New to shares and investing

[damien275x]

Hi all

I am 20 and just got promoted to my second job. My income is $53k per annum before tax. I don't pay much to live right now and i need to put my money into the shares asap so i dont waste it. i have been researching for a year and everything contradicts everything else. if i took into account everything i've read, i would never ever do anything. its pissing me off.

If I just pick random shares that are big companies like banks and hold onto them for a long time, like 5+ years, is that a sure way to have the money go up? My strategy would be to only sell if it was higher than when I bought it, even if that took a long time.

I want a strategy that doesnt involve a lot of thinking.
Sort of just buy it and forget about it
is that possible?

 

[boofhead]

People here can't give much advice because of various laws.

Have you looked over charts for companies? Look at dividend histories?

Bluechips seem to have a reputation for longer term survival but sometimes they can go down a bit like any other company. Qantas is one example of something that suffered during the GFC and failed to regain any substantial ground whereas the banks have recovered a lot of their share price losses.

The major banks are a major part of the top market capitalisation on the ASX.

 

[AlterEgo]

If I just pick random shares that are big companies like banks and hold onto them for a long time, like 5+ years, is that a sure way to have the money go up?

No

I want a strategy that doesnt involve a lot of thinking.
Sort of just buy it and forget about it
is that possible?

No

i need to put my money into the shares asap so i dont waste it.

From what you've said, I'd think shares are not for you. Forget about it. Put your money elsewhere.

 

[Wysiwyg]

Hi all
I want a strategy that doesnt involve a lot of thinking.
Sort of just buy it and forget about it
is that possible?

I am unashamedly in the 90% group and if you have the above attitude I expect you to be in that group too. Success comes with experience and experiences cost time and money.

 

[akkopower]

there are these things caled managed funds. u give a fund manager your money and he buys and manages a share portfolio for u. some funds allow to pay up front >2K and then use direct debit to add an additional >200 per month. Might be good to look into. there are hundreds of different funds u can buy into, google it.

 

[beachlife]

buy, hold, forget and hope doesnt always work and blue chips dont always go up.

Telstra was $9.14 in 1998, never been back since.
HIH - wiped out
One Tel - wiped out
AMP - $14.40 in 1998 - got back there in 2001 for a month - never been back

Some people did well during the boom, some didnt because they held while the market crashed. If you buy at the wrong time you could be waiting a long time to get your money back - or you could have a HIH on your hands.

Also think of inflation. Look at the house prices in 1998 compared to today. Even if the people that bought telstra in 1998 and are still holding ever get their money back, they have lost a big chunk of their buying power.

As for fund managers just ask any retiree about the value of their super now.

No one will ever care about your money more than you so read some books, make a plan that suits your time frame/objectives and follow it.

 

[takeprofits]

If you are investing in shares, you need to choose a strategy that best suits your personality.

From what you have said, you don't want to spend lots of time studying the market. So trading is out.

If buying and holding for up to five years is for you, you need to be comfortable with the daily fluctuations of the market. Would you be able to resist selling if your portfolio had fallen 20% or more. Alot of people bought shares at the height of the boom, when the GFC hit and their shares fell they panicked and sold at a loss. Alot of those shares have now recovered to near those same prices.

Quote - "Opportunities arise when strong investor emotions rather than fundamentals drive the stockmarket. Stay disciplined, detached and avoid getting swept up in the hype".

Psychology and emotions are a major force on the stock market and cause people to do some wierd things.

Look at dollar cost averaging into a number of solid companies.

I suggest you buy and read some, no alot of books. Books about Warren Buffett, books by David Dremen, Benjamin Graham are excellent. Valuing companies etc.

My tips:
Find a strategy that suits your personality. When you work out your strategy, write it down, stick to it and fine tune at time goes by.

Try to work out what you think is a fair price for a good company and aim to purchase it at a significant price to this.

Train yourself to not react to price movements. However don't totally ignore them. (Google Mr Market)

Give your strategy time to work, don't expect instant success.

Don't chase news of the next big thing.

Enjoy the stock market.

 

[lukeaye]

Can i please give you a peice of advice.

Im in a similar situation, im 21 and i earn a little bit more then you, about 65,000.

My best investment has been my unit. Buy a property before you start buying shares. I can tell you right now that many more people have made money out of property then shares. And it fits in with your "not wanting to think" attitude. Not having a go at you, but you have to be ready for hard work and a better attitude then that if you want to make money in the markets.

Hell there are people who work there guts out and still dont make money. There are people who do nothing and there properties make them money. Go for the property!

 

[skyQuake]

Can i please give you a peice of advice.

Im in a similar situation, im 21 and i earn a little bit more then you, about 65,000.

My best investment has been my unit. Buy a property before you start buying shares. I can tell you right now that many more people have made money out of property then shares. And it fits in with your "not wanting to think" attitude. Not having a go at you, but you have to be ready for hard work and a better attitude then that if you want to make money in the markets.

Hell there are people who work there guts out and still dont make money. There are people who do nothing and there properties make them money. Go for the property!

Its also arguable that house/unit prices are inflated atm thanks to record interest rates and First home owner's grant; Also that Real estate prices are expensive versus shares... Property is also far less liquid than stocks and their pricing is less efficient.

However lukeaya has a point in that buying your own property is a 'lazy' way to invest. Also, its a place to live instead of paying rent.

 

[SmellyTerror]

What I'm giving here is very general advice, available from pretty much everywhere. But if you do follow any of this, do it on paper first. Also DYOR, natch.

My strategy would be to only sell if it was higher than when I bought it, even if that took a long time.

That's pretty much the exact opposite of what you should do. It's a cliché, but true for general trading: cut your losses short and let your profits run.

Imagine there was a market where 3-out-of-4 of shares would drop in value by 50%, and only 1-out-of-4 would go up by 50%. You'd get wiped out, right? But the beauty of trading is that YOU get to decide what you do. So if (in that market) you cut your losses to 10% per share, and let your winners run to the top, you'd come out ahead.

You should EXPECT at least as many losers as winners - but THAT DOESN'T MATTER. You can still make money despite more losers than winners by playing smart and cutting those losing trades off. Don't hold on to them!

Money management will make you money. In fact, IMO that's where most of the money is in this stuff. There's a lot of finesse to learn that can make your win rate better or make your winners bigger or cut your losses even further, but all of that is just a bonus. Learn money management, and honestly, random share selection could well do the rest for you.

Really simple system? Say you have $25k. Split it into 20% batches: $5k each. Buy 5 different batches of shares for $5k each. Pick them from the top200 and just pick stuff that seems to be going up (don't try to pick the bottom of a falling share - just pick stuff on a good up-trend).

Set your stop loss (aka a conditional order -> falling sell) at 10% less than your buy price. That will limit your loss to $500 on any one trade, which is 2% of your money. Some will fall out the bottom, but you'll only lose $500, and you can get back in on an up-trending share. Come back every month or so and raise your stop losses if the prices have gone up - maybe give 15% for a share you like, to give it room. That's how you'll sell shares - as they fall from their highs. NEVER lower a stop loss. They stay where they are or they go up. NEVER down (well ok, there's an exception for ex-div - I'll mention that at the end).

So the system sells all your shares. The ones that fall will lose no more than $500 (barring disastrous gapping). The ones that go up can make a lot more than $500, and that's how you make money.

Get a broker (BellDirect is a good starter one, IMO - cheaper than most, free conditionals, good layout, etc). that will send you an email when a share sells (most do). Then you don't have to worry about it until you get an email to tell you that something sold, and then you just have to jump on, find a new share to buy (ie one that's going up) and buy it. Set your stop losses, done. Jump on every month or two to bring stop losses up if things are going up. Easy.

Refinements: you might want to pick shares with decent dividends, though still trending up of course. Dividends are good for long-termers. You might want to sign up for a newsletter or something to help you sift through the dross when it comes to buying time. You might want to learn some basic technical analysis to help you better pick when to get into a stock, and how to get better at seeing when a share is falling again. You might want to get shares from unrelated sectors, so you don't get all 5 dropping at once for the same reason (eg don't buy 5 gold miners, since if gold drops then, instead of a $500 loss for one stock, you'll get all 5 drop out, making it a $2500 loss). And if you see that a share wobbles about so much that your 10% stop loss is likely to get hit the day after you buy it, perhaps look for something else.

But in general, that's all a lot more work for not necessarily much more return (unless you're willing to get serious). The "simple" advice of picking stock that's going up is something that might need a bit of research, but you can generally eye-ball it on a chart - just make sure you're looking at an up trend a good couple of months long. Weekly trends don't count.

So there y'are. Buy stuff wots going up. Sell stuff wots going down. Do that on paper and see how you go.

(Oh, the dividend thing: after eligibility for the dividend passes (ie the share goes "ex-dividend") you can expect the price to drop a fair bit. This is the one case where you might be justified in putting your stop loss down, and then only by the amount of the drop on the day after the ex-div (so if your stop was 15 cents behind the price, and the dividend went ex for 10 cents, the price may drop about 12 cents the next day. That'd make your stop only 3 cents behind the price. In that case, it would be ok to put your stop loss back down to 15 cents).

 

[brty]

I

f I just pick random shares that are big companies like banks and hold onto them for a long time, like 5+ years, is that a sure way to have the money go up?

In 1988, a year after the '87 crash, WBC shares were ~$6, at the end of '94 they were still only ~$4. Does this help answer your question??

Or how about ANZ that also went from ~$5.70 down to ~$4 over the same period?? NAB did better, you couldn't buy CBA in '88.

How about BHP that was ~$9 at the end of '94 yet only ~$5.50 in early '99. I think that HIH, Ansett, Pasminco were all 'bluechip' stocks around that time as well.

brty

 

[condog]

We by law cannot give advice and we must tell you to seek expert indepentdent advice that takes your circumstances into consideration.....

Theres a guy called Roger Montgomery who basically tries to pick companies that have great long term outlooks and have safe and value fundamentals in place....right now he is advocating JBH, WOW and CBA.......he has a few others but there prices are currently too high....you could use that as a starting pointfor your research......consider taking 2 nights to read Brian McNivens "concise guide to value investing" and you should be on track...

Get advice, but initially stick to companies with consistently high and stable or increasing ROE, no history of capital raising unless hugely profitable, low debt or preferably no debt, strong and increasing cash flows and profits.....

I personally hate managed funds but if you are truly lazy and want to toatally avoid any managment / research, most advisors will steer you that way for good reason.....

Most advisers will steer you that way to get the commissions so if they do be sure to ask about no up front fee or low up front fee/ fee refund managed funds.......the advisor will still get there trailing fees for many moons anyway...
A thing to note is during the GFC nearly all managed funds suffered big losses, compounded by the fact they had to sell out and restructure while shares where down, and hence value evaporates for the long term holders...also in managed funds they have a huge habit of stop pauing distributions during corrections, which is exactly when you want them to reinvest while prices are cheap....

Do yourself a favour and do some learning......you will never regret it...
Why bother learning for 13 years of school, training in a trade or uni for 4-6 years to earn and then not know how to manage your hard earned money.....
I see doctors and lawyers who do this regualarly and they are just as poor today as they where they day they started work 20 years ago....
yet here I am on average wages and I soon will have structures that provide me ample money for life before age 40....why, cause I bothered to learn about investing......I never once got lucky, I took claculated risks and made some financial sacrifices.....and with this came great rewards and continued learning...mistakes become your best friends in the future...
When you know what your doing corrections and downturns are your absolute best friend...they provide buying opportunities that accellerate your wealth beyond what seems possible...

Thiose who learn how to shop for things that go up in value inevitably end up very rich...

So please put in some time , its well worth it...

 

[jono1887]

From what you've said, I'd think shares are not for you. Forget about it. Put your money elsewhere.

Perhaps a managed fund would be more appropriate.