Newbie Lessons - All your questions answered

[Zaxon]

thanks for the reply I would say im a value investor

A value investor is someone who buys a company because the value it's currently trading at is far cheaper than what it's actually worth. So step 1 is to work out how you want to calculate the "true" value of a company. Look at P/E, Price to Book, Discounted Cash Flows etc. The modern guru of value investing is probably Warren Buffett. That should give you something to read about.

I wouldnt mind learning more about trading. From what i can make out so far its a hell of a lot like gambling.

Trading can be very risky if not done right. Traders really need to be focusing on risk management: position sizing, stop-losses, drawdowns etc, much more so than a longer term investor. Although these are good skills to have for everyone, they're essential to have as a trader.

 

[Ann]

Trading can be very risky if not done right. Traders really need to be focusing on risk management: position sizing, stop-losses, drawdowns etc, much more so than a longer term investor. Although these are good skills to have for everyone, they're essential to have as a trader.

Excellent advice Zaxon!

A good grasp of charting is also essential in my opinion. Learning the basics of charting and the indicators is incredibly important unless you want to be at the mercy of the markets.

Otherwise it is a simple gamble. Only fools gamble when there is a better way.

 

[93Ceaudist]

Hi All,

I mentioned that I was thinking of doing this in a blog to help out all the newbies who seem to have lots of questions that are constantly repeated. I'll slowly work on this when I have time - At the moment I think I have about ten chapters planned - but I'd appreciate anyone else's input, comments, pedantic spelling corrections, flames - whatever - feel free to contribute, and for the newbies - if something isn't clear PLEASE ask - because I want to make this as newbie friendly as possible.


Budgeting - the foundation of financial independence.

It's generally been my experience that there seems to be a lot of people who hit their thirties and then start to wonder about this creature called "financial security". They start to wonder about things like Mortgage and kids and unexpected financial events in their life and really start to think about how do I get financially comfortable when these events happen? A great many people live hand to mouth and live for the moment, rather than planning ahead and end up realizing when it is almost too late that they haven't planned for their future.

Let me make this point clear. ANYONE can retire very comfortable. It doesn't matter what your income level is, your level of education, whether you went to a private school or any other factors - all it takes to become financially independent is 1) Self Discipline and 2) A small amount of Knowledge.

The average Australian will earn approximately 1.8 million dollars during an average working life. For every Australian working today 8% will become "Financially Independent" when they retire. (we'll talk about this definition in a second). Out of 100 people aged 15 today, by the age of 65

38 will be deceased
38 will be living in poverty
16 will still be working
7 will be retired on a livable income
and 1 will be wealthy.

The way that the ABS (Australian Bureau of Statistics) defines "Livable income"? - In retirement your income is 60% or greater of your last year's pay. "Wealthy" is defined as your retirement income is greater than 80% of your last years pay. Yet with just a small amount of information and self discipline - those numbers could be MUCH better.

So with those scary numbers in front of you lets talk about budgeting, because budgeting really is the foundation upon which you will build your financial security in the future.

Most people think that they know how to budget. My income is x my expenses are y, if I take y from x and end up with a positive number - I'm good. Unfortunately proper budgeting has a bit more to it than that. You should sit down with a full years worth of expenses in front of you and then classify these expenses as Vital, Necessary or Lifestyle expenses. You then take these expenses and work out how much that means from your periodic wage (Eg monthly, fortnightly, weekly).

Of course your expenses are not nice and neat and broken down into discrete periods that match your pay packet. You'll tend to get periods that are expenses heavy when your car rego, rates notice, insurance bill etc etc all happen at once. These events need to be planned for by allocating funds towards them out of your periodic pay packet.

It's as simple as creating a control account (which is what you ACTUALLY have as disposable income after you've paid ALL your expenses rather than what your current bank balance happens to be. If there are expenses that you can plan for, (EG you want to spend $500 on Christmas presents for the kids this year) - you allocate this an an expense in your control account, and work towards it slowly over time.

You'll soon find that when you are aware of all your expenses, your ability to save money will be greatly enhanced. But here is where the self discipline I mentioned previously (and the little bit of knowledge) come in.

Self discipline - There's money in the bank - damn that 52 inch plasma TV looks good doesn't it? Or how about that day spa package in the Hinterlands eh? Oo can I pimp the car out with a tight car stereo system?

Knowledge - So we need to apply some self discipline and some rules to our disposable income. Ready? here we go...

Budgeting Golden Rule number 1
Pay yourself FIRST - For every dollar that you receive - you should put 10% aside for future investment. This should be classed as a VITAL expense in your budget.

Why? Because of the benefits of compounding and the advantages of leverage. If you know exactly what your expenses are and what your disposable income is (after rule 1), you can (subject to adequate security), through the advantages of leverage support a proportionally higher share portfolio. Every $1 dollar saved can be worth if properly and safely structured $4 each year and every year, year after year after year.

I'm not going to add the famous example of which you would rather receive. A million dollars today, or $1 doubled every day for a month. For those of you interested you can look it up, it basically shows you the power of leveraging and brings you to the important realization that compounding effects are greater over longer time frames.


Budgeting Golden Rule 2)
If you want it - plan for it - Don't impulse buy and don't go into debt for something that depreciates in value.

Pretty simple rule - amazing how often people don't follow it. Keep rule 1 firmly in your head at all times and realize that every dollar saved is worth far more in the future.



I'm going to stop here and see what comments and questions arise and finish with the following...

A Budget is not and end in itself, rather it is a means to an end and its' purpose is to

A) allow a prudent access to a small amount of cash flow, and
B) to provide a leveraged exposure to income producing appreciating assets

Realize that through compounding that the increasing cashflow from the assets will eliminate the need for budget surpluses over time and ADD to your disposable income.

Sir O


EDIT -
Dear Newbies,

If you have a question in relation to this thread - please ask me in the thread rather than PM'ing me. I have limited amounts of time each day and if one of you ask's a question, there will undoubtedly be others with the same question.

I don't want you pished at me by copying your private message to me into the thread, so ask me here please.

Si

Hi All,

I mentioned that I was thinking of doing this in a blog to help out all the newbies who seem to have lots of questions that are constantly repeated. I'll slowly work on this when I have time - At the moment I think I have about ten chapters planned - but I'd appreciate anyone else's input, comments, pedantic spelling corrections, flames - whatever - feel free to contribute, and for the newbies - if something isn't clear PLEASE ask - because I want to make this as newbie friendly as possible.


Budgeting - the foundation of financial independence.

It's generally been my experience that there seems to be a lot of people who hit their thirties and then start to wonder about this creature called "financial security". They start to wonder about things like Mortgage and kids and unexpected financial events in their life and really start to think about how do I get financially comfortable when these events happen? A great many people live hand to mouth and live for the moment, rather than planning ahead and end up realizing when it is almost too late that they haven't planned for their future.

Let me make this point clear. ANYONE can retire very comfortable. It doesn't matter what your income level is, your level of education, whether you went to a private school or any other factors - all it takes to become financially independent is 1) Self Discipline and 2) A small amount of Knowledge.

The average Australian will earn approximately 1.8 million dollars during an average working life. For every Australian working today 8% will become "Financially Independent" when they retire. (we'll talk about this definition in a second). Out of 100 people aged 15 today, by the age of 65

38 will be deceased
38 will be living in poverty
16 will still be working
7 will be retired on a livable income
and 1 will be wealthy.

The way that the ABS (Australian Bureau of Statistics) defines "Livable income"? - In retirement your income is 60% or greater of your last year's pay. "Wealthy" is defined as your retirement income is greater than 80% of your last years pay. Yet with just a small amount of information and self discipline - those numbers could be MUCH better.

So with those scary numbers in front of you lets talk about budgeting, because budgeting really is the foundation upon which you will build your financial security in the future.

Most people think that they know how to budget. My income is x my expenses are y, if I take y from x and end up with a positive number - I'm good. Unfortunately proper budgeting has a bit more to it than that. You should sit down with a full years worth of expenses in front of you and then classify these expenses as Vital, Necessary or Lifestyle expenses. You then take these expenses and work out how much that means from your periodic wage (Eg monthly, fortnightly, weekly).

Of course your expenses are not nice and neat and broken down into discrete periods that match your pay packet. You'll tend to get periods that are expenses heavy when your car rego, rates notice, insurance bill etc etc all happen at once. These events need to be planned for by allocating funds towards them out of your periodic pay packet.

It's as simple as creating a control account (which is what you ACTUALLY have as disposable income after you've paid ALL your expenses rather than what your current bank balance happens to be. If there are expenses that you can plan for, (EG you want to spend $500 on Christmas presents for the kids this year) - you allocate this an an expense in your control account, and work towards it slowly over time.

You'll soon find that when you are aware of all your expenses, your ability to save money will be greatly enhanced. But here is where the self discipline I mentioned previously (and the little bit of knowledge) come in.

Self discipline - There's money in the bank - damn that 52 inch plasma TV looks good doesn't it? Or how about that day spa package in the Hinterlands eh? Oo can I pimp the car out with a tight car stereo system?

Knowledge - So we need to apply some self discipline and some rules to our disposable income. Ready? here we go...

Budgeting Golden Rule number 1
Pay yourself FIRST - For every dollar that you receive - you should put 10% aside for future investment. This should be classed as a VITAL expense in your budget.

Why? Because of the benefits of compounding and the advantages of leverage. If you know exactly what your expenses are and what your disposable income is (after rule 1), you can (subject to adequate security), through the advantages of leverage support a proportionally higher share portfolio. Every $1 dollar saved can be worth if properly and safely structured $4 each year and every year, year after year after year.

I'm not going to add the famous example of which you would rather receive. A million dollars today, or $1 doubled every day for a month. For those of you interested you can look it up, it basically shows you the power of leveraging and brings you to the important realization that compounding effects are greater over longer time frames.


Budgeting Golden Rule 2)
If you want it - plan for it - Don't impulse buy and don't go into debt for something that depreciates in value.

Pretty simple rule - amazing how often people don't follow it. Keep rule 1 firmly in your head at all times and realize that every dollar saved is worth far more in the future.



I'm going to stop here and see what comments and questions arise and finish with the following...

A Budget is not and end in itself, rather it is a means to an end and its' purpose is to

A) allow a prudent access to a small amount of cash flow, and
B) to provide a leveraged exposure to income producing appreciating assets

Realize that through compounding that the increasing cashflow from the assets will eliminate the need for budget surpluses over time and ADD to your disposable income.

Sir O


EDIT -
Dear Newbies,

If you have a question in relation to this thread - please ask me in the thread rather than PM'ing me. I have limited amounts of time each day and if one of you ask's a question, there will undoubtedly be others with the same question.

I don't want you pished at me by copying your private message to me into the thread, so ask me here please.

Sir O

I've learned a lot Sir O. Thank you very much. I'm looking forward to read useful information from you soon.

 

[Max23B0]

the strategy looks good but is it proven ?

 

[georgehend]

Hi, I'm wondering if someone can help me understand why my shares today with GEAR on the asx are apparently down when they started off at 13.840 and ended the day at 14.360 according to commsec. GEAR shares today were -$0.330 when I look at my portfolio on commsec

Am I missing something?

 

[peter2]

Yes you are missing something. A stock's up or down result is measured using the previous closing price not the open price. GEAR closed last night at $14.69 and today's close was 0.33 lower at $14.36.

 

[Black Eugene]

Not sure if there is a 'spot' for new questions...recently given some share options and not entirely sure whether or not to "exercise" them.....Everything I google about options comes up with PUT and Call options....
What are the pros and cons of options? Are they worth pursuing? How to I turn them into full shares?

thanks in advance

 

[Chronos-Plutus]

Not sure if there is a 'spot' for new questions...recently given some share options and not entirely sure whether or not to "exercise" them.....Everything I google about options comes up with PUT and Call options....
What are the pros and cons of options? Are they worth pursuing? How to I turn them into full shares?

thanks in advance

You can buy CALL options on the ASX market, for particular stocks. If you want to take more risk/leverage, you can look at the trading houses that offer their platforms to trade through, but you will not get the underlying asset.

 

[Black Eugene]

You can buy CALL options on the ASX market, for particular stocks. If you want to take more risk/leverage, you can look at the trading houses that offer their platforms to trade through.

Thanks for the prompt reply the 'options' in question are KAIOG I just want to know how to convert them to full price shares or if it's even worth doing before the exercise date???
Or am I completely wrong

 

[Chronos-Plutus]

Thanks for the prompt reply the 'options' in question are KAIOG I just want to know how to convert them to full price shares or if it's even worth doing before the exercise date???
Or am I completely wrong

Name of the company?

Who are they?

What do they do?

What resources are they in?

Have they got a JORC?

Have they got a long-term plan?

Who are the directors?

What is the country that they are in?

Which millionaire/billionaire is backing them?

 

[Black Eugene]

ASX : KAI. Kairos Minerals shares

Junior Gold Explorers (?)

Their shares have risen steadily since I have owned them, might be pump and dump but I have got my investment back and made some money so they don't owe me anything, but feel they might still go up further

 

[peter2]

@Black Eugene If you hold KAIOG company options you'll need specific advice in order to know what you may do with them.
I assume these options have a strike price of 0.025 and the expiry is Dec 31, 2021.

I notice that many KAIOG options have already been exercised recently (KAI news). This is because the share price of KAI is now comfortably above the strike price of these options.

You would have got some information when you were given or bought these options. Please read it. If you want to know more please ask the KAI company secretary. They must provide information like this. It would be wrong for me to provide any advice without knowing the exact details of the company options you hold.

 

[Black Eugene]

@Black Eugene If you hold KAIOG company options you'll need specific advice in order to know what you may do with them.
I assume these options have a strike price of 0.025 and the expiry is Dec 31, 2021.

I notice that many KAIOG options have already been exercised recently (KAI news). This is because the share price of KAI is now comfortably above the strike price of these options.

You would have got some information when you were given or bought these options. Please read it. If you want to know more please ask the KAI company secretary. They must provide information like this. It would be wrong for me to provide any advice without knowing the exact details of the company options you hold.

Thanks for the heads up and mini lesson on éxerciseable' options.........will send a message to KAI requesting info

 

[Timejumper]

Hi everyone
It is a mine field out there.
Can anyone tell me the best trading pattform for trading CFD's of the ASX stocks
I was using CMC many years ago and ready to re-active the system I have.

 

[rayb10]

Hello, First post here and have a newbie question about Depth of Market analysis using the Trading View charts and the Depth order book in Superhero broker.

This is the first time I am trying to analyse the DOM and really need some guidance on how to interpret it. I have two Order Books available to me - Tradingview DOM which only gives one figure for the buy and one for the sell column (I assume that number is the total of all orders in the book but could be wrong). (see fig 1) I am not connected to a tradingview broker as I'm not too keen on the ones they offer (not Aussie friendly).

Can someone confirm that fig 1 below shows a larger DEMAND number that therefore has more BUYING pressure and the prices should RISE. Am I looking at it too simply??

Fig 1 from tradingview chart


The second image is from Superhero Broker and I have absolutely NO IDEA how to interpret the Order book below. Hopefully someone can analyse it for me and give me some insight.

Fig 2 - from Superhero - What does this show - More Supply or Demand ?? - Will prices likely to rise or fall based on this order book?



Hopefully someone can enlighten me on this.

Ray

 

[peter2]

MD is a snapshot that can change very quickly when the market is open.

In Fig 1. the bid number is lower than the number offered, therefore we can assume for this moment that supply is larger than demand.

In Fig 2. Looking at the top line there is more supply than demand. A seller with 23K shares to sell is very likely to grab those on the bid (left) before they disappear. A seller with 100K may wait for more buyers but risks selling them at a lower price.

Adding the top 5 lines indicates that there is more demand than supply (at this moment). The large number for sale at 0.15 shows supply at this level. This needs to be overcome or withdrawn for price to go higher.

 

[peter2]

Numbers like this indicate that demand is greater than supply, but this doesn't mean the price will go up immediately. It's probable that price will go higher but not right now. I prefer to have figures like these rather than the opposite when buying.

(WHK)

 

[Austwide]

IMO market depth means very little.
I've seen buyer sell ratios of over 10 x buyers to seller and the price still falling

It can give an indication if a price is rising or falling at a given moment by watching if buyers or sellers are reducing at a given price.

But overall if I bid for 50.000.000 million shares at a stupid price low price, depth will show a lot of buyers but no impact on price.
As a guide, prices within 5 - 10% of last traded are serious bids excluding rapidly moving prices.

 

[rayb10]

Hey thanks heaps Peter2 and Austwide. That makes a lot of sense. I suspected that the DOM is not that useful unless I wanted to trade on the very short timeframes (which I don't). It does seem only to reflect a moment in time and if an unknown trader comes in wanting a large volume of shares to buy or sell then it would change instantly and the numbers displayed wouldn't mean much.

I would assume there would also be a "How much I want these shares bought or sold" variable too. The stronger the intent to buy or sell the more flexible the price I suppose.

Thanks for your insight guys and I can now cross this one off my "To Learn" list

 

[peter2]

Additional research on the topic will lead to Order Flow trading. This is an advanced topic and is a very specialised trading style. Further research leads to volume and market profiling. These are chart based technical analysis subjects.