Best bank to invest in?

[bennib0i]

Hi everyone,

Im 20 and fairly new to this and would like to get some ops from you guys who have been trading for a lot longer time then i have.

I am not ignorant in how the stock market works and have been looking and reading alot recently. Up to now I have accumulated 8k to invest in the stock market! yay! now the questions lays in which stocks?

Im interested in investing for the long-term and am considering either dumping it all into a share in one bank or a mix of two, and collecting the dividends as they come. So which bank(s) would you guys recommend for a safe investment. Or any other recommendations in other sectors that provide good dividend returns?

Im also open to any other suggestions and advice.

Thx

 

[Whiskers]

You need to get hold of some data to compare your stocks.

E*trade for example, provide a fair bit of company information as well as search profiles like immediately below under Research Tools: Sample Queries, The Bank Analyser

Another is dividend yield (bottom chart). You will note that dividend yield alone can be misleading, especially when the market corrects like now. Some share prices are quite low historically reflecting in a higher dividend yield %, and some of them while appearing good value may be suffering from the sub prime credit crisis.

On the pure dividend yield the banks are way down the list around 5 to 6% yield, but are probably safer than many above them.

The annual average return is often more reliable, but at the moment even that is tainted with a degree of uncertainty about future prospects. So there is a lot to consider and make judgements about.

 

[TheRage]

Hi,

With such a low starting capital why not consider investing in an LIC (Listed Investment Company) such as ARGO or AFI. This will give you broader exposure to all industries and not just the financial industry. LIC's tend to hold up fairly well in choppy markets also. However you could diversify some of your return away. In saying that being invested in one bank could potentially put all your money at risk if something was to happen to that bank, while unlikely it has happened overseas.

DYOR this is not financial advice.

 

[Frank D]

That type of 'investing'will be one of the smartest decisions you’ll ever make when it comes to the stock market.

My father told me to buy banks and keep on accumulating them, I haven’t looked back since buying CBA in the float.

By the time you retire you’ll have more than enough in a dividend stream coming to satisfy most lifestyle needs.

I would split it into 3 banks:- CBA NAB WBC.

This is something I do each year, set a side a portion of savings/profits and buy the same banks each year, the best strategy and most simply strategy is BUY them when they come down an re-test the 200 M/A day average. (buy dips), every year.

I use a more complex model to try and get better entries so I can purchase more, but 200 M/A is a good yearly strategy.

For example you want to buy 8K this year, you might only decide to BUY 5k each year after that. That will depend on how well you save. I personally use 10% of my income.

Personally I think banks might remain flat for another 2 years, and could dip slighty lower than 2008 yearly lows next year, which in the scheme of things it doesn’t matter.

In the future you’ll look at margin trading to maximize exposure, but try and keep margin @ 50% LVR, but that’s a personal opinion, if you are using margin as part of a long term investing plan, and re invest the dividends.

In 15 years time you will be well on your way....

gee where did all those years go, it just seemed like it was yesterday....

 

[AnDy62]

8k is enough to enter the market I think.
In terms of banks, I would look at NAB/WBC/CBA and SUN. SUN is slightly higher risk and has an insurance arm but I think it's good value and possibly a target like St George. You can't really go wrong long term with banks. If you are looking at v. low risk Westpac is good. DYOR

 

[brettc4]

I can't help but notice that those who recommend banks stocks, leave out ANZ. Is there are reason for this?

 

[YELNATS]

I can't help but notice that those who recommend banks stocks, leave out ANZ. Is there are reason for this?

Maybe ANZ is not so "flavour-of-the-month" due to their recent write-down provisions and their Opes Prime exposure. However, I can't help thinking that generally they're well-managed, their sp is attractive at current levels and their long term prospects are v. good.

 

[bennib0i]

Hi, Thank you all for all your helpful information and suggestions.

I too noticed that ANZ was left out of the recommendations, any real reasons? future unsure of? and not as strong as CBA, WBC, and NAB?

Currently I am considering splitting my money into two banks; 4k in each. I know that I won't be getting many stocks in each company with, less then 100 with CBA hahaha
After reading I believe this would be safe and the dividends (5-6%) would be as good as leaving it in a high-interest savings account (7-8%) after Tax.

Im going to avoid SUN and take the safe route and go with the big 4, probably CBA and WBC. considering ANZ is not recommended, again any reason?

Also with the dividend yield i've noticed that CNP is well over 100%..which would be the case of its sinking share price since the sub-prime mortage crisis.
Also are trust shares reliable?

Again thx for your help

 

[AnDy62]

^ With ANZ, it's not a big deal- it's pretty much six of one, half a dozen of the other (well, almost). But, it has the worst exposure of the big 4 and yet is not at any significant discount (bar WBC), when assessing from November highs. I prefer Westpac for it's solid credentials and addition of SGB, NAB is cheap with much less problems than ANZ and has exposure to agriculture, which I like. CBA too is cheap, and benefits from being a well loved stock- market darling. Just my

 

[hangseng]

Hi, Thank you all for all your helpful information and suggestions.

I too noticed that ANZ was left out of the recommendations, any real reasons? future unsure of? and not as strong as CBA, WBC, and NAB?

Currently I am considering splitting my money into two banks; 4k in each. I know that I won't be getting many stocks in each company with, less then 100 with CBA hahaha
After reading I believe this would be safe and the dividends (5-6%) would be as good as leaving it in a high-interest savings account (7-8%) after Tax.

Im going to avoid SUN and take the safe route and go with the big 4, probably CBA and WBC. considering ANZ is not recommended, again any reason?

Also with the dividend yield i've noticed that CNP is well over 100%..which would be the case of its sinking share price since the sub-prime mortage crisis.
Also are trust shares reliable?

Again thx for your help

You may wish to speak with an adviser about SFI's http://www.asx.com.au/investor/warrants/tools/library/sfi_positively_geared_investment.htm

Unlike margin loans you will never get a margin call.

 

[andy87]

benniboi,
Ive been told by investors that banks are a good long term investment. In saying that i was told this when SUN were down around the $11 mark at the start of the year, and now $15. If your 20 and you have 8k to invest, your doing well (compared to the majority). At the time, I had only the basic understanding in the world of the stock markets, but i invested all my savings (about 9k) into QAN, TLS and MIG evenly with the simple princples (i.e. good p/e ratio, good dividends, good cash flow etc.)when i was about 16 (now 21). All steady companies with decent dividends and steady growth, and sold QAN last year to record a 100% growth. Not bad for an amatuer like myself. So at your age id look at a long term investment and banks seems to be a good investment.

The majors dont seem to be affected to much by the sub-prime mortgage crisis because, but what someone previously said (or hasnt mentioned) is that there is still a little uncertainty about the market. Every second week im reading some bank somewhere around the world has written $400billion of bad credit here, $200billion there etc. and its going to be a while before we know the full extent. Who know's, next year we could see a recession and then were all boned.

Anyway, sorry if ive yapped on, but from one newb to another, invest in strong performing companies with the goal of medium - long term return

 

[bennib0i]

benniboi,
Ive been told by investors that banks are a good long term investment.

Thx Andy for sharing your experience. My mum has been telling me that banks are the way to go, but she doesn't have much expertise on stock trading and as such I have gone ahead to do some research and readings myself.

Even though I am highly tempted to jump into a boat full of CNP stocks and the like, and hope to catch it on the ride up as it shots 6-15% in a day...I believe that my money is better off put on banks for a better/safer return over time.

How do the smaller banks fair compare to the major 4? would they be a wise investment, say bank of queensland or bendigo bank?

Thx again, Ben

 

[TheRage]

It might pay to remember in the early 1990's some of Australia's largest banks almost went under. Things are most certainly different now with prudential regulation but I should warn you banks do go bust. Ever heard of bear sterns last year traded at $160 a share Mrogan Stanley recently offered $2 a share to existing share holders. My original point was that owning one or two banks keeps you exposed entirely to one or two shares. Why not buy an index like STW or a listed invested company like arg or afi which by the way have shares in banks but also in many other companies like BHP and WPL.

 

[JTLP]

Hahaha...all this risk is making me laugh. Just throw it into an internet saver account...7% ra ra virtually risk free. Sure it's boring but at least you are not umming and ahhhing about it everyday.

Or

Go on one helluva World Tour holiday

 

[Mofra]

Hahaha...all this risk is making me laugh. Just throw it into an internet saver account...7% ra ra virtually risk free.

7% after tax and inflation is virtually a 0% return. I'd be inclined to lean towards FF dividend paying companies that have a track record of growth over an extended period of time.

 

[JTLP]

7% after tax and inflation is virtually a 0% return. I'd be inclined to lean towards FF dividend paying companies that have a track record of growth over an extended period of time.

Virtually 0%? Man have i've been wasting time

 

[Uncle Festivus]

Banks profit contribution from 'growth' has been steadily decreasing over time eg decreasing interest margin, and is only compensated by rising fees. If they can still keep raising fees then maybe they can keep increasing profits.

 

[Garpal Gumnut]

I can't help but notice that those who recommend banks stocks, leave out ANZ. Is there are reason for this?

They are very much on the nose for Opes prime exposure and many investors and traders were badly burnt in that failure, so ANZ are not flavour of the month

gg

 

[andy87]

but I should warn you banks do go bust. Ever heard of bear sterns?

I think everyone shoud know about Bear Sterns. They were also an investment banker like Citigroup, and they got caught up in the hedge debarkle and consequently started the snowball effect with all the other investment firms around the globe. I dont expect SUN, ANZ or CBA will right off $800billion worth of bad investment.


Furthermore, a savings account is a joke. At 7% p.a. interest, inflation is at 4.2% so your only getting 2.8%. What a crock, and the majority dont even realise this. Its fine if you have a margin loan because your still going to have to fork out the $10,000 but its not worth $10,000 by the time you pay it back because your purchase power has decreased, so technically you might only owe $6000. Other than that, forget about getting an income off interest. Pigs bloody ass

 

[MrBurns]

Bank Shares

Ok instead of jumping into a BMW M3 or Merc C63 AMG I've decided to put $100k into shares for starters, it's never the right time but here I go.

Which bank share is the best or are they all about the same, I'm choosing bank shares because of the safety aspect and the dividends which I understand are quite good ?

Any hints appreciated.