# Stuck in a rut



## makybe04 (5 May 2011)

Hi everyone,

I've spent the last 18 months or so paper trading and dabbling in a few shares (I class myself as beginner). I've read a number of different books on the art of mastering the sharemarket and check in on the forum quite a bit!  I use a mixture of TA and FA to select stocks although a lot of the time money prevents me from actually buying them since I'm a poor uni strudent 

I guess the last couple of months, I feel like I know the basics of investing but want to take my knowledge to the next level. I was wondering if anyone could offer some advice on how to take it to the next level? and if they've found themselves in a similar position and what they did. At times I wish I had someone to mentor me and bounce ideas off.

Thanks in advance for any help.


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## burglar (5 May 2011)

makybe04 said:


> ... I was wondering if anyone could offer some advice on how to take it to the next level? ...




Hi makybe04,

Your previous posts suggest you are trading, yet here you're asking how to go to the next level? Which levels are you talking about?


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## makybe04 (5 May 2011)

burglar said:


> Hi makybe04,
> 
> Your previous posts suggest you are trading, yet here you're asking how to go to the next level? Which levels are you talking about?




Thanks for the reply burglar. I'm focusing on investing now. I guess what I'm seeking is how to develop from a beginner to intermediate. People continually say it's all about finding your own way, but I guess I'm just after a greater understanding and improving my profits. My results over the last 12 months have just out done the market and I have learnt a few valuable lessons. 

At this stage, I practice Weinsteins charting method with some common sense FA. 

Should I just continue to read as many books as I can about the sharemarket? 

I'm sorry about this late night rant. I think it just boils down to me being a bit frustrated that I'm jogging on the spot at the moment.


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## burglar (6 May 2011)

makybe04 said:


> ... from a beginner to intermediate. ...




Late night rants are my speciality!

Warren Buffett says he don't know anyone who got rich on his seventh good idea

What he means by that, learn about six good companies. Learn a lot about six good companies.

I was so surprised cause I wasted ten years researching hundreds of companies.

there is 53 billion good reasons to:
Go to Youtube and search for Warren Buffett. 
Be surprised how down-to-earth he is.


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## suhm (6 May 2011)

I just run my own thread to get some ideas about my trades. You could try that. Helps to articulate your reasoning for a trade.


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## burglar (6 May 2011)

makybe04 said:


> ... Should I just continue to read as many books as I can about the sharemarket? ...




If you feel they're doing you good and/or you enjoy reading (and not just filling your head) then go frit!

My last post did not mention which part of your dilemma I was addressing.
Obviously about learning and about (light) entertainment. 
And an alternative to reading.

But mostly about effectiveness and efficiency.

Remember: effective is doing the right thing and
efficient means doing it right.

http://www.differencebetween.net/business/difference-between-efficiency-and-effectiveness/


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## youngone (6 May 2011)

burglar said:


> Late night rants are my speciality!
> 
> Warren Buffett says he don't know anyone who got rich on his seventh good idea
> 
> What he means by that, learn about six good companies. Learn a lot about six good companies.




Hi Burglar

What things should i be looking at when researching the company. My main problem right now is that, I read up on the company, everything is good and the timing seems good. and then market goes on a roller coaster. Obviously, I am doing something wrong?


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## kingcarmleo (6 May 2011)

There is no secret mate, all you can do is get experience and have patience, despite what a lot of people say, those are probably the most important aspects of investment.


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## ENP (6 May 2011)

> What things should i be looking at when researching the company. My main problem right now is that, I read up on the company, everything is good and the timing seems good. and then market goes on a roller coaster. Obviously, I am doing something wrong?




- Does it have a durable competitive advantage?
- Are it's earnings, sales, profits, showing a consistent improving trend?
- Has it paid dividends which are increasing each year over the past 10 years?
- Is it increasing it's return on equity or maintaining a high return on equity?
- Does it have comparatively low cost of sales, debt and advertising/R&D expenses compared to it's competitors?
- Does it have high gross margins and net profit margins?
- Will this company (in your opinion) be around in 10/20+ years time and (in your opinion) will it be a stronger company in 10/20 years?

- Is it at a suitable price?

Basically, you should be looking at its income statement, its equity statement and cashflow statement in the annual report. 



> There is no secret mate, all you can do is get experience and have patience, despite what a lot of people say, those are probably the most important aspects of investment.




Experience = trial and error with buying stocks then learning from your mistakes?


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## makybe04 (6 May 2011)

Thanks for the help. Some really valuable points have been raised. At times I was trawling through the top 300 or so companies on the ASX looking for Weinstein signals to buy and then cross checking with solid fundamentals. I think my frustrations are much the same as youngone where everything looks great and then the market goes on rollercoaster ride denting my confidence a bit. 

What I can take out from the replies, is to really focus on some sectors that interest me and I see doing well in the future. Research a handful of good companies instead of going through hundreds and then select stocks based more on fundamentals then I have in the past.


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## mr. jeff (6 May 2011)

makybe04 said:


> Thanks for the help. Some really valuable points have been raised. At times I was trawling through the top 300 or so companies on the ASX looking for Weinstein signals to buy and then cross checking with solid fundamentals. I think my frustrations are much the same as youngone where everything looks great and then the market goes on rollercoaster ride denting my confidence a bit.
> 
> What I can take out from the replies, is to really focus on some sectors that interest me and I see doing well in the future. Research a handful of good companies instead of going through hundreds and then select stocks based more on fundamentals then I have in the past.




then buy that stock and watch it go through the floor. it will happen.
 - make some rules and stick to them like sell points and places where you cash out.
- read the averaging down thread for an insight into emotions of trying not to sell losers too. be a good loser. (I am not being snide.)


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## burglar (6 May 2011)

youngone said:


> ... Obviously, I am doing something wrong?




I think you are misjudging the volatility of the market. 

After a recommendation from Sir O, I am reading "THE (MIS)BEHAVIOR OF MARKETS" by Benoit B. Mandelbrot.
He proves financial markets are far riskier than has commonly been believed.

Just my opinion!


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## tothemax6 (6 May 2011)

I would recommend you also learn some macroeconomics. Not only will it help protect you from investing at the wrong time, but it is arguably much more interesting than TA and FA if you have no money on the table. 
Macroeconomics helps you decide not which stock to buy, but things like 'should I buy _any_ stocks at the moment'. It includes understanding politics, the nature of different nations and states, the effects of different economic policies etc.

I think it also helps if you pick _one_ stock, and watch it in particular for a while. Understand everything about the company, what its inputs and outputs are, what its financial position is, what currencies it is exposed to, what commodities it is sensitive to etc etc. Then watch how the stock price reacts to different news, different events, different market trends etc. This will help you understand stocks better overall.


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## burglar (6 May 2011)

So many here say, "You are wrong!"
"You are wrong!"

You are not wrong!

You have no control over the outcomes.

You could improve your picks. 
You could improve your timing.

Or you could lower your expectation!!


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## Julia (6 May 2011)

burglar said:


> You have no control over the outcomes.
> 
> Or you could lower your expectation!!



Well, if you really believe it's not possible to have control over outcomes, you will indeed need to lower your expectation.


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## burglar (6 May 2011)

Julia said:


> Well, if you really believe it's not possible to have control over outcomes, you will indeed need to lower your expectation.



Hi Julia,

Why do I sense that you can control outcomes?!


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## burglar (7 May 2011)

youngone said:


> Obviously, I am doing something wrong?




Julia, 
Can you see that youngone has ended his statement with a question mark.

To me it suggests, he does not believe he is doing something wrong.
If youngone is trying to make large profits in a short time, I would suggest the market is a riskier place than we are led to believe. Hence I say his expectations may be too high.

Is that clearer than my previous poorly-worded post?


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## Julia (7 May 2011)

burglar said:


> Julia,
> Can you see that youngone has ended his statement with a question mark.
> 
> To me it suggests, he does not believe he is doing something wrong.



Perhaps youngone will clarify what he meant.  I didn't take that sentence as an assertion that he thought he was doing nothing wrong at all.



> If youngone is trying to make large profits in a short time, I would suggest the market is a riskier place than we are led to believe. Hence I say his expectations may be too high.



I understand what you were saying here.  I was just taken aback by your suggestion that it's not possible to have control over outcomes.


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## youngone (7 May 2011)

Julia said:


> Perhaps youngone will clarify what he meant.  I didn't take that sentence as an assertion that he thought he was doing nothing wrong at all.




In response to my early post. It was a question of, "What am i doing wrong?" 
on behalf of most newbie traders here, what are we doing wrong as a beginner in the share market.


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## ENP (8 May 2011)

"The market goes on a roller coaster" 

and 

"What am I doing wrong"

If you think you *can control the ups and downs* of the market then *that is what you are doing wrong*. Profit from volatility and folly rather than participate in it.


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## ENP (8 May 2011)

I'd say the most basic mistake of beginners (including myself sometimes) is that they go to the market with their 10k savings for example and expect to "make money." If you go into the share market with that mentality then you are most likely going to have a roller coaster ride, watching the share price and getting excited or depressed as it bounces around.

I've learnt to go into the stock market to invest in the business, I don't pay too much attention to the daily price bouncing around as it would do my head in. As long as the business itself is doing ok (eg. Woolworths keeps selling bread and milk and doesn't burn down and Coca Cola Amatil keeps pumping out the coke and powerade) then I'm not too fussed. I actually get excited both ways.

If the price goes down I get excited because I may buy more at a good price. If the price goes up I get excited because my investment decision was a good one. 

Change up the way you think about investing and you will be much happier.


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## burglar (9 May 2011)

youngone said:


> ... what are we doing wrong as a beginner in the share market.



a thread I like:

https://www.aussiestockforums.com/forums/showthread.php?t=22559&p=631747#post631747

A post by Logique is particularly relevant and I quote:
"... start small, remember there's no silver bullet, and mistakes are the price of an education."


I did not agree with all of this article, does that make me "Wrong"?:

www.decisionpoint.com/TAcourse/TradeMistakes.html


Video, if you prefer, but stop the advertisement, scroll down and on the right! 

http://fundamentalwithtechnicalanalysis.blogspot.com/2011/04/top-10-trading-mistakes.html


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## burglar (10 May 2011)

Hi youngone,

You have seen Nioka's thread on investing $1500 and you commented on the trading plan. Did you note that the companies are in Oil Shale. The "fundamental" here is ENERGY and in particular liquid fuel. 

My question to you is this. Do you have a trading plan? Do your companies share a fundamental idea? Are you passionate about a NUCLEAR future or are you keen on TRANSPORT?

I like the Chinese commodity boom with emphasis on anything associated with STAINLESS STEEL!
Iron Ore, Manganese and Nickel have my attention!
If the China story fades, India & Brazil will continue the story!


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## Tysonboss1 (17 May 2011)

youngone said:


> I am doing something wrong?




Perhaps you are not relating what you are paying to what you are actually purchasing.

There are two parts, Quality and quantity.

Most people focus on quality first (and rightly so), But alot forget to check the quantity. meaning how much of the company are you buying when you buy a share, and is the price you are paying for that sized piece sensible given the likly future earning power.


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## Tysonboss1 (18 May 2011)

Tysonboss1 said:


> Perhaps you are not relating what you are paying to what you are actually purchasing.
> 
> There are two parts, Quality and quantity.
> 
> Most people focus on quality first (and rightly so), But alot forget to check the quantity. meaning how much of the company are you buying when you buy a share, and is the price you are paying for that sized piece sensible given the likly future earning power.




Benjamin Graham wrote an article in a ladies magazine and suggested that you should buy stocks in the same way you buy your grocereries, not in the way you buy perfume.

What he was saying was that when people buy groceries, they look for quality but also compare value and make their purchased based on both, But when it comes to perfume often quality or brand is the only factor considered and purchases are made regardless of price, this may be ok for consumer items, But when it comes to investing it will almost always lead to disasterous results or medocre returns at best.


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## tech/a (18 May 2011)

Tysonboss1 said:


> Benjamin Graham wrote an article in a ladies magazine and suggested that you should buy stocks in the same way you buy your grocereries, not in the way you buy perfume.
> 
> What he was saying was that when people buy groceries, they look for quality but also compare value and make their purchased based on both, But when it comes to perfume often quality or brand is the only factor considered and purchases are made regardless of price, this may be ok for consumer items, But when it comes to investing it will almost always lead to disasterous results or medocre returns at best.




Wouldnt work for me

Im an impulse buyer.


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