Questions from a stock market beginner

[tech/a]

Eight years ago or so I was asking my bank and an independent agent for investment advice. Both sold me products that return less profit than a standard savings bank account and I can’t get out of that before I’m 45. The only different to the independent agent, banks tend to recommend their own products in my opinion.
I will never ask these guys again, rather spend an hour each day teaching and informing myself.

To get to your question, I would choose the cheap online broker despite I’m a beginner as well but am not sure what is best for you.
Good luck!

In total agreence

 

[Garpal Gumnut]

Eight years ago or so I was asking my bank and an independent agent for investment advice. Both sold me products that return less profit than a standard savings bank account and I can’t get out of that before I’m 45. The only different to the independent agent, banks tend to recommend their own products in my opinion.
I will never ask these guys again, rather spend an hour each day teaching and informing myself.

To get to your question, I would choose the cheap online broker despite I’m a beginner as well but am not sure what is best for you.
Good luck!

+1

gg

 

[Sir Osisofliver]

Fantastic, that’s the info I was looking for

On this site it says the performance is calculated before fund management fees and expenses. In other words the .35% MER will weaken the gain even further.

My bolds.

This is something you'll find across all funds. They charge their expenses out of the fund performance, not within the ME as is a common misconception. $35m advertising campaign.... High rise address... Long boozy lunches with clients.... All of that comes out of your performance.

Oh and if the fund goes backwards... It comes out of your contributions.

Cheers

Sir O

 

[YMI]

This is something you'll find across all funds. They charge their expenses out of the fund performance, not within the ME as is a common misconception. $35m advertising campaign.... High rise address... Long boozy lunches with clients.... All of that comes out of your performance.

Oh and if the fund goes backwards... It comes out of your contributions.

Cheers

Sir O

Hi Sir O, thanks for your thoughts on the topic.

You’re so right, I compared the performance of the shares with their stated performance minus MER and there was still something missing – oh, is that a new Aston Martin in the manager’s garage

I try to imagine what you actually thought when you wrote that “OMG who on earth would waste their money in funds!” :freak3:
Well, I’m not a risk taker and despite of that I lost a lot of money, or better said I didn’t gain any although I owned a house for many years and one would expect property prices to always go up. Interested in anything that gains more profit than my bank account (3%) I was watching the stock market and a few days ago: ‘Apple reports record sales for the fourth quarter’. And I thought: ’lucky people who own some of those shares now’. But the value dropped by 10% - reverse logic!

What I’m trying to say is, I need more experience and in the meantime I think a fund will earn greater returns than my bank account and still be somewhat predictable.

Thanks again

 

[bailx]

Re: Questions from a beginner

SORRY BUT OPEN YOU EYES!@:confused::

 

[YMI]

What is the best strategy to sell shares on ex dividend day?

EXAMPLE: I expect the stock price to drop by $1 (amount of dividend). I want to sell as early as possible but if the price drops by more than $0.80 and I haven’t been able to sell, then I’d rather keep the shares.
The broker told me to simply place a limit order but I am worried this will result in the low limit price because many shareholders will try to sell at the same time...

And does it make a difference if I place the order as early as possible before trading hours?

 

[skyQuake]

What is the best strategy to sell shares on ex dividend day?

EXAMPLE: I expect the stock price to drop by $1 (amount of dividend). I want to sell as early as possible but if the price drops by more than $0.80 and I haven’t been able to sell, then I’d rather keep the shares.
The broker told me to simply place a limit order but I am worried this will result in the low limit price because many shareholders will try to sell at the same time...

And does it make a difference if I place the order as early as possible before trading hours?

Wouldn't make a difference. The stock will "gap" down on ex div date usually by the full div amount.
ASX is price then time priority. So again, it wouldnt make a difference when you put in your order.

 

[pixel]

What is the best strategy to sell shares on ex dividend day?

EXAMPLE: I expect the stock price to drop by $1 (amount of dividend). I want to sell as early as possible but if the price drops by more than $0.80 and I haven’t been able to sell, then I’d rather keep the shares.
The broker told me to simply place a limit order but I am worried this will result in the low limit price because many shareholders will try to sell at the same time...

And does it make a difference if I place the order as early as possible before trading hours?

for information about orders entered BEFORE the market opens, see this thread:
https://www.aussiestockforums.com/forums/showthread.php?t=11619

 

[YMI]

Wouldn't make a difference. The stock will "gap" down on ex div date usually by the full div amount.
ASX is price then time priority. So again, it wouldnt make a difference when you put in your order.

for information about orders entered BEFORE the market opens, see this thread:
https://www.aussiestockforums.com/forums/showthread.php?t=11619

Thanks for the great answers Sky and Pixel!

Wow is that hard to understand and I have to admit that I will need to read that a second time – and still probably don’t understand 100%.

I believe the opening/closing price is a kind of average of outstanding orders (for example my sell-at-limit order if I place that before the market opens). But only if there is an overlap in sell and buy demand.
In the case of ex dividend however, there will be very little demand for buying shares above the current price minus dividend. After all, the dividend just reduced the value of the company by exactly this amount.

So, as I understand, that will cause the “gap” down because there is simply nobody who wants to buy any shares more expensive.

This raises another question:
What is all the fuss about dividends?
Theoretically, wouldn’t the result be (almost) exactly the same if I sell on ex dividend day or on the day before?

 

[cbc1]

In general you don't pay tax on dividends. Pends on the type

 

[burglar]

What is all the fuss about dividends?

You appear to be looking for easy money.
No such thing, I'm afraid to say.

Getting back to dividends.
You collect them once or twice yearly,
in cash or in reinvestment (DRP).
This allows you to profit without need to sell your shares.
No Capital Gains Tax (CGT).

If you take cash, it's just income.
If you reinvest then you will discover compounding!
It is the strongest force in the cosmos.

From Sir O's thread:
https://www.aussiestockforums.com/forums/showthread.php?t=14370&p=396949&viewfull=1#post396949

Read about compounding:
http://www.investopedia.com/terms/c/compounding.asp#axzz2L3UeBBvR

Compounding will make you rich slowly.

 

[pixel]

Thanks for the great answers Sky and Pixel!
This raises another question:
What is all the fuss about dividends?
Theoretically, wouldn’t the result be (almost) exactly the same if I sell on ex dividend day or on the day before?

In general you don't pay tax on dividends. Pends on the type

Let me start my answer with another quote:
"In theory, there is no difference between theory and practice. In practice, there is."

Sure, on ex-div day, you will often find the share price drop by the dividend amount; sometimes a little less, sometimes even more. Influencing factors include, but are not limited to -

• How sharply has the share price risen during the last few days in anticipation?
• How does the size of the dividend relate to the average daily/ weekly volatility?
• Is the share generally in a rising or falling trend?

As an example, let's assume the share is in an uptrend with a daily trading range of 3%. In figures, that would mean it's trading between 99c and $1.02, or $5 and $5.15 - something not hard to find shares that do so. Now assume that the current dividend, including any franking credits, is 2% (2c for the $1 share, 10c for the $5 one). In that case, I would rather expect the dividend effect to create only a little blip on the chart, potentially dropping in the order of the dividend, but recovering within a few days to couple of weeks. If I were to hold that stock as a dividend-paying investment, I'd stay put and wait for the next dividend to add to my profit.

In contrast, take a share that has been in decline for weeks and will be paying a 1% dividend. Its daily trading range is around 3c, and a few days before ex-div it has held just above $1. You can bet that it will continue to drop after the ex-div date. For evidence, check the chart of NST. Can you find the date that 1c dividend has been announced?

 

[YMI]

In general you don't pay tax on dividends. Pends on the type

I guess that’s a point, tax can make a small difference, thanks.

You appear to be looking for easy money.
No such thing, I'm afraid to say.

Priority is actually not to be fooled too often by banks and other companies – it still happens quite regularly unfortunately. Easy money if possible, yes but it doesn't even come second.

Getting back to dividends.
You collect them once or twice yearly,
in cash or in reinvestment (DRP).
This allows you to profit without need to sell your shares.
No Capital Gains Tax (CGT).

If you take cash, it's just income.
If you reinvest then you will discover compounding!
It is the strongest force in the cosmos.

Compounding will make you rich slowly.

So the only advantage of dividends is no or less tax, right? Apart from that the outcome of a stock that pays no dividend and a stock that pays dividend and I reinvest would be the same, of course in theory only. Is that correct?

 

[YMI]

Let me start my answer with another quote:
"In theory, there is no difference between theory and practice. In practice, there is."

Sure, on ex-div day, you will often find the share price drop by the dividend amount; sometimes a little less, sometimes even more. Influencing factors include, but are not limited to -

• How sharply has the share price risen during the last few days in anticipation?
• How does the size of the dividend relate to the average daily/ weekly volatility?
• Is the share generally in a rising or falling trend?

As an example, let's assume the share is in an uptrend with a daily trading range of 3%. In figures, that would mean it's trading between 99c and $1.02, or $5 and $5.15 - something not hard to find shares that do so. Now assume that the current dividend, including any franking credits, is 2% (2c for the $1 share, 10c for the $5 one). In that case, I would rather expect the dividend effect to create only a little blip on the chart, potentially dropping in the order of the dividend, but recovering within a few days to couple of weeks. If I were to hold that stock as a dividend-paying investment, I'd stay put and wait for the next dividend to add to my profit.

In contrast, take a share that has been in decline for weeks and will be paying a 1% dividend. Its daily trading range is around 3c, and a few days before ex-div it has held just above $1. You can bet that it will continue to drop after the ex-div date. For evidence, check the chart of NST. Can you find the date that 1c dividend has been announced?

Yeah, that’s why I used the word theory, I know practice is all that matters but I’m trying to understand the theory first. Thanks for the tip, I will compare that with different charts and see if you’re right

Back to your question “Can you find the date that 1c dividend has been announced?” I can’t actually but 1% isn’t a huge amount, many companies pay between 2% and 3%.

Tanks!

 

[burglar]

... So the only advantage of dividends is no or less tax, right? Apart from that the outcome of a stock that pays no dividend and a stock that pays dividend and I reinvest would be the same, of course in theory only. Is that correct?

Yes!
In theory the company with no dividend should be growing (in value).
And the share price, in theory, should be growing too.

 

[uzzzzy]

Really beginner question

Hi everyone,

Can you help me? I have a really beginner question.
Is there any way to buy stocks directly from the company that I want to invest into? Or it is needed to have a broker in order to purchase them?

Thank you very much,

 

[McLovin]

Re: Really beginner question

Hi everyone,

Can you help me? I have a really beginner question.
Is there any way to buy stocks directly from the company that I want to invest into? Or it is needed to have a broker in order to purchase them?

Thank you very much,

Only during the IPO, dividend reinvestment, cap raisings etc. Remember when you buy shares in the market you are not buying them from the company you are buying them from someone else.

 

[JoshuaJ]

New To Trading Question for the knowledgeable

Hey guys.


So I go to uni and study corporate finance and international relations.

I understand the basics of stocks (also read ASX tutorials), but I want to ask some questions please, and hope you will respond.

Question 1) firstly Stock trading ordinary shares, I just don't understand when one buys shares ( say online westpac investment) can you hold on the shares for as long as you want. Or do you have to rapid buy and sell constantly.

I understand Bluechip is a long term investment, but just buying ordinary stocks on the ASX I don't understand.

I know for example if there is a boom then you can sell, but if there is a economic downturn you can buy cheap bonds etc.

So where and how can I learn this whole process. I have westpac investing, but its confusing, and provides no tutorials.

Thanks Guys

 

[brty]

Re: New To Trading Question for the knowledgeable

Welcome Joshua,

Firstly there is an enormous amount of learning ahead for yourself, where you stated you understand, by your own comment you clearly dont.

All stocks that you purchase on the ASX can be kept as long as you want. "Bluechip" stocks are just shares that people attribute the concept of 'bluechip' to. It is meant to mean large, safe, long term dividend, reliable etc. Some just use the ASX50 or ASX20 as there definition of bluechip. Personally I find the concept of bluechip worthless, as there are many supposedly bluechip stocks that have gone bust over the years.

You need to read and read to gain your education in the world of stockmarket investments. Go to the ASX website and poke around there a little bit to start your education... Here is a good place to start....

http://www.asx.com.au/resources/shares-education.htm

 

[theinvestorguru]

Re: New To Trading Question for the knowledgeable

Welcome Joshua,

Firstly there is an enormous amount of learning ahead for yourself, where you stated you understand, by your own comment you clearly dont.

All stocks that you purchase on the ASX can be kept as long as you want. "Bluechip" stocks are just shares that people attribute the concept of 'bluechip' to. It is meant to mean large, safe, long term dividend, reliable etc. Some just use the ASX50 or ASX20 as there definition of bluechip. Personally I find the concept of bluechip worthless, as there are many supposedly bluechip stocks that have gone bust over the years.

You need to read and read to gain your education in the world of stockmarket investments. Go to the ASX website and poke around there a little bit to start your education... Here is a good place to start....

http://www.asx.com.au/resources/shares-education.htm

Hi josh

I m newbie as well , I just started the path of education in stocks 2 months ago, I m professional in medical field which is really different worl than stocks.

My adv that u can start the game at asx now, I do it . It is great learning curve.
Part of education, my adv get some quality books and read them, use this forum . It is awesome .
The book that found invaluable is
1 how I made 2000000 in stock market( you can buy kindle version for 1 dollar from amazon,I googled it and got free ebook copy, it is old but really good.

2.the layman's guide to trading stock for DAve LAundry
3. Stan Weinsteins secrets for profiting in bear and bull market
Both 2-3 on technical analysis, good to start trading that works

Google warren BUffit for fundamental analysis

Lastly, keep update yourself using this forum and others, and keep learning, and teach others, have fun mate and good luck

It may take years to master this field.