# Questions for Investing in shares



## Harro (28 August 2006)

Hi all, new to this website/forum and hoping I could get some questions answered for starting out in Trading (buy and selling shares) in the stockmarket.

Before I start with my questions, I feel it is important to convey where im coming from and my investment goals. 
I wish to start with $5000.00 to invest in one stock with a long term out look,
and continuing to purchase new shares either once a month or yearly. I can buy $1000.00 worth of shares per month or $12000.00 per year.
Assuming the cost of buying and selling shares (brockerage cost) is $30 per transaction (trade) my initial entry would be $30 and 12 transactions(trade) a year would be $390 ($360/yr).

So my initial question is
Would I be better of buying $1000.00 worth of shares per month at a cost of $390 or banking $1000.00/mth and making one purchase per year of $12000.00/yr at a cost of $60.
I know the answer would depend on what shares I buy and weather of not they go up or down in price but im looking at long term (say 10 years+) historically share prices go up over the long term so Id say its pretty low risk. 
The difficulty is how much would they have to go up averaged out over 10years to cover the brockerage costs of buying monthy and the same of buying yearly and determining what would give me the better return.

Any advise would be greatfull

Once I figure out my best option I will be asking even more newbie questions for getting started at the begining. Questions like, opening a trading account, how to open a brocking account and who with. Heck im so newbie I dont even know the questions to ask yet..lol


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## Knobby22 (28 August 2006)

Sounds good to me Harro.

I agree with your thinking so far.
Buy one stock worth $5000, then I would continue to buy a stock at a time for $4000 to $5000 as you save up the money.

If you feel that you are able to choose what stock to buy then buy through comsec or similiar. If not then I would go through a broker who can teach and guide you over time. 

When you get the annual reports study them and learn to understand them so you can further build up your knowledge base so you can become a more aggressive investor over time.

Knob


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## Harro (28 August 2006)

thanks Knobby22.. I will probably do just that , make less trades but with larger amounts, probably in 5k lots as I save from my income.

so far ive looked at westpac and etrade..for opening a brockering account ill have alook at comsec...any others I should have alook at before I get in (start trading)


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## Bobby (28 August 2006)

Hey Harro,

Before you risk one dollar in the market, you need to learn how it all works.
Then you need to learn how you can go broke !.

After that if your still keen to place your money in stocks, you need to learn how to play the game to survive.

Get some books first, read & understand them before you trade.
Its a cheap education, that will save you heaps.   

Bob.


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## Realist (28 August 2006)

Harro said:
			
		

> Would I be better of buying $1000.00 worth of shares per month at a cost of $390 or banking $1000.00/mth and making one purchase per year of $12000.00/yr at a cost of $60.




Despite the higher brokerage fees which you should always look to reduce.

Buying 12 different shares each month for 12 months in a row is better than waiting 12 months and buying 1 share.

Because you are diversifying - protecting yourself by investing in different sectors. Your one share may die in the ass, the chances of 12 shares all dying in the ass is much smaller.  The chances of you picking a real winner that triples is low if you have 1 share, if you have 12 you've got a much better chance of picking a real winner.

You are also buying more shares when the ASX is lower, and less when it is higher which is great - because say the ASX roars up 30% in 12 months then you buy and it drops 15% you're probably down 15%. But had you bought at regular intervals over the year you'd have got shares before they went up 30%, then some others before they went up 25%, then some others before they went up 20% etc. And only some that dropped 15%.

It is hard to pick highs and lows, infact almost impossible to get it perfect, regularly buying a small amount of shares means you are guaranteed to get some when it is at a low, and you only buy some (not all) when it is dangerously high.


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## Harro (28 August 2006)

thanks guys and gals, I really appreciate the input..and yes im not jumping into it but we all gotta start some where. (reading heaps)
Im definatly not after a quick profit but still want to make sound desisions.
So far all the advise has been very helpfull in making an informed decision on my investment.

I have chosen to start with $5000.00 and taking some of every ones advise,  so far I have chosen to bank $1000/mth and when it reaches $5000 invest that.  

Moving along
I need advise for selecting an online brocker
What are other poeples experience when opening an account?
what are the pit falls to look out for? (are there hidden costs)

Here is a list Im finding usfull in my research, I hope it helps others
http://moneymanager.smh.com.au/tools/compare/fee_and_services.html


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## Bobby (28 August 2006)

Realist said:
			
		

> Despite the higher brokerage fees which you should always look to reduce.
> 
> Buying 12 different shares each month for 12 months in a row is better than waiting 12 months and buying 1 share.
> 
> ...



SHeeze Realist,

You know little  about trading stocks   yet your advising ?
You only joined this site in June  this year.
You have over a 1000 posts so now your title is Veteran member.
You must understand that new members will just look at your rank & may well do what you recommend,.   

Please consider this.

Bob.


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## Julia (28 August 2006)

Bobby said:
			
		

> SHeeze Realist,
> 
> You know little  about trading stocks   yet your advising ?
> You only joined this site in June  this year.
> ...




Hello Bob,

What is about Realist's suggestions that you disagree with?

Julia


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## watsonc (28 August 2006)

Just save every cent you make! A recession is on the cards! lol


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## Bobby (28 August 2006)

Julia said:
			
		

> Hello Bob,
> 
> What is about Realist's suggestions that you disagree with?
> 
> Julia



 Hi Julia,

Diversification without directive for one.

Bob.


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## nizar (28 August 2006)

Bobby said:
			
		

> Hi Julia,
> 
> Diversification without directive for one.
> 
> Bob.




I second that Bob,

Diversification for the sake of it is something to AVOID and i certainly would not be advising a beginner on that... 

Realist wat were u thinking...   

Even your idol Warren Buffet is against diversification


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## It's Snake Pliskin (28 August 2006)

Harro said:
			
		

> Hi all, new to this website/forum and hoping I could get some questions answered for starting out in Trading (buy and selling shares) in the stockmarket.
> 
> Before I start with my questions, I feel it is important to convey where im coming from and my investment goals.
> I wish to start with $5000.00 to invest in one stock with a long term out look,
> ...




Harro,

Full of great or grateful?  

Above you mention trading first, then investing. Which is it and why? answering that question may involve some reading.

Bobby`s comments are apt; confirmed by Nizar.

Realist is not one to be trusted over trading, though Ben Graham rubbish he does tout.  

Snake


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## Realist (29 August 2006)

nizar said:
			
		

> Realist wat were u thinking...
> 
> Even your idol Warren Buffet is against diversification





Oh dear, oh dear, I'll repeat myself.

Buffet does not diversify, however Buffet is a genius, he does not get things wrong. He lives to study annual reports and companies, and he only buys when he is absolutely certain of his investments.

Buffet recommends diversification, infact he recommends people just buy an index fund because picking winners is impossible.  Buffet never picks winners, he picks great stocks that others think are losers - big difference.

If he owns 1 share or 10 shares you can be certain they are good investments.

The rest of us mere mortals need to follow Buffet's mentor Ben Graham who advises diversification across sectors and markets.

Anyone who had ALL their money in tech stocks in 2000, or all their money in mining stocks now is asking for trouble.


You guys do not even understand the mere basics of investing. Quite sad.


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## Realist (29 August 2006)

Snake Pliskin said:
			
		

> Realist is not one to be trusted over trading, though Ben Graham rubbish he does tout.
> 
> Snake




I am no trader, but this thread did say investing.

Snake, do you think buying 1 share for $12,000 is better than 12 diversified sahres for $1000 when investing? And why?


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## Realist (29 August 2006)

Bobby said:
			
		

> Hi Julia,
> 
> Diversification without directive for one.
> 
> Bob.




Diversification without directive is alot safer than trading without directive.

Topic closed. I win!!


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## It's Snake Pliskin (29 August 2006)

> You guys do not even understand the mere basics of investing. Quite sad.




Is it true the P/E ratio is a ratio of not much value? :burn:


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## Bobby (29 August 2006)

Snake Pliskin said:
			
		

> Harro,
> 
> Full of great or grateful?
> 
> ...



 Greetings Snake,

Yep Nizar is on track ~  

Off topic: Our talk on the third way will continue, my turn soon.   

Have fun Bob.


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## It's Snake Pliskin (29 August 2006)

Realist said:
			
		

> I am no trader, but this thread did say investing.
> 
> Snake, do you think buying 1 share for $12,000 is better than 12 diversified sahres for $1000 when investing? And why?




Actually it said both.

Well if I were buying Sahres then I would need to find out what they were first. I may need to get back to you. :bekloppt: 

But simply $1000 for a few shares will take a lot of movement just to get back to its original value of $1000 due to brokerage - x 12. Something you have blurted about is taxes and brokerage  

I don`t condone buying anything and only comment. 




> Yep Nizar is on track ~
> 
> Off topic: Our talk on the third way will continue, my turn soon.



No worries Bob.  

Snake out.


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## It's Snake Pliskin (29 August 2006)

Realist said:
			
		

> Diversification without directive is alot safer than trading without directive.
> 
> Topic closed. I win!!




Actuallly I`m interested in your comments here Reallo!


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## Bobby (29 August 2006)

Realist said:
			
		

> Diversification without directive is alot safer than trading without directive.
> 
> Topic closed. I win!!



Yep you  sure win the ( top rabbit ) award for that statment ! 

Realist please stop *Standing Up Whilst You Read My Posts* its OK now to stay seated   

regards Bob.


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## barney (29 August 2006)

I'm certainly in no position to give anyone advice, but I thought the inference that Realist's advice was incorrect was a bit harsh. Whether right or wrong, large numbers of advisors will tell you that diversification is critical to having a balanced position. Obviously its up to the individual to reseach and check the stocks he invests in. I thought in the context of a general forum Realists advice was very sound. 
My only advice to Harro is read as much info as you can on everything from charting to day trading (and everything in between) and formulate a plan/system in your own mind that you are comfortable with and stick to it. Keep reassessing and improving your system, and never put yourself in a position where you are pressured to make a financial decision which is outside your comfort zone. The old saying "scared money never wins" is so true....... I speak from experience regarding that. What I write at the bottom of my posts about losing half my life savings is correct....by becoming too casual,not treating the market with respect (people are in there trying to win your money) and over trading outside my financial means I paid a high price. Trade smart and trade careful. Make sure there is a sound reason for every trade you make. Amen (If only I had listened to my own advice)   All the best


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## tech/a (29 August 2006)

> I thought in the context of a general forum Realists advice was very sound.




Hmm.
Diversifying $12000 over 12 trades as a risk preventative measure is frankly rediculous.
Brokerage kills it to begin with.
Investing $1000 in anything is a slow boat to the next shore.

Personally I would save the $15k needed to trade Margin and take advantage of the leverage.
Mind you Ive been doing this 12 yrs.

But using other peoples money is THE SECRET.
Staying in the game is also a major requirement,but you dont need to spread yourself that thinly that you lose interest.


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## Realist (29 August 2006)

tech/a said:
			
		

> Hmm.
> Diversifying $12000 over 12 trades as a risk preventative measure is frankly rediculous.
> Brokerage kills it to begin with.
> Investing $1000 in anything is a slow boat to the next shore.




I do not disagree, howver you can buy shares for $20 or less.

12*20 = $120, after tax, it is tax deductable, $120 for $12,000 worth of shares.  Woop-de-do.  It is the constant buying and selling that kills you with brokerage, not buying and holding.

As for being a slowboat...
Now if someone only has $12,000 then investing it in 12 shares aint gonna make them rich quick. If you wanna get rich overnight with $12,000 buy lotto tickets and hope.


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## RodC (29 August 2006)

Realist said:
			
		

> 12*20 = $120, after tax, it is tax deductable,




Only if you're a trader. 

If you're an investor the brokerage gets added to the cost base for CGT purposes.


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## stink (29 August 2006)

tech/a said:
			
		

> Hmm.
> Diversifying $12000 over 12 trades as a risk preventative measure is frankly rediculous.
> Brokerage kills it to begin with.
> Investing $1000 in anything is a slow boat to the next shore.
> ...




Hi Tech,

From reading alot of your other posts, i know you could expand on your statement a bit   

The comment you make about trading margin. Are you saying this is a good idea for someone starting out (lets assume their money management practices are sound) or only a good idea for someone of your experience?

I am interested in using margin to my advantage and am aware of the risks but i am trying to work out if it can be done without the risk of being wiped out? I mean if i have 10k i can get god knows how much on margin and obviously if i traded the max amount on margin its financial suicide and i have read statements you have made that are similar to this.

But lets say i am not a cowboy or a total fool am careful with my money and dont want to expose myself to any situation that could potentially ruin me, can trading margin be done sensibly as a way to increase capitol? If so could you give a brief example of how you would structure this type of approach, please keep in mind i have not decieded i will be doing this i just want to find otu what options i have.

Regards Stink!


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## Harro (29 August 2006)

Snake Pliskin


> Above you mention trading first, then investing. Which is it and why? answering that question may involve some reading.




The answer is Investing , why? Because im looking at it long term and plan on buying into a buisness/'s that I believe has growth potential over then next ten years. I mentioned trade becasue buying and selling is essentially just that.

Also thanks again every one that posted

 I wont be putting all my egg's into one basket but at the same time I wont be spreading my investment too thin, keeping it simple, but I really do want some real life information on online brockerage.

For example Ive looked at comsec, eTrade and westpac
comsec look's competitive but just dont feel right to me.
eTrade is most expensive but the online package looks the best to me.
Westpac well I bank with them so am bias toward as far as locality and simplicity goes but is also quite expensive.

Price isnt the only thing im looking for. Ease to navigate the online system and the total package is important too.

What are some of the experiences when operating with an(non-advisory) online brocker?
Is application easy, are there hidden costs, is the navigation of the site simple to navigate but not too complex (for a beginner) but also has all the nessisary functions for an intimmediate user?


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## tech/a (29 August 2006)

stink said:
			
		

> Hi Tech,
> 
> From reading alot of your other posts, i know you could expand on your statement a bit
> 
> ...





Stink I wrote a thread on Margin trading,have a look.
Personally the correct use of leverage wether it be in Share trading,stocks,futures,options or Property,or Business is an absolute MUST in my veiw if you are ever going to perform above mediocrity.

Have a read and I'll get back to this important topic when I have enough time to devote to it.

Im happy to run a chat one night on it if you or others are interested.


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## Realist (29 August 2006)

tech/a said:
			
		

> Personally the correct use of leverage wether it be in Share trading,stocks,futures,options or Property,or Business is an absolute MUST in my veiw if you are ever going to perform above mediocrity.




Again I do not disagree, but I would not recommend a newbie go any where near a margin loan. Especially now when the ASX is double what it was a few years back.


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## Realist (29 August 2006)

Harro said:
			
		

> comsec look's competitive but just dont feel right to me.




Commsec is excellent in my opinion.

and at $19.95 per trade it is good value.


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## Julia (29 August 2006)

Harro said:
			
		

> Snake Pliskin
> 
> 
> 
> ...




Hello Harrow,

Re choosing an online broker, I came to the same conclusion you have and have subsequently been very happy with E-trade.  Certainly they are a little more expensive but if you are not planning to do frequent trades, I think the extra is well worth it for the level of research and general info you have access to, including quite a lot of education (e.g. technical analysis etc) which can be helpful for a beginner.

Although Realist's suggestion of dividing share parcels into $1000 amounts seems fairly unrealistic to me (I'd go for a minimum of around $5000), nonetheless the general principle of diversification for a balanced investor makes good sense imo.  As Bob has pointed out, however, this should be carefully thought out and not done for its own sake.

Tech has espoused the value of using margin loans.  He has an excellent point.
However, my suggestion would be that you stay away from that until you have something approaching his level of experience.

Good luck.

Julia


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## tech/a (29 August 2006)

Realist said:
			
		

> Again I do not disagree, but I would not recommend a newbie go any where near a margin loan. Especially now when the ASX is double what it was a few years back.





This is where we differ.

I'm not suggesting ANY trader rush out and trade Margin.
Infact most that trade margin today do so "half" blindfolded.
*IE they dont have enough information about their trading methodology to be in the position to mitigate risk "Leveraged" by the use of margin.*

But trust me you dont have to have a degree in Finance to be able to safely use leverage.


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## Ageo (29 August 2006)

tech/a said:
			
		

> But trust me you dont have to have a degree in Finance to be able to safely use leverage.




Finally some sense being spoken


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## stink (29 August 2006)

tech/a said:
			
		

> This is where we differ.
> 
> I'm not suggesting ANY trader rush out and trade Margin.
> Infact most that trade margin today do so "half" blindfolded.
> ...




This is what i am digging around trying to find, it annoys me when people post answers that only contribute a negative point of view without providing any reasoning behind the statement.

Not saying that you guys do that, i have found a couple of posts on similar topics and there is nothing constructive in them.

I think alot of people bag something because they dont understand it.

Anyway my goal is to learn what the mitigation strategies are when trading margin and then make the decision as to whether its for me.

Regards Stink


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## ice (29 August 2006)

Actually Buffett does get things wrong as he conceded himself (more or less) over his forex trade. Just that he doesn't get a lot wrong. 


ice


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## Realist (29 August 2006)

ice said:
			
		

> Actually Buffett does get things wrong as he conceded himself (more or less) over his forex trade. Just that he doesn't get a lot wrong.
> 
> 
> ice




Well no-one is perfect, he is as close as you can get to the perfect investor though.


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## Harro (29 August 2006)

Thank you Julia and Realist on your advise on eTrade and Comsec retrospecively. 

Realist you basicaly told me what I already know, yes its cheeper than eTrade, and I realise if you use one you may not know the other to be able to make comparisons so thats cool, im glad Comsec works for you and gives me comfidence as well. Same with Julia.

Any way I'll have a look at both of them again and make my descision, im not in too much of a hurry I still have alot to learn and research in the actual initial share I wish to purchase.

Some of you are still debating on the smaller 1k investment packets , you may have missed my post saying I would wait and invest with 5k/6k amounts as I earn/save. So ill only be doing very few trades in a year.

Question
1. Does any one else have imput on these or other online stockbrocker's?
2.a) When setting up with an online brocker, do you need to open a new bank account with that particular brocker? 
2.b)If no, is it wise do so anyway? (I know with wespac I dont have to, but to get the cheeper (advertised) brockerage rates I need to open a specific bank account with them just for trading)


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## michael_selway (29 August 2006)

ice said:
			
		

> Actually Buffett does get things wrong as he conceded himself (more or less) over his forex trade. Just that he doesn't get a lot wrong.
> 
> 
> ice





Yeah he made big losses betting that the US dollar will plunge, well it hasnt as yet

Also he sold out of his big Silver holdings a bit too early

thx

MS


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## nizar (29 August 2006)

Harro said:
			
		

> Thank you Julia and Realist on your advise on eTrade and Comsec retrospecively.
> 
> Realist you basicaly told me what I already know, yes its cheeper than eTrade, and I realise if you use one you may not know the other to be able to make comparisons so thats cool, im glad Comsec works for you and gives me comfidence as well. Same with Julia.
> 
> ...




Harro,

1) im with westpac and im about to switch very soon to POWER etrade coz i need the extra features it offers. But even for buying/selling only, iv found Westpac to be very slow and i wouldnt recommend it

2) no, u can nominate any bank account (in Aust.) u want, just show them a recent statement when u apply to confirm

2b) There are no cheaper advertised rates; for me i thought it was $24.95 but then after 1 month they lifted rates to $29.95 which is just like Commsec (ordinary one, though if u open a cash management acct with $5,00 initial deposit u can get $19.95 brokerage for life even if u spend the 5Gs). But i dont know maybe they have a special advertised at the moment. Still i wouldnt recommend it coz its just soooo slow. By the time the "place an order" page uploads the market depth has already changed so much i dont even know why i still bother... but this week the etrade switch will be made...

Also - if u go to www.infochoice.com.au
You can choose which criteria u want in an online broker and they will give u range of the different brokers that fits the criteria u have specified

All the best


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## nizar (29 August 2006)

michael_selway said:
			
		

> Yeah he made big losses betting that the US dollar will plunge, well it hasnt as yet




Surely its only a matter of time before USD collapses

Most analysts have now said he wasnt wrong - just early


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## bvbfan (29 August 2006)

michael_selway said:
			
		

> Also he sold out of his big Silver holdings a bit too early
> 
> 
> MS




I have heard theories he was selling shorting silver and got caught and insteead of buying back he simple chose to deliver


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## Flathead Flick (16 April 2007)

Realist said:


> Well no-one is perfect, he is as close as you can get to the perfect investor though.




But is he only "perfect" because when he trades, so many trade with him that it is self-fulfilling?


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## acooper (7 July 2007)

Harro said:


> Hi all, new to this website/forum and hoping I could get some questions answered for starting out in Trading (buy and selling shares) in the stockmarket.
> 
> Before I start with my questions, I feel it is important to convey where im coming from and my investment goals.
> I wish to start with $5000.00 to invest in one stock with a long term out look,
> ...



 You might like to try Netwealth Trading on line Brokers they only charge 17.99 per trade and they send you a newsletter update every day also there are some good programs agound that help you pick the shares that most likely to go up
Adrianna


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## Spaghetti (7 July 2007)

Hello Harro

I find ComSec slow at times and when you are trading a few seconds or a few minutes can lose you a lot of money. It never seems to work the other way.

But for investments should be fine. Though I would recommend learning some basic trading to find a good entry price. My very first trade was a great long term stock pick, but if I had even looked at the chart I would have seen it had just had a good run and was headed south. No technical analysis ability was required, just having two eyeballs would have told me that. If I had looked.

So please be aware that at the time you have accumulated $5,000 for a trade it may not be the best time to buy the stock you have chosen. It may have been a better time when you only had $4,000 or perhaps when you have accumulated $7,000. Better in the bank earning 5% than watching a share nosedive 12%.

Difficult to find the best time but sometimes easy to see it isn't the best time.


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## Struzball (10 July 2007)

My advice is to get an margin loan, borrow money now and buy all the shares you want now, then pay the loan off $250/wk. 

Assuming all up you put in $12,000 over the year ($1000 every month), brokerage makes up a 3.3% loss already, buying just a few stocks right now worth $12,000 would be more like 1% into brokerage.  
Then you make the 10%-20% pa capital gains you would miss out on if you buy at the end of the year rather than now.  Plus 4% from dividends, minus the 9% for interest (which is actually reverse compounded.. if there's such a word, if you're paying off the loan gradually), plus tax deductable interest payments (3%ish).

So you're pretty much 15%/$1800 better off with the margin loan.. according to my dodgy assumptions and calculations.

This is my opinion and what I do, and probably won't work very well when the market goes down... but with enough of a buffer you could survive a fall anyway.


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## rowes (10 July 2007)

Harro said:


> Hi all, new to this website/forum and hoping I could get some questions answered for starting out in Trading (buy and selling shares) in the stockmarket.
> 
> Before I start with my questions, I feel it is important to convey where im coming from and my investment goals.
> I wish to start with $5000.00 to invest in one stock with a long term out look,
> ...




Hmmm,

This is in response to the question only... 
If you want to invest in one company cool, if you want to diversify into 10 companies thats cool to. Do what is best suited to you taking into consideration how simple you want to keep it. 

You could bank the money and purchase one set of shares per year but depending on what company you are buying into you could miss out on some great profits, alot can happen in 1 year.

I get analyst reports regulary regarding the mining sectors and read one a little while ago that expected a particular stock which i wont mention that is expected to gain upwards of 500% over the next 4 years. i know i'd rather my money in that stock than it sitting in the bank while they give me a piddly interest rate. 

I think It all comes down to research if you are in it for the long term, do your homework well, find a good company that has a great product, good management and a bright future with ongoing demand for whatever they are doing and your heading in the right direction.

This is only my opinion and i should also point out that i have no long term interest holding in anything. i certainly plan to in the near future but i dont have any at the moment, thought i outa point that out.


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