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Newbie Lessons - All your questions answered

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youngone said:
Hi Sir O.

Im a newbie here and i do have alot of questions.

So, what is ASX300. my understanding of it is that, companies listed in the ASX300 have huge amount of investors and are a term long stock (blue chip) eg.

thanks for reading.
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The ASX300 is the 300 largest stocks in our market by capitalisation (size) as such they tend to be where the marjority of institutional investors will park money in our market. They do not meet my criteria of "blue Chip" however unless they meet certain other conditions. There is no defination of Blue Chip - so you need to think not just about which index a stock appears in but what other characteristics they exhibit.

Regards

Sir O
 
Thanks Sir O.

Another silly question.

I am a student working part time, have recently saved up about $600. What is your advise on buying shares?

Should i save up till i have a little bit more $1000+ or should i just buy the shares asap? I dont think the $600 sitting in my saving is giving me much interest and i would rather see it make a small killing in the market.

Pros and con, thanks.
 
Youngone, If you have your $600 in an ordinary savings a/c take a look at:
http://www.infochoice.com.au/
There are online at call accounts where you can get >6%

I'd suggest you save at least $1000. Brokerage on $600 will make a hole in your investment.

Good on you for saving and thinking about investing. All the best.
 
youngone said:
Thanks Sir O.

Another silly question.

I am a student working part time, have recently saved up about $600. What is your advise on buying shares?
Click to expand...

Hi youngone - according to the rules on this website I am not allowed to provide advice to you. I do not know your specific circumstances, ergo I do not fulfill Know Your Client obligations under the legislation.

That said, you need to decide for yourself if shares is the right asset class for you. With such a small amount of money you only have just enough for a marketable parcel of shares. I would follow Julia's lead and see if those funds can be made to work harder for you whilst you learn. I always encourage people to learn first so kudos on reading this forum and gaining more information.
Should i save up till i have a little bit more $1000+ or should i just buy the shares asap? I dont think the $600 sitting in my saving is giving me much interest and i would rather see it make a small killing in the market.

Pros and con, thanks.
Click to expand...

Pro's and con's are personal - you would do well to research and discover the pro's and con's yourself.


Cheers

Sir O
 

Thanks Sir O and Julia

Well i have been making a killing in the market. Its not much, its been a successful snail trial. My current portfolio sized has increased by 20% giving me confidence to jump in the market with my saving.

I recently bought SSN (.092) valued at $500, its current market value is at $1000. im so happy 100% profit!
 

just from another newbie:
some things you might want to consider:
although you want to make a killing there is also the possibility you'll lose it, so regardless of circumstance, the main question is "can you afford to lose it?"

another point that was raised earlier is that the brokerage is usually about $30 per transaction so something else to think about esp if you plan on making a number of purchase and sales...

and of course you should read all of SirO's epic of newbie information (which i warn, WILL turn your brain into mush if you plough through it )

good luck!! =)
lots of supportive people here!!
Sir O and Julia among many!
 

Congratulations!

I would now go read the "when do I sell thread" by Chaosi

Cheers

Sir O
 
Hi All,

I am new to this forum and very new to shares and investments. I knew that I had to invest my hard earned money to make it work harder for me but I have been very busy for last couple of years in my professional life and didn't think I had enough time and energy to get into Investing.

Thankfully I am in not so busy phase of my work and have enough time to spend on learning. I may be about 6 months away from getting very busy again. My target is to study and do some self learning during this time and come up with a

1) My Investment Plan
2) Risk management strategy

Do you guys think that it is enough time to get fundamental understanding of various investment options?

Do you think I have a chance to make an entry into the market in this time frame? It doesn't matter how small my first investment is, it’s mainly to get my hands dirty.

My first step is to buy some books. Any suggestions on anything to add or remove?
List of Books I am planning to read.(My first investment)
=====================================
1) The Intelligent Investor: The Definitive Book on Value Investing. A Book of Practical Counsel by Jason Zweig and Benjamin Graham
2) The (Mis)behavior of Markets by Benoit Mandelbrot and Richard L. Hudson
3) Against the Gods by Peter L. Bernstein
4) The Seven Deadly Sins of Investing: How to Conquer Your Worst Impulses and Save Your Financial Future by Maury Fertig
5) Stan Weinstein's Secrets For Profiting in Bull and Bear Markets
6) Reminiscences of a Stock Operator (Wiley Investment Classics) by Edwin Lefèvre
7) How I Made $2,000,000 in the Stock Market by Nicolas Darvas
8) Trading for a living by Alexander Elder
9) Trade Your Way to Financial Freedom by Van Tharp

Thanks Sir O, Julia and other for the contribution on this thread

Cheers,
Sri
 
Thanks for your quick reply.

You seem to have a fine attitude, though I sense some trepidation, (else you would just do it)
Click to expand...

I would actually agree with you. I guess that's understandable when you are entering an unknown territory

Cheers
Sri
 
luckyforteja said:
... Do you think I have a chance to make an entry into the market in this time frame? ...
Click to expand...

It takes time to get a broker, some documents need signatures, thence snail mail.
With some brokers you may need a little time to transfer funds to a trading account.

If you have already done that, you're right to buy.
And the moment you buy they are yours to sell or to hold.

Good Luck!
 
Hi All,

Was hoping to get some opinions and advice about careers in economics/finance and what sort of jobs are out there. I realize this is a very broad question however apart from maybe being a broker or accountant, I am not really sure just what sort of jobs are out there and what potential career has the best opportunities to rise and earn greater rewards.
Any sort of book or perhaps somewhere I can browse further would be much appreciated in my search for a career in the financial sector or similar areas.
Thanks
 

Rather broad indeed. My advice is to volunteer at an accounting firm or a finance institution. See the day to day activities and the running of the place, and the stress you might encounter.

Sure you can simply ask people in the profession, but I found was that what people thought and how they really felt about their profession were sometimes two very different things.
 
burglar said:
Hi youngone,
Is this in reference to PEN sp ?
Click to expand...

Possibly. I have been watching PEN forum continuously quite a bit. Its like a party in that forums, dramas, hormone level building building up, you can feel the tension, the love, jealousy, and hatred. Its like a party everyday!

I was a former PEN holder, all that racket in there is priceless and highly entertaining. Im waiting for an opportunity to get back in PEN. anyone a PEN holder here?
 
Ok Time for a long-overdue lesson.

Economic Cycles and how to spot them

Our market is cyclical. CYCLICAL. As is every market. Do not delude yourself that somehow this current market is different. Do not listen to the crowing of a broker who spouts rubbish about supercycles and how the emergence of China will create a cycle that will last for twenty years. (I heard this at the tail end of the last cycle) Do not listen to those that say "We are different". We are the same as everyone else because the things that drive us are the same. Therefore the market goes through periods of boom and bust. NEVER THINK OTHERWISE.

Historically our market is rising roughly 80% of the time and during this time we are all gods. It's easy to make money when the market is rising. It is however the 20% of time that tends to kill people. This is where the cowboys and those that have let the excitement and emotion of the bull run lead them into disaster as we approach the inevitable correction. Every cycle there will be someone who thinks that the conditions that we see now are going to stay around, (or that the correction won't be bad). This is where the Storm financials, the Opus Primes, the Tricoms, lose money and destroy wealth for their clients. They do NOT understand the principle of the economic cycle and how to use this to their advantage.

So the biggest question is How do you tell when everything is about to go pear shaped? What are the signals? What do I look for to know when it's time to liquidate or protect my share market assets?

Economic Clock


If you do a search for Economic Clock you'll get images like those I have attached above (hopefully). The Economic clock dates back to the 1930's where it was proposed as a forecasting methodology by English Economists and released in the London Evening Standard as a series of articles. The basic theory is that certain events which are:

a) Easily recognizable; and
b) highly correlated;

will allow you to ascertain at which point of the broader economic cycle we currently sit. Theoretically if you know where we are in the cycle, you know which asset class in a broad sense is the correct one to invest in for an optimal investment. Each event is related to the previous event. Each previous event causes the following event to occur. It's Cause and Effect, but in a cycle of events that roll around and around in a never ending cycle.

You'll note some differences in the two diagrams I attached, even though the basic principals of one event following another event in a series remains intact. This is where the theory gets subjective and it's subjective because we are dealing with a mechanism that is attempting to take a complex aggregation of factors and deliver them to you in a simple easy to understand diagram. The clock does not tell good time. The clock is an imperfect and generic indicator - but is still a valuable tool, particularly for analysing the market over the longer term.

The clock is a simple representation of a complex aggregation and there are differences between the interpretation of the theory because each cycle is an aggregate of several different cycles, with each of these individual cycles having their own characteristics in terms of length, midpoint and amplitude (depth or height). Have a look at the wave below to see what I mean.



Imagine that the wave represents that of the interest rate cycle. This wave will be highly correlated yet different to the wave representing the currency cycle. It's only when these two waves move in combination with each other that the effects will be felt. In terms of the broader economy there are 14 different cycles that are correlated to a greater or lesser extent. It's only when all these cycles move in a negative aggregate direction that our economy as a whole moves into a corrective pattern. Where academics and economists differ is where this cycle of events starts and finishes. Where exactly on the circle do you point to an arbitrary position and say "this is the start of the cycle". It's a cycle...it never ends..hence the differences in the two diagrams and the differences between academics.

I like to conceptualise the 12 o'clock position as being the peak of the share market cycle, and the six o'clock position as the start of the new cycle. From 12 to 6 the market is falling, and other asset classes are more appropriate to invest in.

Note that because it is an aggregate of a bunch of individual cycles, each time the cycle rolls around, it looks different. Some cycles are 5 years in length, some cycles have been 14 years in length with the long-term average of the cycle 7.8 years.

The important thing to remember is that the sequence of events around the outside of the clock is always consistent. Yes they look different each time but the major events (or the signposts if you will) stay the same every cycle. The sequence is consistent.

Now I'm going to add a layer to make the concept a little bit more complex for you. Global economies are correlated. They synchronise their clock's, but they aren't perfectly synchronised. Larger economies tend to lead and smaller economies tend to lag. Australia makes up 1.6% of world economic activity. So we are a very small player. This is GOOD FOR US. Other economies lead the way into and out of booms and busts, meaning that we have a higher level of predictability in our market that the larger economies do NOT. We get an indication of what is to come for us, by looking at larger economies. This is the reason why I frequently rant at Australian Managed Funds because of their behaviour during the GFC. They could see what was about to happen in our economy and they did nothing to protect the assets in their control.

Ok I'm not finished but I have to stop here. I still need to discuss in detail the events around the outside of the clock, talk about confirming and conflicting data and what to look for at the start and finsih of the share market cycle. I'd appreciate it if we could keep the comments to a minimum until I get a chance to write that (which will be more than a day).

Cheers

Sir O
 
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