Was I actually doing that, anyway?

I don't know who you are, what you do, what your "credentials" are. But when someone just says "Trust me" on a public internet forum, why shouldn't you be able to stand up to scrutiny?

I have made lots of money from the sharemarket and the only fund manager was me, myself.

Well good on you. I wish I could say the same. I've lost more money than I've made in the stockmarket. But I can recognise - through hindsight - that this is a lack of education, lack of experience, and incorrect mindset. All of which I'm working on fixing.

Managed funds are terrible 'investment' vehicles - why try to be politically correct about it and say that 'it depends on your circumstances blah blah'?

No political correctness about it. I don't understand why you're being so defensive. All I did was suggest to the OP that a managed fund of some type, MAY be suitable for them to consider. Would you deny that "depends on your circumstances" should go out the window for all investment types, or only managed funds?

No one gets wealthy from investing in them - you are giving people your money with no correlation to performance. If you want to be informative - then help the OP understand that the sharemarket is all about investing in the right companies, at the right time, at the right price. It is NOT about 'oh buy some managed funds and dollar-cost average and you'll be right'. That's just BS and you know it.

Who said anything about getting wealthy through managed funds? Not me. All I said is that a managed fund can give you "exposure to the market". You mention "right company, right time, right price." Perhaps you could provide some insight into how one can obtain 3 out of 3? As Meatloaf once sang, is "two out of three not bad?"

I've not purported myself to be an expert in the share market. You were the one coming in like a bull in a china shop, with "managed funds are a waste of money, just buy xxx, xxx, xxx" with no justification, no background information, no analysis, nothing.

Maybe you can educate us all by suggesting why buying BHP, RIO and the big 4 banks is a good idea. Are they the right companies, at the right price, at the right time?

Thanks.

 

[Kinnon Bell]

The stockmarket is something I've been wanting to get into but I'm not confident enough with my knowledge to use real money.

About 6 months ago I discovered the Sharemarket Game on the ASX and it's been great for me to get a feel of the sharemarket without risking real money. Without going in to too much detail it runs maybe 3 times a year and the actual trading period goes for approx 3 months. During this trading period you're given $50k to trade with. There are a limited amount of companies you can trade with (approx 100?) but you use your $50k as if it were real money traded in real time on the ASX so it gives you a good feel for trading.

 

[Aaron_C]

Maybe you can educate us all by suggesting why buying BHP, RIO and the big 4 banks is a good idea. Are they the right companies, at the right price, at the right time?

I'm not trying to start anything here. I mentioned BHP, RIO and the big 4 banks because that is what your 'fund managers' will be putting the vast majority of your money into (if you are going for a 'normal' fund).

Personally I don't think any of those companies are a good investment right now and I don't pretend to know - which is why I don't have stock market investments. There are definitely good investments in the ASX - but it's a matter of picking up on them. Shares are much more unforigiving than conventional real estate so it pays to get it right.

 

[JIT]

Sorry, but managed funds are un-equivocally a waste of time.

They are the last place for a newbie to be investing.

May as well throw a dart at a dartboard... while blindfolded!

 

[Intrinsic_Value]

I will make a further point on managed funds given the 'debates' that are occuring in the above posts.

At the end of the day managed funds will achieve a result that 'approximates' the overall indexes. Some will outperform, some will underperform but the overall correlation will be an approximate return on the underlying indexes.

Right now we are seeing those indexes achieve sub optimum returns, ie over the last 5 odd years they have not performed very well.

Now this is not a scam, nor is is due to a bunch of muppetts running these funds, its just that its not that time in the cycle yet, for equity markets to be showing sustained year after year fab results. One day it will occur, but the previous season has passed (ie pre 2008), and the next season has yet to arrive.

There is nothing wrong with managed funds per sei, some are better than others, and its up to the individual to work out which are better.

My question is:
are people taking the validity of investing in managed funds from the price movement of those funds. ie recent performance

Isnt this the same as questioning the validity of an asset class based on near term historical performance, yet as we all know future performance is not dicated by prior performance. Why is it that pre GFC managed funds were so popular, is it because their recent track record pre GFC was fantastic that people thought that such returns could be extracted into the future indefinately.

For the record i have no exposure to any managed funds (however i do like the listed investment stock code: MFF), i prefer active exposure to individual stocks. However the opportunity cost of my way of investing, is one has to have alot of time to continuously research and update opinions on individual stock selections, for many people this is not a wise allocation of their time.

 

[Intrinsic_Value]

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

Yes and i notice you have been consistent in your views over time.

Well done, take a long term view, after the GFC crash, those that take a long term view from the post GFC crash (and i mean long, ie 8-12yrs post GFC, my gut feeling is that the height of the equity bullmarket occurred around 2000, not the pre GFC 2007), should expect a nice return on their investment.

My discussions in other posts regarding a secular bear market, shouldnt effect the truely long term holding, the 'big damage' has been caused already, those holding pre-GFC will see pretty average returns, those holding now (and marking performance from now) wont see great returns whilst the secular bear market continues, however performance should be reasonable (because of the dividend yld) and when the next secular bull market occurs those returns will look very attractive.

Things move in cycles and for everything there is a time under heaven.
http://www.phrases.org.uk/meanings/141100.html

 

[Random Eagle]

A little investment of your time and energy first may be a far better investment in the long run than putting your hard earned money up front.

I'd encourage you to get a thorough education from active share market investors first, before plunging into the market (or managed funds for that matter). Why not go in with your eyes wide open and a well packed kit bag of sound strategies at the ready?

I'd strongly urge you to investigate the website of the Australian Investors Association (AIA) which costs $130 pa to join.

Here's the link:

http://www.investors.asn.au/

It has a great website complete with a members forum which covers a comprehensive range of topics. It has a broad range of resources which are free or at very low cost.

You can buy a terrific 12 DVD + 1 CD set covering 12 hours of introductory, and more advanced info on share investing which you can watch over and over again, pause, rewind etc. until you get it.

It is well paced and perfectly presented by an authentic, highly experienced presenter with over 40 years experience who is active in the market. It covers fundamental and technical analysis, charting - including links to a free charting package and information and resources on how to develop your own investment plan. This will help to stop you making rash and costly investment choices. The cost $297 for non members or $197 for members. That will be some of the best money you will ever spend.

Unfortunately they don't conduct meetings in Darwin but they conduct them in most other mainland states for anyone else who may be reading this. The Perth branch, of which I am a member, conducts monthly meetings with professional speakers which include fund managers, investment analysts etc. and they also conduct a share market competition using a notional $100,000 for practical experience. This is a great way to learn from experienced investors and novices alike. Meetings attract people from high wealth investors to regular working people who have an interest in the market.

The website provides book reviews on all manner of investment topics (written by members) and contains regular commentary on all asset classes; including property! In my view the whole thing is terrific value.

Given all of the uncertainty and volativity in the stock market at the present, this may be the ideal time to invest 6 - 12 months of your time and get a thorough grounding before you put any of your hard earned at risk.

All the best.

 

[jingo]

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

Hi Investor2009,

As others have already mentioned (Player and Intrinsic Value) with the level of gearing you have, why not put any spare $ into offset accounts to help you reduce your debt and build buffers?

At least that way you will have a guaranteed return on your $.

Regards Jason.

 

[redwing]

^
^
^
^
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.

I know someone who has share certificates in their bottom drwaer on penny dreadfuls that don't even exist anymore

Every year the number of ASX listed companies change. Companies are added, taken over, revert back to private ownership or go broke many of these de-list

I have an article where the Financial Review apparently reviewed 30 years of data of delisting compnaies, spanning 1975-2004. On average, 150 per cent of the ASX board delists each decade.

The extent of delisting decreases significantly if capitalisation changes and name changes are excluded from the analysis (60 per cent each decade). In order to determine the extent of delistings for the largest companies, the Top 150 ASX companies were examined for the period 1990-2005 in a separate analysis. Eighty per cent of the Top 150 companies in 1990 had delisted by 2005. Excluding delistings attributed to capitalisation changes and name changes, 62 per cent of the Top 150 companies in 1990 had delisted by 2005.

looking at the ASX's official list for the last six months, there are sixty-four companies removed

 

[devank]

That is why ASX20 is a safe place to start. Less chance to going broke.


I had a look at the Delisted companies. CENTREBET is one of them and I had about 3.5K and then they acquired all of the shares. During this 4 years time this stock gave about $900 in dividend and $400 in capital gain. That is about 36% return over 5 year. Amount of learning... priceless

Delisted doesn't mean that stock dropped its value to zero.

 

[Aaron_C]

I would argue that the ASX20 is one of the most dangerous places to put your money. It lures people into a false sense of security, which leads to ignorance and the idea that 'if i hold it for X years I will get a good return'.

The ASX20 list includes such 'venerable' names like Telstra (remember T2 at $7+, now it is $3.07), Rio Tinto (Remember they had a bid from Chinalco for ~$160 per share, now they are $67 after a massive rights issue), ANZ (remember they used to be $32? Now they are $21), NAB (Remember they used to be $44 many many moons ago, now it is languishing at $24), Fosters (Hasn't moved for 10 years since they bought Southcorp at ~$5), Macquarie (Remember they used to be $99? Now it is $24), AMP (Remember they used to be $20 after they demutualised? Now they are $4.11).

Need I go on? And let's not forget that most of these companies have issued significant amount of shares that dilute your stake over time unless you tip more good money after bad. You don't need the company to go into liquidation to go 'broke' on a stockmarket investment. Just a nice 50% drop or 10 years of no growth will do the trick for you.

 

[devank]

Well.. why buy when their prices are high? It is same as properties.

I did buy ANZ when it was $14.4 in July 2009. After all these problems it is still at $21. I'm okay with that.

It is not all happy story. I got burnt with MQG as Aaron mentioned. I didn't buy at $99 but I bought it at $35.00 thinking it can't possibily fall any further
It is all part of learning. The point is.. MQG is still there and I will eventually go up.

 

[investor2009]

Thanks to all three of you. Very sound advice indeed.
I sometimes get carried away, thans for bringing me back down to earth.
At the minute I'm spending up on improvements for our new PPOR. Garden improvements for the time being like mulch and plants, and lots of hard work. The original owners had it set out magnificently and then rented it out for two years before we took on the title and it was not looked after within that tenancy so I'm enjoying adding value to it. Theres 2.5 acres to get through and it will make a great improvement once done. And with properties like these, nicely done gardens make a huge difference to price. I have a good buffer sitting in offsets at present so am not too concerned with that. It's always nice to have more though.

Hi Investor2009,

As others have already mentioned (Player and Intrinsic Value) with the level of gearing you have, why not put any spare $ into offset accounts to help you reduce your debt and build buffers?

At least that way you will have a guaranteed return on your $.

Regards Jason.

 

[AAA]

Hi Investor2009,

I have also been trying to learn more about the shares .
The way I have been trying to choose shares in my limited experience has been more ad-hoc.

For example, a couple of years ago the company that I worked for was taken over by another company. I changed jobs six months after. However it gave me very good exposure to the character and cost saving steps the new management was taking. (as an e.g., they were decommissioning all Microsoft products and switching to open source to save licensing fees!!).
Based on the above I then try to research that company and see if it is a good buy.

Similarly, I try to keep an open eye to all the services/goods that family/friends buy and research those companies and see if they are a worth putting money in.
So far, from what I have experienced it is going ok.

Anyone else tried this and did not work?

 

[wobbycarly]

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

I would argue that the ASX20 is one of the most dangerous places to put your money. It lures people into a false sense of security, which leads to ignorance and the idea that 'if i hold it for X years I will get a good return'.

The ASX20 list includes such 'venerable' names like Telstra (remember T2 at $7+, now it is $3.07), Rio Tinto (Remember they had a bid from Chinalco for ~$160 per share, now they are $67 after a massive rights issue), ANZ (remember they used to be $32? Now they are $21), NAB (Remember they used to be $44 many many moons ago, now it is languishing at $24), Fosters (Hasn't moved for 10 years since they bought Southcorp at ~$5), Macquarie (Remember they used to be $99? Now it is $24), AMP (Remember they used to be $20 after they demutualised? Now they are $4.11).

Need I go on? And let's not forget that most of these companies have issued significant amount of shares that dilute your stake over time unless you tip more good money after bad. You don't need the company to go into liquidation to go 'broke' on a stockmarket investment. Just a nice 50% drop or 10 years of no growth will do the trick for you.

So it's buy RIO, BHP, and the big 4 banks, except for RIO, ANZ and NAB?

(PS. I know the first quote was comparing buying managed funds to purchasing "blue chip" shares directly)

 

[Vesuprop]

Before you start researching an investment class it is best to ask yourself what do you want to achieve and how will it help get me there?

Do you want to create a passive income stream (that outpaces inflation) or are you looking for capital growth?

Answering that question will ultimately narrow down what share market education you require and what stock selections would suit you.

 

[icemanmelb]

So it's buy RIO, BHP, and the big 4 banks, except for RIO, ANZ and NAB?

(PS. I know the first quote was comparing buying managed funds to purchasing "blue chip" shares directly)

Like property investment, blue chip shares are just that. Just because a company is rated as blue chip doesn't mean it won't go broke either. I can give you some examples where they went to 0.

Besides, the market has move cycles than melbournes weather which means that if you missed one, there's always another.

The market can give one a good return on investment.

Paul

 

[MIW]

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'.

Aaron, totally agree! Some extra fees are:
An upront fee, switching fee, exit/withdrawal fee since I programmed them in about 15 years ago.
The fees will get you at some point, whether you like it or not, if not upfront, than if you switch, then when you withdraw. On top of that you have the management fee, regardless.
It amazes me how over the years the funds have grown yet the fees still remain a percentage % (huge, huge, huge profits for Managers!).
I enjoyed this thread (and chuckled) and I am amazed at the risks people take before educating themselves........ Knowledge and education is the key, not the hype of how people make or have made money from stocks....
Remember for every successful trade there was an unsuccessful one..... (how do the people feel that bought Macquarie at their height - around $100).

 

[MIW]

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?

But the original poster said he has no expertise there.......
Wouldn't you suggest he should become educated in the field first before recommending anything?