Newbie Lessons - All your questions answered

[MrBurns]

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.

Where did you get these figures from ?

 

[Semillon]

This thread is full of gold, thank you Sir O.

I would be very interested to hear your thoughts on long term investing, specifically potential dividend return vs potential capital growth.

I understand that your typical self funded retiree is more interested in the former since obviously they want an (somewhat?) reliable income to live on, however does that mean that the latter is inherently better for somebody who has a full time job?

My guess is that the situation is really not black and white and both should be taken into consideration by everyone, but perhaps the weightings will be skewed based on your circumstances and objectives...

 

[Sir Osisofliver]

Re: Newbie Lessons - Chapter Two - How to manage your Bank Manager (secrets from the

Sounds brilliant, but you still maybe better off paying your loan monthly.
The Time Value of Money concept needs to be taken into account - $100 now is worth more than $100 in the future.
In order to fully analyse the financial merit of one repayment scheme versus another, you really need to know what 'alternative uses' are available for your funds.
What opportunity do you lose by undertaking a particular course of action?

Ahh but it's even more complex than you think Ashaege. Because that opportunity cost you are talking about is also dependent upon what interest rates are doing. So tell me Ash, which is better, paying a larger amount of your mortgage now when rates are low, or paying a larger amount of your mortgage in the future when rates are higher?

Most mortgages at present are running between 5 and 6 percent depending upon whether you choose to fix your loan or not. The long term average however for loans runs closer to 9%, and there is a reasonable probability that we will return to this higher rate (and even exceed it over a thirty year period). When you start bringing this variable into the "opportunity cost" of paying off your mortgage sooner it can make things a) complex and b) pretty subjective. I could say I expect home lender rates will return to 9% within 3 years and provide reasons, whilst someone else says it will stay where it is for the next five years. I find it's simpler just to tell people to pay it off early in an economic cycle and draw their capacity at the end of the cycle.

Where did you get these figures from ?

I've already provided links to answer that question previously Mr Burns

This thread is full of gold, thank you Sir O.

I would be very interested to hear your thoughts on long term investing, specifically potential dividend return vs potential capital growth.

I understand that your typical self funded retiree is more interested in the former since obviously they want an (somewhat?) reliable income to live on, however does that mean that the latter is inherently better for somebody who has a full time job?

My guess is that the situation is really not black and white and both should be taken into consideration by everyone, but perhaps the weightings will be skewed based on your circumstances and objectives...

You're welcome.

I've previously mentioned on these boards what I do to create core portfolio's for long term buy and hold positions. If you search diligently you may find it. I use a set of rules for long term investing just as I do for shorter-term trading (although the rules are very different). Right now I can positively gear an equity portfolio...magic stuff. Doing it a fair bit using a portfolio based approach (ie what is the yield across the portfolio rather than a single stock)to create these types of portfolio's so dividend income is important for that kind of strategy. Over time those dividends increase and widen the gap between the interest expense and revenue generated.

Cheers

Sir O

 

[skyQuake]

...Modern Portfolio Theory among others. (by the way if you are curious and want a chuckle - and also learn something that they won't tell you about Harry Markowitz - go research what happened when Markowitz decided to try reality rather than academia.

Hi Sir O, would you happen to have a few links for suggested books for that? Can't seem to find any info about Markowit's investing.

On a side note, he mentioned in one of his recent interviews:

"Portfolio theory, as used by most financial planners, recommends that you diversify, with a balance of stocks and bonds and cash that’s suitable to your risk tolerance. Contrast this with Australian municipalities that put all their money into credit-default swaps. They’re bankrupt. That’s why we need to be diversified."
http://moneywatch.bnet.com/investing/article/harry-markowitz-getting-ready-for-recovery/277144/

What? Which Australian Municipalities?!

 

[Sir Osisofliver]

Hi Sir O, would you happen to have a few links for suggested books for that? Can't seem to find any info about Markowit's investing.

On a side note, he mentioned in one of his recent interviews:

"Portfolio theory, as used by most financial planners, recommends that you diversify, with a balance of stocks and bonds and cash that’s suitable to your risk tolerance. Contrast this with Australian municipalities that put all their money into credit-default swaps. They’re bankrupt. That’s why we need to be diversified."
http://moneywatch.bnet.com/investing/article/harry-markowitz-getting-ready-for-recovery/277144/

What? Which Australian Municipalities?!

WHOOPS!

SkyQuake that's a major whoops on my behalf. Comes from too many bloody names in the finance industry. It wasn't Markowitz that lost his shirt in the market back in the '90's but Scholes and Merton (both Nobel prize winners as well) the company was Long-Term Capital Management running out of Wall Street, went kablooey in 1998 after the Ruskies defaulted on their bonds and was bailed out and taken over.

Look for those names - you should be able to find something.

Once again my apologies If you've been searching for Markowitz losing his shirt...

Cheers

Sir O

 

[awg]

Re: Newbie Lessons - Chapter Two - How to manage your Bank Manager (secrets from the

You pay exactly the same over the course of a year.[/B]

Now ask yourself why would they do that? Go ahead - ask your bank manager (and remember that he'll use sales techniques against you) you probably won't get the REAL answer.... Here it is.

There is 52 weeks a year, 26 fortnights a year...but only 12 months. So by choosing to pay fortnightly (AND NOT AMORTISING THE PAYMENTS) you are in effect making 13 months of payments in a year. You are making EXTRA payments (even though the difference to you is about the cost of a cup of coffee every fortnight).

By not amortising the fortnightly payments, over the course of a 30 year mortgage, you will make an additional 19 payments earlier than you would normally have done so, and save yourself...72 mortgage payments.

Wait 72??? How is that possible I hear you cry? Because when you start paying your mortgage - for the first decade or so when you make a payment, the largest portion of that payment is paying off the interest - not the principle. Extra payments reduce both the principle and interest portion of the loan - and hence you pay it off that much faster. Don't believe me? Go ahead ask your bank manager. I haven't found one yet who'll give me a straight answer - but they will all blush when they realize they have been caught out.

[

Thanks for all the info

Re: Amortisation

If it is standard for the banks to amortise fortnightly payments,

how easy is it to get the payments NON-amortised ?

I was not aware of the above, and will be rolling over an IP loan soon.

I pay my loan weekly.

I would have to check the contract to see whether payments are amortised, not that it matters much at this point in the loan, but it will be a learning exercise to see if I can spot the clause

Will hopefully ensure I can get the best deal at time to roll loan

 

[Sir Osisofliver]

Re: Newbie Lessons - Chapter Two - How to manage your Bank Manager (secrets from the

Thanks for all the info

Re: Amortisation

If it is standard for the banks to amortise fortnightly payments,

how easy is it to get the payments NON-amortised ?

I was not aware of the above, and will be rolling over an IP loan soon.

I pay my loan weekly.

I would have to check the contract to see whether payments are amortised, not that it matters much at this point in the loan, but it will be a learning exercise to see if I can spot the clause

Will hopefully ensure I can get the best deal at time to roll loan

Ask them for a monthly figure, then ask for a weekly and fortnightly figure...when the figures are different ask them why.

Have fun with the double-speak.

Tell them it's too confusing and ask them to provide you with a written example.

When they balk ask them how much they want your business.

When you have your examples ask them to calculate the term of the loan using weekly,fortnightly and monthly non amortised figures.

When the period for the weekly and fortnightly non amortised payments is less ask them why they didn't advise you to do this in the first place...

Laugh when they blush.

Have fun.

Cheers

Sir O

 

[awg]

Re: Newbie Lessons - Chapter Two - How to manage your Bank Manager (secrets from the

Ask them for a monthly figure, then ask for a weekly and fortnightly figure...when the figures are different ask them why.

Have fun with the double-speak.

Tell them it's too confusing and ask them to provide you with a written example.

When they balk ask them how much they want your business.

When you have your examples ask them to calculate the term of the loan using weekly,fortnightly and monthly non amortised figures.

When the period for the weekly and fortnightly non amortised payments is less ask them why they didn't advise you to do this in the first place...

Laugh when they blush.

Have fun.

Cheers

Sir O

Thanks for the speedy reply,

now that you will be paid hourly rate, send me the invoice by PM

I did this at the start, and the difference over fortnightly versus monthly was, ( and I go from memory here), was a reduction of 4 yrs on a 25yr loan via a saving of around $50k...on a sub $200k loan!

However, when I inquired as to what the advantage was going weekly, I was puzzled as to why, too my memory, they said there would be no difference.

Maybe that was the reason. (amortisation)

I will prepare to negotiate in a more detailed manner this time, ( partially thanks to yr post)

trouble is, when you speak to the call centre staff, they are not well informed, which makes it a pain.

Have you got any opinions about the usefulness of mortgage brokers?

I have found them to be helpful in the past.

 

[Sir Osisofliver]

Re: Newbie Lessons - Chapter Two - How to manage your Bank Manager (secrets from the

Thanks for the speedy reply,

now that you will be paid hourly rate, send me the invoice by PM

I did this at the start, and the difference over fortnightly versus monthly was, ( and I go from memory here), was a reduction of 4 yrs on a 25yr loan via a saving of around $50k...on a sub $200k loan!

However, when I inquired as to what the advantage was going weekly, I was puzzled as to why, too my memory, they said there would be no difference.

Maybe that was the reason. (amortisation)

I will prepare to negotiate in a more detailed manner this time, ( partially thanks to yr post)

trouble is, when you speak to the call centre staff, they are not well informed, which makes it a pain.

Have you got any opinions about the usefulness of mortgage brokers?

I have found them to be helpful in the past.

Who pays the Mortgage Brokers fees?

Is it a) The bank - we know they love to spend money.

or

b) You

I've used Mortgage brokers in the past - but only when I don't have the time personally to deal with the banks.

Cheers

Sir O

 

[awg]

Re: Newbie Lessons - Chapter Two - How to manage your Bank Manager (secrets from the

Who pays the Mortgage Brokers fees?

Is it a) The bank - we know they love to spend money.

or

b) You

I've used Mortgage brokers in the past - but only when I don't have the time personally to deal with the banks.

Cheers

Sir O

I used them in the past, cause I was too busy, and lacked the time and knowledge.

I have more time and knowledge now.

I will do my own research, including websites where the mortgager bids for MY business.

I used a mortgage broker, to do a really drawn out deal on a property development.

When I sold up and cashed the loans, the credit provider clawed back the brokers commission.

He wrote me a nice letter, explaining what had happened, and said that I could throw it in the bin, or send him a cheque for what I thought he was worth.

I did the latter

 

[andygunn]

Hi all... I am newbie in stock trading... I wish I am posting in the correct thread...

I opened an account with CommSec last week, and I noticed something about Issuer Sponsored Holdings and CHESS Participant Sponsored Holdings.

My question is:
1. Does CHESS tie into my CommSec account? E.g. everytime I buy shares, it will automatically be CHESS sponsored.
OR
Does CHESS tie into every shares that I buy? E.g. initially, when I buy shares, those shares will be Issuer Sponsored. What I need to do to make it CHESS sponsored is to transfer those shares to CHESS.

2. In CommSec, to be able to use trading tool, I may need to be CHESS sponsored. Is that the only advantage of CHESS sponsored?

Thank you

 

[kotim]

Sir OSIS, are you aware that when you apply for a loan from the bank to purchase a property that as part of the contract you assign power of attorney to them(bank) to allow them to create a promissory note in your name, which they then use as a deposit itself.

And generally speaking in finance when a promissory note is placed on deposit in an account it becomes CASH.

Just seeing how deep your knowledge is that all.

 

[Sir Osisofliver]

Hi all... I am newbie in stock trading... I wish I am posting in the correct thread...

I opened an account with CommSec last week, and I noticed something about Issuer Sponsored Holdings and CHESS Participant Sponsored Holdings.

My question is:
1. Does CHESS tie into my CommSec account? E.g. everytime I buy shares, it will automatically be CHESS sponsored.
OR
Does CHESS tie into every shares that I buy? E.g. initially, when I buy shares, those shares will be Issuer Sponsored. What I need to do to make it CHESS sponsored is to transfer those shares to CHESS.

2. In CommSec, to be able to use trading tool, I may need to be CHESS sponsored. Is that the only advantage of CHESS sponsored?

Thank you

page 3 post 43 has your answers

Cheers

Sir O

 

[Sir Osisofliver]

Sir OSIS, are you aware that when you apply for a loan from the bank to purchase a property that as part of the contract you assign power of attorney to them(bank) to allow them to create a promissory note in your name, which they then use as a deposit itself.

And generally speaking in finance when a promissory note is placed on deposit in an account it becomes CASH.

Just seeing how deep your knowledge is that all.

Kotim, next time I apply for a loan I'll check. I don't claim to be the fount of all finance knowledge, just know a few things... Of course if you have a few secrets please share them.

For example...what advantage do I get with the above?

Cheers

Sir O

 

[Australia]

SGP announced their estimated dividend distribution up to june 30 2009 on 16th June, record date is 30th June. I bought this shares on 17th June.

Will I get those dividends?

Comsec website says ex dividend date is today 24th June, and dividend paid is $ 0 . What is the difference of record date (30th June) and ex dividend date?

 

[Sir Osisofliver]

SGP announced their estimated dividend distribution up to june 30 2009 on 16th June, record date is 30th June. I bought this shares on 17th June.

Will I get those dividends?

Comsec website says ex dividend date is today 24th June, and dividend paid is $ 0 . What is the difference of record date (30th June) and ex dividend date?

Australia your question is a simple one, you are confused between the difference of a record date and an ex date.

The ex dividend date is the date that you must be on the registry to be entitled to the distribution. So if you purchased your SGP shares on the 17th of June, and the ex dividend date is the 16th of June, you are NOT entitled to the dividend. You would have to purchase the shares on the 11th of June (T +3 until settlement) to have been entitled if the share went ex dividend on the 16th.

(A quick check on ASX.com tells me that the Ex date of Stockland Group is the 24th of June, if you purchased on the 17th you should be entitled).

The record date is the date the the registry locks the records held on the register. This is your last chance to advise the registry of any changes to your details such as payment details, use of a DRP (Dividend Reinvestment Plan), address etc.

Simple really.

Cheers

Sir O

 

[Gordon Gekko]

A question I hope someone can help me out with is the following and it is based on allot of assumptions.

Im convinced that the US dollar will far further in the future as inflation takes hold due to government debt. If This happens gold should also increase as a flight safety.
So the question is wouldn't you buy international shares in gold miners valued in US$?
If gold does rise and the US$ does fall wouldn't you get more bang for you buck as compared to AUS shares.

Total newbie question, I'm sure I am missing something simple and as I said its based on allot of assumptions.

Thanks for the help!!!

G

 

[Sir Osisofliver]

A question I hope someone can help me out with is the following and it is based on allot of assumptions.

Im convinced that the US dollar will far further in the future as inflation takes hold due to government debt. If This happens gold should also increase as a flight safety.
So the question is wouldn't you buy international shares in gold miners valued in US$?
If gold does rise and the US$ does fall wouldn't you get more bang for you buck as compared to AUS shares.

Total newbie question, I'm sure I am missing something simple and as I said its based on allot of assumptions.

Thanks for the help!!!

G

GG I'm going to ignore your assumptions - they are YOUR assumptions after all, hopefully you have done your own research and have valid reasons for your assumptions.


So the question is wouldn't you buy international shares in gold miners valued in US$? If gold does rise and the US$ does fall wouldn't you get more bang for you buck as compared to AUS shares.

What are Australian Miners Valued in? If you ask this question Gordon you'll find that a great many "Australian" miners - especially those whose operations or a portion of their operations are overseas based, are already valued in USD.

You'll also find that many Australian Miners (because they don't want to be subject to fluctuation in currency rates) will hedge against this risk.

Once you can answer these two questions (what is the project currency and what is the level of Hedge), for your targets, then if you believe your assumptions are correct then you take advantage of them. Of course if your assumptions are wrong then it will go against you.

Cheers

Sir O

 

[awg]

Australia your question is a simple one, you are confused between the difference of a record date and an ex date.

The ex dividend date is the date that you must be on the registry to be entitled to the distribution. So if you purchased your SGP shares on the 17th of June, and the ex dividend date is the 16th of June, you are NOT entitled to the dividend. You would have to purchase the shares on the 11th of June (T +3 until settlement) to have been entitled if the share went ex dividend on the 16th.

(A quick check on ASX.com tells me that the Ex date of Stockland Group is the 24th of June, if you purchased on the 17th you should be entitled).

The record date is the date the the registry locks the records held on the register. This is your last chance to advise the registry of any changes to your details such as payment details, use of a DRP (Dividend Reinvestment Plan), address etc.

Simple really.

Cheers

Sir O

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The latest you can buy to be entitled to the dividend is in the closing matchout the business day before exdiv date.

Then the earliest you can sell to be still entitled to the dividend (provided that it was bought before exdiv date) is on the open matchout on exdiv day.

The important buy/sell dates for the dividend entitlement, is your buy/sell contract dates.....T3 settlement is irrelevant.
__________________
rozella

##############################################

Hi Sir O.

yr answer and this answer from a previous thread seem to be in conflict.

Can you please clarify

 

[nomore4s]

#################################################

The latest you can buy to be entitled to the dividend is in the closing matchout the business day before exdiv date.

Then the earliest you can sell to be still entitled to the dividend (provided that it was bought before exdiv date) is on the open matchout on exdiv day.

The important buy/sell dates for the dividend entitlement, is your buy/sell contract dates.....T3 settlement is irrelevant.
__________________
rozella

##############################################

Hi Sir O.

yr answer and this answer from a previous thread seem to be in conflict.

Can you please clarify

Rozellas post is correct. T3 is irrelevent - as long as the share is purchased before ex-div day you will receive the D/E. The record day is normally 3 days after ex div day so shares are settled by record day and you appear on the registry.