Awaiting a global downturn...??

[willoneau]

Hi willoneau,

No i don't understand franking come tax time (or any other time for that matter ). That's one thing I am yet to wrap my head around.

My overall goal is really to feel more like i am somewhat in control of my destiny, and that I am not just working the daily grind for no reason other than to pay my bills. As a low income earner who has never made more than 70k p/a, I am just trying my best to make small gains where I can.

So my goal is to learn as much as I can about investing, and hopefully to build a small passive income stream over time so that I can pull back on how much I need to work after another 10-20years in the full time grind!

Well your at a great place to start your journey down the road of investing/trading with a lot of smart people here that are doing it.

 

[willoneau]

aside: an amendment is just a button press inside mygov, but if she did her own it would probably have been pre-filled by the ATO if her return was done just recently - like august (but certainly worth investigating what that is up to to get $$ back)

Thanx HelloU, worth looking at if she is bothered.

 

[willoneau]

Tomboy77, often asking people here how to invest your money, you don't usually get much response. But asking people here how to learn how to invest/trade usually gets positive responses.

 

[Tomboy77]

Welcome to ASF Tom - 10K in an ETF will bubble away at an incredibly slow rate, watching a car rust would be more exciting, as for timing - yep it's all very
strange now, uncharted waters in many ways, i'm starting to come around to thinking that there many not be a cliff to fall off with interest rates so low globally,
maybe we/the world can just stumble along for the next half decade or so.

Hi So_Cynical,

Thanks for the warm welcome! I am already learning here so that's great!

I don't mean that I will buy 10k in ETF's and then just sit and watch.... I will be attempting to put in as close to 10k p/a as possible. This is still very 'small-fry' stuff I know, but it is the best I am able to do in my situation. Still probably as exciting as watching paint dry

I also figure that If I learn about investing now, If I ever get any sort of inheritance in future (which could happen at some point) I will have a good idea of how to make it work for me and my family, instead of squandering the opportunity.

 

[Tomboy77]

Thanks all, I will read back through this again in the morning with fresh eyes (and brain)... Thanks so much for the tips and ideas.

 

[willoneau]

Hi So_Cynical,

Thanks for the warm welcome! I am already learning here so that's great!

I don't mean that I will buy 10k in ETF's and then just sit and watch.... I will be attempting to put in as close to 10k p/a as possible. This is still very 'small-fry' stuff I know, but it is the best I am able to do in my situation. Still probably as exciting as watching paint dry

I also figure that If I learn about investing now, If I ever get any sort of inheritance in future (which could happen at some point) I will have a good idea of how to make it work for me instead of squandering the opportunity.

How would you feel about putting 10k in if the value drops to 5k in fund?

 

[Tomboy77]

How would you feel about putting 10k in if the value drops to 5k in fund?

I am 41, so I guess if that happened but I was confident that the fund I chose was reputable and that the overall market was in a slump, then I would try my best not to be too bothered by it (easy to say I know). I have 20 odd years before I need to be in a better financial position, so there is still time for some fluctuations at this point...

 

[willoneau]

I am 41, so I guess if that happened but I was confident that the fund I chose was reputable and that the overall market was in a slump, then I would try my best not to be too bothered by it (easy to say I know). I have 20 odd years before I need to be in a better financial position, so there is still time for some fluctuations at this point...

I have been were you are, don't be in rush to jump in. Start reading the threads and enjoy the journey.

 

[Tomboy77]

Thanks willoneau,

I'll do my best!

 

[willoneau]

Learn the difference between investing and trading, using fundamentals or technicals.
Just a starting point of many.

 

[aus_trader]

Firstly welcome to the Forum, you must be our newest member. We need some fresh faces here at ASF.

You are doing the right thing. It's easy to just let life go by and say it's all too hard or I am on low income so it doesn't matter what little contribution I make to investments etc. But it's those small initial steps that could turn into a lifelong journey that could put you in a better position one day than if you never took that journey.

This forum is a really good educational source and better than other forums out there that resembles popularity contests with just stock tips and favourite tipsters who get a lot of votes.

ASF also runs stock tipping competitions, so just for fun and to test your skills test out your skills at picking stocks here:
September Stock Tipping Competition Entry Thread!

Enjoy that. It's something you can enjoy without committing your own money to the markets.

Take your time educating yourself and although it's hard to do, try not to be impatient putting your money into the markets in a hurry. As willoneau said, there are good threads in this Forum that show how members approach the financial markets, whether it's through investing or trading. You are also welcome to look at my portfolios for educational purposes, since I try to document my reasoning behind investments and trades.

Best of luck on your journey Tomboy77, if you have further questions just ask, I found people on ASF are happy to help.

 

[qldfrog]

Overall my advise would be

Pay back any loan mortgage first with any spate cash AND start paper trading/learning via this forum
Do not put your hard earned money straight away into even eft
In a year or 2 you will be more confident
Share market is risky, as beginner we all make mistakes and yes you could get lucky but can not be confused with skills
.it takes a while
So learn learn learn but do not risk your money yet
So loan repayment and super in the meantime..hope it helps

 

[Tomboy77]

Thanks so much guys. This is really all very good advice. It makes me less frantic about getting my money into the market hearing what you have said above. I will just keep hanging around on here and trying to learn what I can, happily knowing that I am doing the right thing just putting extra into my mortgage for now. I must confess that I have already made 2x investments in the market (albeit small ones). I have 2k worth of AFI (Aussie LIC I am certain you all know of), and 1.5k of SPX (speculative miner...much more risky I know).

I bought AFI on the day of the inverse yield curve news a few weeks ago (they lost about 2.5% that day I think so i bought at a small discount). I bought SPX at 11c, so not so smart there I don't think. I bought that on back of a thread at HotCopper after hearing that a Canadian firm had invested millions of dollars in it.

Anyway, I'll cool my heels for now and try to learn some more first as suggested.

Thanks all, and best of luck with your own endeavours.

 

[sptrawler]

Thanks so much guys. This is really all very good advice. It makes me less frantic about getting my money into the market hearing what you have said above. I will just keep hanging around on here and trying to learn what I can, happily knowing that I am doing the right thing just putting extra into my mortgage for now. I must confess that I have already made 2x investments in the market (albeit small ones). I have 2k worth of AFI (Aussie LIC I am certain you all know of), and 1.5k of SPX (speculative miner...much more risky I know).

I bought AFI on the day of the inverse yield curve news a few weeks ago (they lost about 2.5% that day I think so i bought at a small discount). I bought SPX at 11c, so not so smart there I don't think. I bought that on back of a thread at HotCopper after hearing that a Canadian firm had invested millions of dollars in it.

Anyway, I'll cool my heels for now and try to learn some more first as suggested.

Thanks all, and best of luck with your own endeavours.

You could do a lot worse than picking up AFI on weakness, also they have dividend re investment, by the time you retire you could have a nice little income stream right there.
Best of luck.

 

[craft]

Hi all,

There has been plenty of news lately of a looming global downturn, with Trump and China's trade war, Australia's reliance on China as our major trading partner, and Australia's long overdue 'pendulum swing' into a what could be another 'recession we had to have'.

So, as a new investor with very little money currently 'in the market' this has got me thinking. Should I jump in now with my investments, or wait for the possible downturn to occur, and then try to buy in at a discount? (Buy low, sell high)

MY POSITION:
I have a bit less than 10,000AUD available to me that I will be investing, I am 41 years old, and want to see what I can do over the next 20 years. I have about 270,000 equity in my home, and no other debt besides a 150k mortgage. I have 2x kids (8 and 11), a cat, a dog and a wife. (classic, standard dad ) I am the sole breadwinner for the family. I work in retail FT, low income (47k p/a). My wife is a stay at home mum.

INVESTMENT APPROACH:
Given my position as above, (I know its pretty low powered...) I am looking at getting into ETF's as a starting point. I figure if I can plug away at investing in ETF's and slowly learn about the market more in depth I will be able to perhaps take bigger positions in individual stocks as time progresses.

Meanwhile I will have the ETF's bubbling away in the background as my main 'base' to my portfolio. I figure i will be able to invest between 5-10k per year on average, by living on about 40k p/a ....

So my main point of this post is, do you guys with more experience think it is better to just jump straight in now, or wait it out, and try to buy into ETF's when the market is lower? I am looking into 'Betashares' products, like their A200, etc.

Thanks for your time.

Any input much appreciated.

Do you want to invest and achieve market returns, whatever they may be?
This is easy to implement but not necessarily easy to stick too. Efficiency is the key to get right with this approach, little expenses make a big difference.

Or do you want to trade and try to do better than the market and/or try to control depth of loss?

This option requires much higher time commitments, both to learn and to implement. Its also what is called a zero-loss game, which means on average those who try will do worse than taking the first option. The potential rewards are the lure to compete. Gaining skill is the key to get right with this approach.

This seems to me, the first question you need to answer. It will determine so much about what are the right moves for you. And it will help people make relevant suggestions.

It could be that you want to do both. Implement the first option why you learn about the second option.

You are in a pretty good position thinking about accelerating your wealth creation at 41 with a fair bit of equity in your house and what seems to be a pretty happy life on a modest income. By the time you retire you could be financially independent on similar sort of income, part pension if still available or an inheritance could be bonuses.

Don’t think what you are doing at this point as small fry, you are striking out from a good base at a good time in your life, what you learn and do at this point will make a big difference.


So, fist question

Investor or trader?

 

[Tomboy77]

Do you want to invest and achieve market returns, whatever they may be?
This is easy to implement but not necessarily easy to stick too. Efficiency is the key to get right with this approach, little expenses make a big difference.

Or do you want to trade and try to do better than the market and/or try to control depth of loss?

This option requires much higher time commitments, both to learn and to implement. Its also what is called a zero-loss game, which means on average those who try will do worse than taking the first option. The potential rewards are the lure to compete. Gaining skill is the key to get right with this approach.

This seems to me, the first question you need to answer. It will determine so much about what are the right moves for you. And it will help people make relevant suggestions.

It could be that you want to do both. Implement the first option why you learn about the second option.

You are in a pretty good position thinking about accelerating your wealth creation at 41 with a fair bit of equity in your house and what seems to be a pretty happy life on a modest income. By the time you retire you could be financially independent on similar sort of income, part pension if still available or an inheritance could be bonuses.

Don’t think what you are doing at this point as small fry, you are striking out from a good base at a good time in your life, what you learn and do at this point will make a big difference.


So, fist question

Investor or trader?

Hi craft, thanks for the input. To answer your final question there I would like to think the answer could be both...trader (small time), and investor.

I have this idea that perhaps I could trade small amounts in penny stocks, or small caps as they are called, (say $500 or $1000 at a time), and then funnel any profits made back into things like AFI or similar.
For example if SPX jumps to 0.16c (fingers crossed), after I bought 12,500 units at 0.11.5c ($1500 cost,) I'll likely sell 9,375 units (recoup my $1500 capital) and buy more AFI, or maybe just sit cash back in Mortgage and wait... Meanwhile extra $500 profit can stay in SPX to gain even more, or it could collapse to zero... This is a perfect world scenario where I have money 'in play' that I never had to start with

Then again Betashares has stuff like their NASDAQ ETF which could also be quite good for some capital growth...

I know trading is not something that you should attempt half heartedly though, so I think I will take advice given so far and try to learn via paper trading while I just pump what extra I can into my mortgage for now.

Cheers

 

[Struzball]

Hey Tomboy,

You're never going to nail the timing 100%.
If you had $1million worth of stocks right at this moment, would you sell out now waiting for the downturn? Or would you continue to accumulate as prices fall?

In my opinion I don't think anybody should be fully out of the market, waiting for a fall.
But at the same time I think you should have some cash available to buy opportunities that come along.
It's no use seeing a bargain come along (a market crash) and having no cash spare to buy the opportunity.

In the long run, 20-50 years time the person who gradually accumulates is obviously going to be better off than the person who leaves it in a bank account earning 2%.

 

[willoneau]

How many saw the GFC before it happened or even while it was happening, but everyone saw it after it happened.

 

[sptrawler]

I have this idea that perhaps I could trade small amounts in penny stocks, or small caps as they are called, (say $500 or $1000 at a time), and then funnel any profits made back into things like AFI or similar.
For example if SPX jumps to 0.16c (fingers crossed), after I bought 12,500 units at 0.11.5c ($1500 cost,) I'll likely sell 9,375 units (recoup my $1500 capital) and buy more AFI, or maybe just sit cash back in Mortgage and wait... Meanwhile extra $500 profit can stay in SPX to gain even more, or it could collapse to zero... This is a perfect world scenario where I have money 'in play' that I never had to start with
Cheers

What you have to be a little carefull of is constantly losing money in the penny stocks, that is neutralising any dividend from your investment holdings.
What I mean is, you have say $2000 in AFI and $1500 in penny dreadful's, the penny dreadful's go belly up. Meanwhile AFI has two dividends, that could have been re invested at a discount to market value.
It would be worth doing a couple of paper examples to see the difference, if you had bought $3500 of AFI and had a couple of dividends, then see how much you would have to make on the $1500 penny dreadful's to match it.
Easy enough to do the info is readily available.
Just a thought.

 

[craft]

Hi craft, thanks for the input. To answer your final question there I would like to think the answer could be both...trader (small time), and investor.

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.