Awaiting a global downturn...??

[Tomboy77]

O.K lets address both, or at least give you some random opinions.

Starting with trading.

Firstly, In relation to your thread title “Awaiting a global downturn?”

The advice that macro timing is basically dead is on the money, at least as far as predicting the Macro environment goes – it’s just too hard, too many moving parts. Traders might switch off their trading businesses when they “observe” a macro level measure like an index is trending down. Trading on observation and reaction is vastly different to trading on predicting the big picture.

So lets tick up predicting the future as a basis for taking on risk as rookie mistake 1.
The mental accounting about free carry, you demonstrate in your post is rookie mistake 2.
without trying to put you off there is penty of other mistake evident as well.

By the way, the more mistakes you get under your belt (hopefully without doing harm) the better off you will be in the long run. Make no mistake, the best traders are the ones that are best at fixing their mistakes, the things they get right, the upside, takes care of itself. So, don’t take offence when I say mistake. You have already shown an abilty to take action, learn, and pause for thought - that's exceptional qualities to move forward.

When you get right down to it, trading is either timing or stock selection. Stock selection is where you take position in a particular company based on the underlying business fundamentals. Timing, you don’t care much about the business but a lot about the price and enter and exit based on price alone. I personally prefer stock selection, but I think you would be better off learning timing, at least first. It’s less risky and the feed back loop for learning is much quicker.

I haven’t been around the forum for a while, but when I was, @peter2 fitted the mould of a timing trader that had the gift of being able to educate and the desire to do so freely on this forum. @Skate appears to be another one that has emerged in the same vain, their may be others I don't know. Go check out their respective threads. Natural teachers that just want to share their knowledge need and will appreciate somebody like you that wants to learn. You will be the student for a while, but it will be mutually beneficial, so go say hello and interact, I’m sure you’ll find them accommodating.

AFI is an investment type share, holding it whilst you gain some more investment knowledge shouldn’t cause you too much harm.

SPX is potentially very volatile. You’ve talked about the upside you hope for but nothing about the where or how you are going to protect against the downside if it doesn’t turn out as you wish. How you are going to protect your downside on this purchase is in my opinion the very first thing you need to concentrate on.

Nothing wrong with investing in your mortgage whilst you learn, it could arguably be the best option even if you had already gathered more knowledge on trading or investing – It is making a positive difference to your financial foundation, so don’t feel rushed that you have to take quick action.

Speaking of investing in your mortgage – Is the interest rate you are paying the best you can achieve. You have a heathy LVR that makes you attractive to lenders, especially if you are owner occupied and paying Principle and interest. When did you last put pressure on your bank? New OO P&I from the big 4 banks are around 3.3% and peripheral lenders sub 3%. Do not underrate the long-term savings on reducing your interest rate and its risk free/tax free. If you have not got a competitive rate this could be the next action after sorting out protecting against SPX downside.

I’ll come back with some more things to think about in relation to investing in future posts when I get a bit more time.

Thanks @craft . I will read the above posters threads as suggested. The more I learn the better .

I am in the process of transitioning to a new lender actually. I found 'WellHomeloans' who are on online lender with a current variable rate of 3%, (1.5% cheaper than my current 4.5% rate with Bankwest).

Once 'well' is set up, (new 30yr term at 3%) I will continue to pay into it at the rate I currently pay Bankwest. This will be as if 'well' is a 20 year loan at 4.5%. If I can pay new loan at that rate I should hit the principal faster and save about $50k over the next 20 years (assuming rates don't change... As if that would happen).

Anyway, I read today that rates are likely to stay low for a few years at least, so if I can hit the mortgage a bit harder for those years that will help.

Thanks again @craft .

Tom

 

[craft]

Thanks @craft . I will read the above posters threads as suggested. The more I learn the better .

I am in the process of transitioning to a new lender actually. I found 'WellHomeloans' who are on online lender with a current variable rate of 3%, (1.5% cheaper than my current 4.5% rate with Bankwest).

Once 'well' is set up, (new 30yr term at 3%) I will continue to pay into it at the rate I currently pay Bankwest. This will be as if 'well' is a 20 year loan at 4.5%. If I can pay new loan at that rate I should hit the principal faster and save about $50k over the next 20 years (assuming rates don't change... As if that would happen).

Anyway, I read today that rates are likely to stay low for a few years at least, so if I can hit the mortgage a bit harder for those years that will help.

Thanks again @craft .

Tom

That is awesome that you have already addressed your loan interest rate.

I’ve done some quick numbers.



Calculation (a) is 150K for a 30-year P&I at 4.5%, your original situation.

Calculation (b) is your new situation of 3%. Clearly the savings of time and interest are huge. Kudos for getting this done, it makes the biggest difference and doesn’t cost you a cent. The key as you state is keeping your repayments the same so that you make quicker inroads into the capital.

Calculation (c) is lump summing the 10K you have for investing now into the mortgage.

Calculation (d) is the lump sum plus an additional $625 per month (halfway between the 5 & 10K you mentioned you could save.)

The calculations (c) and (d) should provide a basis for comparing alternative trading or investing opportunities against.

I assume your original loan was for more that 150K so your original loan repayments would be higher than these examples which means you crush the loan even quicker and save even more interest.

Understanding how much you can save by small changes in interest rates and hitting the principle as early as you can is a great start to appreciating the power of compounding – A vital investment insight.

 

[Tomboy77]

Hi @craft .

Thanks very much for the numbers above. It certainly makes for a compelling argument looking at option C, and even more so option D!!! Knocking basically 10 years off my mortgage and paying only about 20k interest would be bloody amazing!!! If I was mortgage free at about 50 years old that would be a huge milestone for me.

 

[bngood]

Hi @craft .

Thanks very much for the numbers above. It certainly makes for a compelling argument looking at option C, and even more so option D!!! Knocking basically 10 years off my mortgage and paying only about 20k interest would be bloody amazing!!! If I was mortgage free at about 50 years old that would be a huge milestone for me.

So I think the question is can you make more on your $10,000 than 3% compound a year? I think you can but you would have to be disciplined.
If I were you (and I am not you but I have been in your position). I gave up my day job at 40 to trade for a living full time.

1) Get out of the ASX entirely until you have a trading plan. There are hundreds of ways to make money on the ASX you have to work out what suits you.

2) See an accountant to see the best structure you should be using to invest in shares. Your wife (while not working) has a tax free threshold of $18,200. If you had all your “investment” money in her name you could earn $18,200 before you pay any tax.

3) Buy some books on trading and charting. Go to the library. I am not talking about day trading or forex but share trading. You need to have a written trading plan and know about candlesticks and chart setups before you buy any shares. Louise Bedford’s books are good – she shows you how to work out a trading plan and charting patterns (don’t get caught up in paying for educational stuff - you can do it yourself out of books without paying anything).

4) You need to work out a trading plan that will work for you: that you are comfortable with, that suits your work, life and time commitments. The most important thing about your trading plan is your exit. You can buy anything at anytime but you need to know when to get out. An exit for me is a stop loss. I personally don’t think anyone can make money without one especially with a small bank balance. You cannot afford to lose money. I have an initial stop loss of $300 on every single trade. You need to work out an amount you are happy to lose (and you will lose it so you have to be sure that you are prepared to cut your losses when you stop is hit). Your aim is to have every cent of your capital working for you (gaining).

5) Once you have your trading plan and you’ve chosen your first share because you have researched it to death fundamentally and you have been patiently waiting for a perfect set up on the chart according to your plan you get out your trading diary and work out when you will get out in writing. So you are prepared to risk $2000 of your money and you look at 2,500 shares of DDD at 76c = $1900. You are prepared to lose $300 so $1900 - $300 = $1600/2,500= 64c. (If you include brokerage this will be higher). When your share closes below 64c you sell. You can now buy your share. Watch your share. If it closes below 64c and you don’t sell you can’t trade shares so go back to your day job and put your extra money in the bank.

6) If you are still determined to do this but can’t stick to stop losses you can set an automatic stop loss before you buy your share. The disadvantage of this is that sometimes intraday trading will take out your stop loss but it is better than being stuck in an unsuccessful trade.

7) Paper trading is a good way to go initially to see if you think you can trade and your system works but there is nothing like the test of a stop loss to see if you really can trade.

 

[Tomboy77]

Hi again guys,

I have just read back over this thread after some time has elapsed. My SPX shares dropped from 0.11c to a low of less than 0.07c since I was last on here, then just today reached back up to 0.11c.... But now there is news of a legal battle about to begin, so SPX share price will likely take another hit (tank) tomorrow at 10am!

I just held on through the drop to 0.07c and was thinking that I might even start to see a climb but looks like this legal battle (between VMC and SPX) is about to hit that possibility on the head!

I'm assuming mass exodus from SPX tomorrow... I will watch and continue to hold in hope that a longer term outlook (another 12 months) sees SPX develop a great resource that is ready to be mined.

What a learning experience...!!!

Gulp

 

[sptrawler]

Hi again guys,

I have just read back over this thread after some time has elapsed. My SPX shares dropped from 0.11c to a low of less than 0.07c since I was last on here, then just today reached back up to 0.11c.... But now there is news of a legal battle about to begin, so SPX share price will likely take another hit (tank) tomorrow at 10am!

I just held on through the drop to 0.07c and was thinking that I might even start to see a climb but looks like this legal battle (between VMC and SPX) is about to hit that possibility on the head!

I'm assuming mass exodus from SPX tomorrow... I will watch and continue to hold in hope that a longer term outlook (another 12 months) sees SPX develop a great resource that is ready to be mined.

What a learning experience...!!!

Gulp

As long as you keep track of where you would have been, having taken other options, we will all learn something.

 

[willoneau]

Hi Tomboy77, just wondering how you are going now we are into the new year?

 

[sptrawler]

Hi Tomboy77, just wondering how you are going now we are into the new year?

Hi @Tomboy77, how about an update?