A beginner's possible portfolio

[sofman2000]

Hi There- I have engaged a fin planner and these are the stocks they have recommended as a good start. 90% low risk and 10 % high risk.

Low risk 90%
ORG origin
WDC westfield
IPL Incitec Pivot
CBA Commbank
BHP
STO santos

High risk 10%
BBI BB infrastructure
BJT BB Japan
ABY Aditya birla
ESG eastern star gas

Is this decent advice for a long term hold. While I learn the ropes? OR would I be mad?

 

[Trembling Hand]

Re: a beginners possible portfolio

Hi There- I have engaged a fin planner.....

....... 90% low risk.

Low risk!! How do they classify that?

I guess they mean that they are less likely to go broke? But that still doesn't mean you will not lose half of your money on them. Just pull up a chart of the "safest" of all stocks CBA. not so low risk.

 

[CanOz]

Re: a beginners possible portfolio

Westfield is low risk? Don't they own shopping centers or something?

Cheers,


CanOz

 

[prawn_86]

Re: a beginners possible portfolio

Sofman,

Its good to see you are thinking about your financial future. A few words of warning though if i may:

Fin planners are often caught in conflicts of interest. They receive commissions for products such as managed funds, so of course they will recommend them.

As some of the other (blunter ) posters have put, what do you classify as risk?

Ask your planner why he has recommended them and why are they classified as that type of risk? If he says "its cause thats what the broker/research houses say" then be wary. Ask if he owns them personally.


Personally i would say keep your money in the bank until you know a bit more, and dont take out a margin loan if you dont know what your doing even if the FP advises it.

Also please note it is against ASIC policy for ASF members to give advice along the line of "buy this" or "sell that".

Hope that helps

Prawn

 

[sofman2000]

Re: A beginners possible portfolio

interesting feedback- i suppose low risk means over the long term it will go up from where it is right now- there may be some down times though- do you guys think it will be that bad for so long? over 12 months?

 

[Trembling Hand]

Re: A beginners possible portfolio

i suppose low risk means over the long term it will go up from where it is right now-

LOL

So what does high risk mean? Over the long term it will go down :

 

[prawn_86]

Re: A beginners possible portfolio

interesting feedback- i suppose low risk means over the long term it will go up from where it is right now- there may be some down times though- do you guys think it will be that bad for so long? over 12 months?

Anyone that tells you a stock 'WILL' go up, has no idea. No-one can predict the future.
Ask your FP why they classify them as diff risk?

Leave your money in the bank and educate yourself would be the best option IMO

 

[sofman2000]

Re: A beginners possible portfolio

yes interesting feedback untill the last comment anyway.from trembling hand

 

[mazzatelli1000]

Re: A beginners possible portfolio

yes interesting feedback untill the last comment anyway.from trembling hand

Its his way to hinting to you that you have no idea IMO

 

[theasxgorilla]

Re: A beginners possible portfolio

yes interesting feedback untill the last comment anyway.from trembling hand

If I know TH I expect he's only challenging you to try and explain what you've been led to believe that low and high risk means.

In defence of your FPs advice, with PEs where they are, you could pick far, far worse times to start a dollar-cost-averaging strategy over a very long time frame.

 

[cutz]

Re: A beginners possible portfolio

Hi Sofman,

IMO if you want to go for low risk/long term, investing in the whole market via a low cost fund may be the way to go.

I can see what TH is getting at, recently i had some spare cash so i thought i throw some money into a high risk stock (no research involved), now the stock is worth ziltch and in receivership, i just need to work out how to claim the loss as i can't unload it.

 

[marklar]

Re: A beginners possible portfolio

Is this decent advice for a long term hold. While I learn the ropes? OR would I be mad?

Many people here have in their signature block "Do your own research" or variant thereof, it's actually really good advice.

Your FP has suggested some stocks for you to take a look at, that is all; it's up to you to further research these companies (eg. financial reports, stock price charts, directors' shareholdings & experience) as little or as much as you like. ASF is a great forum for learning about what & how to research as well as drawing attention to some often overlooked companies.

The one and only time I went to see an FP, he asked "so what do you want to invest your money in?" so I got up and left his office, 'cos his job was done!

m.

 

[theasxgorilla]

Re: A beginners possible portfolio

Its his way to hinting to you that you have no idea

Can we please be more constructive to our less experienced members? You may or may not be right, but he/she has come here asking questions, which is better than blindly following advice with out doing-your-own-research...wouldn't you agree?

 

[mazzatelli1000]

Re: A beginners possible portfolio

Can we please be more constructive to our less experienced members? You may or may not be right, but he/she has come here asking questions, which is better than blindly following advice with out doing-your-own-research...wouldn't you agree?

hmmm --- I usually jest alot, but on this medium it may not come out the right way.

Definitely agree with you.

 

[Trembling Hand]

Re: A beginners possible portfolio

yes interesting feedback untill the last comment anyway.from trembling hand

Seriously what is the difference then if low risk you expect to go up in the long term and collect some div.

Very important question. Its looks like an each way bet from someone who has no friggin idea - Buy XYZ group they are "safe" but also throw in a few of theses duds with small bets, you may land a winner but if you don't I have only lost 10% of your money

What classifies the high risk and why the attraction to them?

Why ORG and STO they are both gas plays?

Why WDC, a retail/retail real estate play in what looks to be a coming recession?

Where is the position sizing model?

When/how will you acquire them? All in one hit or small purchases over the next year?

What does your FP advice as far as selling? If they go up? If they go down? Have you got an amount where you will sell out once you reach a certain amount of loss?

Where is your FP EVIDENCE that this is a good strategy??? WHERE? When you go to a Doctor with a problem they give you a strategy to fix it based on tests that have proven to be beneficial? And if it doesn't fix the problem they stop it and try something else/test more.

When you go to a FP with a problem they give you a solution to make you feel like you are doing something. They don't give you evidence that it will work and even more importantly what to do if it doesn't work. If you Doc prescribed medicine that made you sick you would stop it and go back for another solution, in the case of a FP they tell you to keep taking your medicine although its not working because they have no other tricks.

 

[CanOz]

Re: A beginners possible portfolio

interesting feedback- i suppose low risk means over the long term it will go up from where it is right now- there may be some down times though- do you guys think it will be that bad for so long? over 12 months?

There is one thing that is almost a sure thing, that your money would be no worse off in the bank while you research and become more financially enlightened. The markets have a fair bit of basing left to do, IMHO, before we are into a situation that you do not want to miss out on.

Take some time, and learn about fundemental analysis, technical analysis and some basics on economics so that when good times are being priced back into equities you can recognise it.

During this period of a typical business cycle, equities are not always the best place to be.

Take some time and use the forum to learn more about where to look for all of these resources.


Cheers and good luck,


CanOz

 

[sofman2000]

Re: A beginners possible portfolio

i ve gotr to say- that if you use the beginners lounge you are boasting that you have no idea- in fact you are starting to research- I think there a too many enlarged egos in here for my liking- but thanks to the decent people who arent so full of themselves.

 

[dj_420]

Re: A beginners possible portfolio

Hi There- I have engaged a fin planner and these are the stocks they have recommended as a good start. 90% low risk and 10 % high risk.

Low risk 90%
ORG origin
WDC westfield
IPL Incitec Pivot
CBA Commbank
BHP
STO santos

High risk 10%
BBI BB infrastructure
BJT BB Japan
ABY Aditya birla
ESG eastern star gas

Is this decent advice for a long term hold. While I learn the ropes? OR would I be mad?

Hi sofman2000

I would see low risk as a company that still has strong earnings and demand for product, has very little debt and has strong management. All despite recent global financial turmoil.

As far as what I have invested in it has only ever been resource companies and support services to the mining industry. The companies I have personally chosen to invest in are energy, ie coal/uranium, in my opinion there should still be strong demand for these commodities as they are used in part of everyday life, ie power.

I would see high risk in resources as a company in greenfields exploration in commodities with poor demand, very little on mgt track record and little cash in the bank to get through tough times.

I suppose the same can be thought of to other industries also.

With your list of stocks there ORG seem to fit the bill as a low risk BUT I think because the shareprice has been underpinned by the BG offer it leaves very little in terms of future growth of the company. I think they are fully priced and do not offer much upside.

 

[Bushman]

Re: A beginners possible portfolio

Here is my 2c

Low risk 90% - incorrect. All these equities have different risk profiles.


ORG origin - retail gas utility. Brownfield infrastructure has lower risk to cashflow due to the demand elaticity of the product being sold, gov't regulation of gas prices, and the exponential growth of the replacement costs currently being witnessed.

WDC westfield - Dec Qrt 08 (to be dislcosed in Jan 09) will be a crunch time for retail cap rates. In Westfield's favour is that they own mostly regional shopping centres and they have relatively low gearing. On the downside is cap rate expansion is evident across all property classes (see CFS recent announcement) and even regionals are blowing out by 25 bp. This is despite the historical divergence between cap rates and treasuries which one day will return to their historical means.

IPL Incitec Pivot - monopolistic supplier of fertiliser product. Good outlook for soft commodities given drough breaking in Aus and the outlook for inflation.

CBA Commbank - loan book looking a tad sick. Farcical equity raising means instos might prefer other banks next time once tier 1 is further eroded by as yet undisclosed provisions for bad debts (we are heading into a recession and a big plunge in commercial property - a 'no brainer'). Positive is a fully franked divvie in the region of 8%, a reasonably robust regulatory framework and an ever strengthening oligopoly.

BHP - diversified miner. Look at commodity prices (oil, coal, iron ore, nickel etc) - it has been a historic 'up with the stairs, down by the elevator' as Lehmans has precipated a deleveraging event the likes of which has not been witnessed for many a moon. Plusses is a strong, strong balance sheet and many a struggling, tasty morsel to acquire. Also oil will not remain in the doldrums and base metals will recover over time (copper is the one to watch).

STO santos - what is your forecast for the oil price?


So my 2c.

If you truely want 'low risk' then treasuries and cash are at the bottom of the risk spectrum.

Next level is traditionally corporate bonds, though remember that sub-prime has spooked investors and thus default risk is being 'exaggerated' by the market. Where there is smoke, there is fire a la Ford, GM, GE and the like.

PS: 'Risk', while a hydra-type measure, is primarily the risk to your capital in this market. What the market did wrong in 2006-2007 was misprice risk (eg yields on securitised subprime mortgages) and, in effect, leverage off an illusion re asset prices. Hence the nasty capital destruction we are witnessing.

 

[sofman2000]

Re: A beginners possible portfolio

I can see that there is still alot of work to do- So I will scrutinise these suggestions and use some of this advice before donating my funds. Thanks a lot for offering your useful suggestions. Maybe invest in one stock at a time with al ot of home work before each one.