# Starting Young: Speculative or Long Term Plan?



## Jono S (18 February 2010)

I will be 20 this year.

Looking to invest about 8000-10,000 each year for the next 5 years then increase the amount after that (after I finish my degree and have a decent paying job)

I'm just starting out investing (mostly in shares for now) and trying to learn as much as I can

I know that being younger I should not be as concerned about risks as say some one who is living of their investment returns in retirement. But that being said, I also would like to start building a solid foundation so I will always have something to fall back on.

I'm wondering what kind of weighting I should aim for in my portfolio (for example say 50% in long term growth shares, 10% in bonds and 40% more speculative?)

ANY advice is greatly appreciated!

Thanks


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## lasty (19 February 2010)

It depends on what type of investor you want to be.
Passive or Active.
For the passive investor which the majority are then spreading is ok but the returns won't be good because you will have money in non performing asset class.
You should spend some time and become an active investor and let your money get the best returns by identifying trending asset classes.
I don't believe in balanced portfolios.
All you are doing is giving someone free money.
Learn about the cycles of investment.
There is no point in holding 10% in bonds when the interest rate cycle is on the way up for example.


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## Mr J (19 February 2010)

> I know that being younger I should not be as concerned about risks as say some one who is living of their investment returns in retirement.




I could argue that it's the other way around - being young you recover less easily, while being older and cashed up gives you a large cushion. Truth is that it's different for everyone, because we all have difference financial circumstances, now and in the future. I can't afford to lose what I have now, so I can't be as aggressive as I will be when I'm older. Someone else may earn well young and can afford to be aggressive, but find themselves in an average position later on in life and forced to be conservative.



> I also would like to start building a solid foundation so I will always have something to fall back on.




I wouldn't count on this as something to fall back on. I'd question the real value that most "investors" get from "investing". I think most people are doing little more than spinning their wheels.



> I'm wondering what kind of weighting I should aim for in my portfolio (for example say 50% in long term growth shares, 10% in bonds and 40% more speculative?)




I don't touch stocks and don't know much about investment (I see it as lazy trading , but the way you're splitting this up sounds like something I'd hear from a financial product salesman. If I was looking to trade the longterm, I'd try to time booms and busts rather than throw some money at a "speculative" stock and hope it makes a run. Then again, I would trade currencies and futures, not stocks.

This isn't advice, just comments. I'm sure many people will disagree with them, particularly "investors"!


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## Julia (19 February 2010)

Mr J said:


> I wouldn't count on this as something to fall back on. I'd question the real value that most "investors" get from "investing". I think most people are doing little more than spinning their wheels.



Can you explain the basis for drawing this conclusion?

Your suggestion that people in retirement have more capacity to take risks doesn't seem very logical to me.  Once one is no longer in the workforce, the preservation of capital needs to be a priority for most people.

I agree with the previous poster, i.e. that he can take some risks while he's young and earning a salary.


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## Jono S (20 February 2010)

I am planning to be an active investor and I will have the time to review my portfolio (even if just briefly) daily. At the most once per two days. 

Mr J,
I there two sides to look at it, I meant I can afford to take more risks compared to an older person living of their retirement who isn't "cashed up". Because my investments will not be my source of income yet. 

I suppose that I'm really debating what I should be focusing on for my first year investing. I will have around 10,000 to invest this coming year but still have a lot to learn about the market. 

I would rather have my money in something a bit safer for this year while I'm learning (my first year investing) more about the market. 

If I have capital of 10,000 for the year, what are peoples opinions on how much of that I should invest per purchase? Because I know that at lower amounts (500 or 1000) the brokerage relatively costs more


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## Wysiwyg (20 February 2010)

Jono S said:


> I would rather have my money in something a bit safer for this year while I'm learning (my first year investing) more about the market.



Smart beginning. 
Remember your money is at the whim and will of the company and markets when you exchange it for shares. That is you can only decide on when to hand it over and when to get it back.


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## ROE (20 February 2010)

Jono S said:


> I will be 20 this year.
> 
> Looking to invest about 8000-10,000 each year for the next 5 years then increase the amount after that (after I finish my degree and have a decent paying job)
> 
> ...




I'm not sure you can discard risk doesn't matter how young you are, you can face permanent capital loss and could take many years to regain.

You should concentrate on preserve your capital and get adequate return and because you young you got time and compounding on your side so it work out nicely no need to chase crazy return..walk slowly and never walk backward and with time and compounding you can be wealthy


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## bobbylat (20 February 2010)

Im 24 years old and just re entered the share market after a 2 year exit, im currently setting up a portfolio of 15 core bluechip shares to the tune of $15000, then once i reach that goal i will then buy $10000 of medium risk shares, then $5000 of speccies. That is my goal for this year. Next year i plan to save cash into a decent intrest account of say 6% or so up to $20000 for a deposit for a IP unit of around $130000 value.

Thx Bobby


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## Julia (20 February 2010)

It's really good to see young people with a thoughtful plan for their financial future. 
Wish there were more of you.

Best of luck to you, not that you will actually need it, given your outlook and planning.


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## aleckara (21 February 2010)

Julia said:


> Can you explain the basis for drawing this conclusion?
> 
> Your suggestion that people in retirement have more capacity to take risks doesn't seem very logical to me.  Once one is no longer in the workforce, the preservation of capital needs to be a priority for most people.
> 
> I agree with the previous poster, i.e. that he can take some risks while he's young and earning a salary.




When you are young the little dollars you have mean more. Any decision you take is compounding, both success and failure. When your in middle age you have more money as a cushion (i.e you can afford to lose more without changing your life as significantly).

When you are young there is more time for compounding. Losing the lot straight away may affect the quality of your life a lot more down the road (the loss of compound return on that cash).

Invest wisely.


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## jbocker (21 February 2010)

Well Done Jono! That is very good thinking.
I dont know what % of your earnings that $8-10K is, but dont forget to have some fun, some of that may require $.
You are making one of the best investments already by investing in yourself with education.
This is an idea only. Put the money in the bank, and continue to learn about investing, take $30-$50 occassionally and buy a general 'how to make money' book, and read the covers off it. From the reading develop an investing strategy that you feel confident with. 
I would set up some portfolios in theory and see how they go for 6 - 12 months. The ASX has sharemarket games, one has just started and you can still register up to the 24th. This will give you $50K to play with.
Learn one thing. Discipline. Take some of what ever you earn and invest it (I would suggest 10%). Its call paying yourself first. After many years this will very likey return money to you in much greater quantities than you can probably earn. Read about it.

Oh and what of the other 90% that you earn - you give that away to other people. Most people give 100% away.
The big difference comes to those who learn discipline and keep the 10%.
Good Luck.


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## Mr J (21 February 2010)

Julia said:


> Can you explain the basis for drawing this conclusion?




Inflation etc and then consider risk - most people aren't making much of a gain. People are sold on 5-10% returns while exposed to 50% drops. Insane stuff. I'm not talking about all investors.



> Your suggestion that people in retirement have more capacity to take risks doesn't seem very logical to me.




It's a good thing I didn't say that then :- I said it depends on the personal situation. We have to consider the distribution of our total income and our potential returns. 

If someone chooses an occupation that pays well while young, but doesn't increase much over time, that would favour them being aggressive while young. They'll be able to replenish capital quickly, and lifelong investments will make all the difference for them. 

For someone who starts slower but will probably make a lot in their 40s and 50s, it would favour more aggressive investment later on in life. Of course it's not quite that simple as there will be other financial responsibilities, I'm just pointing out that assuming being young is the time to be aggressive is not sensible.




> Once one is no longer in the workforce, the preservation of capital needs to be a priority for most people.




Yes, for _most_. 



> I agree with the previous poster, i.e. that he can take some risks while he's young and earning a salary.




He can take some risks, but that doesn't mean he should. There are many things to consider, much of it just speculation of the future. It should not be as simple as "you're young, you can afford to take risks". I think that suggestion is financially irresponsible.

Jono S, something to consider is the effect gains while you're young will have on your future financial situation. Losses while young can be a major setback in the long run.


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## lasty (21 February 2010)

A portfolio can mean not shares but bonds, fixed interest,currency,property and options to name a few.
Rather than buying bluechips and saying I'm going to start from there, you need to understand the investment cycles FULLY.
The world has changed. Economic powers are shifting.
Understand the benefits and the demises of Australian companies.
Learn how to short as well as go long assets.
There is money to be made and lost both ways.
Lastly your on the planet a short time and somethings in youth you struggle in age. Money is no good when your old when you could have done something youthful.So weigh up pleasure and investment money.
Good luck and enjoy


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## Jono S (21 February 2010)

Thank you everyone for your replies! It's all been very helpful.

 jbocker, 
Some books are currently in the mail on their way, and have already registered for the game 

Is actively investing and trying to time the market using technical analysis etc considered high risk?


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## lasty (21 February 2010)

Jono S said:


> Thank you everyone for your replies! It's all been very helpful.
> 
> jbocker,
> Some books are currently in the mail on their way, and have already registered for the game
> ...




Not really,actively investing means you are constantly monitoring your assets and looking at trends.
I would say leaving your money with a fund manager who usually has a buy hold strategy is high risk.
Their will be times when you are unsure and you might have to be defensive.
Nothing wrong with this. Infact if
you had done it in early 2008 when the US started to have cracks appear you could have saved 40%.
Others actually short sold and
made the 40%.
Look for trends both fundamentally and technically.
Focus locally as the information is easier to
obtain.
Once you trust information resources look internationally.
One step at a time.


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## kermit345 (22 February 2010)

Hi Jono, I'm only new to the forums as well, 23 years old and started investing March last year by taking out a 10k loan (as i'd only just started working full time at this steage) and investing into shares. Luckily I work in the financial services industry (I currently work as a paraplanner with the outlook of being a financial adviser within the next few years).

Most younger people typically have the more aggressive investment philosophy as they have more years to recover from any mishaps. Although as stated before this approach does not suite everyone. Also as someone else stated, I wouldn't commit too heavily to investing a set amount per year, have to continue to enjoy yourself as well. I set aside a certain amount per pay that goes to a cash account, and while it builds up I do my research and find stocks a like. Once this cash account gets to a stage where its ready to be invested (i.e. 1500-2000+) I check which of the investments I like a fairly priced or undervalued, and make a choice for which one to move into.

Its worked reasonably well so far for me, I don't currently have any bonds or fixed interest, but definately want to allocate some funds to these areas in the near future. Probably looking at holding 3 rolling 3-month Fixed Interest investments so that 1 matures every month, so it gives me the flexibility to have cash ready each month if something really catches my interest and I want to invest ASAP. Also gives that balance to make it easier for portfolio re-balances.

If your really keen to jump straight in, I'd personally look at blue chip stocks, with solid management, good dividends and a dividend re-investment plan (thats how I started). Then your dividend income is compounding (usually at a discounted price) and it doesn't cost you brokerage. The more you read and monitor the market, the greater you'll learn about companies. The amount i've learnt between now and 12 months ago is amazing and I've still got a long way to go.

If you wanted to discuss stuff further let me know, it's great to find other people my age that are interested in investing (a lot of my friends aren't really interested and have used their cash on any number of different things).


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## kermit345 (28 February 2010)

prezstar I hope you read this as I recieved your private message and tried to reply however it said you are unable to recieve my private messages.

Maybe you need to enable it? Let me know if/when you have and ill send you my reply.

Cheers


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## Largesse (28 February 2010)

the key is to get your chips in the middle


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## c-unit (5 March 2010)

Hey guys,

I'm in a similar situation and have a similar query.
I am 22 now and in my final year of Uni, and currently have about 25k invested in blue-chips. I should be able to save 10k this year to add to my portfolio throughout the year. My predicament is follows:

I'm hoping to stay at home next year (start my grad role in 2011, and hoping the folks let me stay an extra year - though not confident of my chances!) and I've worked out I can save roughly 25k whilst still maintaining a decent lifestyle, so my goal is to have my portfolio at least 50-60k by the end of 2011 when I want to move out. 

Question is - I was thinking of then selling my entire portfolio to put towards a deposit in an apartment/house near the city (closer to work), and rent out the remaining room(s) to help pay the mortgage. Is it worth selling the entire portfolio to put down more deposit, or keep maybe 20k in stocks and use a 30-40k deposit...I guess it depends whether I am confident I can get my portfolio earning more than the mortgage rate...

Or, maybe I can be like the rest of my generation and leech at home until 25-26

Does anyone here have opinions on this? My decision also depends on what happens to property. I just wish the government had the balls to pop the bubble.


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