Questions from a stock market beginner

[AnthonyJ]

SOR is excellent long term investment IMO. On the other hand, I would not root for managed funds investing in shares at the moment. I'm new myself though, so don't take my advice as gold.

I would however highly recommend you read these very recent articles (best read from oldest to newest as they are in a series)
http://macrobusiness.com.au/category/superannuation/

Cheers,
I will check it out.
Appreciated.

 

[Julia]

Good to know you have a researched plan.
Best wishes. Hope it works well for you.

 

[skip9]

Hey guys, simple question here

what does "net" in financial statement mean? why "net" profit rather than just profit, also the same question in regards to "normalised"

thanks.

 

[mazzatelli]

Hey guys, simple question here

what does "net" in financial statement mean? why "net" profit rather than just profit, also the same question in regards to "normalised"

thanks.

Net usually refers to a final figure net of all deductions required. Net profit is to distinguish from Gross profit - which is usually just Revenue - less related expenses to generate that revenue rather than overhead. In the end it is a classification.

Normalised - the variable in question is calculated as a multiple of some chosen base for ease of comparison e.g. expressing salaries as $x/$1 revenue

 

[skc]

Normalised - the variable in question is calculated as a multiple of some chosen base for ease of comparison e.g. expressing salaries as $x/$1 revenue

I think normalised in this instance is where people take out abnormal items. The definition of what is abnormal is subjective (I think), but the QLD flood damage may be an one-off abnormal for many businesses, for example.

Let's say this year my net profit is $5m but it includes a $3m loss due to the floods. So I might say that my normalised net profit is $8m.

This is useful because next year when I make $7m profit, you can see that I've actually went backwards compared to the normalised profit of $8m.

 

[mazzatelli]

Ah okay - its been a while, but I thought items are now only disclosed as extraordinary or not (no more abnormal classification).

I've never heard of P/L from ordinary activities referred to as normalised - times they are a changin'

 

[skc]

Ah okay - its been a while, but I thought items are now only disclosed as extraordinary or not (no more abnormal classification).

I've never heard of P/L from ordinary activities referred to as normalised - times they are a changin'

Actually I am a bit unsure as to what the "statutorily correct" terminology should be. But terms like "underlying", "pre-abnormal", "non-odinary", "excluding one-off", "normalised" all mean pretty much the same thing. And it might be used by market commentators or in descriptive texts in annual report etc so they are not subjected to the same reporting standards.

 

[MichaelThomas]

I have just started trading and began an online trading account with Westpac since i already bank with them. It looks like i will be doing about five to ten trades every month so i was wondering who is the best online broker to go with in terms of cheap, reliable trading. Westpac have been good, but i think i can do better, they seem a bit expensive.

I only need a trade-only broker since i know what shares i'm buying but is there any specials or deals that people are aware of?

This is probably a common question, i apologise if it's in the wrong place. I will have a look around the site to see if there is information on here already, but i just thought i'd ask in case someone had some info at hand.

Thank you.

 

[Starcraftmazter]

I have just started trading and began an online trading account with Westpac since i already bank with them. It looks like i will be doing about five to ten trades every month so i was wondering who is the best online broker to go with in terms of cheap, reliable trading. Westpac have been good, but i think i can do better, they seem a bit expensive.

I only need a trade-only broker since i know what shares i'm buying but is there any specials or deals that people are aware of?

This is probably a common question, i apologise if it's in the wrong place. I will have a look around the site to see if there is information on here already, but i just thought i'd ask in case someone had some info at hand.

Thank you.

Seems like a lot of banks (including yours) are giving $600 free brockerage. If you are looking more into long-term cheapest pricing, then perhaps Bell Direct (www.belldirect.com.au) or Interactive Brokers (www.interactivebrokers.com) might be good.

There's some $10 per trade one as well, but everyone seems to say bad things about them, so...

 

[ROE]

Seems like a lot of banks (including yours) are giving $600 free brockerage. If you are looking more into long-term cheapest pricing, then perhaps Bell Direct (www.belldirect.com.au) or Interactive Brokers (www.interactivebrokers.com) might be good.

There's some $10 per trade one as well, but everyone seems to say bad things about them, so...

Nothing stopping you from sign up use $600 free trade then move later

 

[johnnyhuynh21]

Hi,

I've recently just started stock trading and using commsec as my broker. I've got a couple of questions to ask and was wondering if anyone could help.

I study finance so i know most of the basics and the jargon used but never really engaged in any real life trading. The only book i've read was "one up on wall street" by peter lynch which mainly focuses on fundamental trading. In practice, how is fundamental trading compared to technical ?

Also, in finance, we study many models to value stocks but obviously in real life these models dont really work. (dividend discount model etc etc..) So i was wondering if there was a general way to estimate the value of a stock ? ofcourse i'm not hoping for the exact price but just an estimate of how much i should be paying for a stock ? Would something like the dividend discount model be able to provide me with a somewhat estimation of a stocks price ? if so, how would i get the variables such as required return or beta ?

Another thing i was thinking of was shorting but realised this wasnt possible with a commsec account. However, i learnt that i can use options to create a synthetic position and was wondering how i could do this using commsec ?

Basically, right now ive just been trying to look out for good newer companies that are forming, doing a little bit of research on them and if i think they will grow in the near future then to go long on them rather than trading everyday based on technical analysis (buying low, selling high, looking for rebounds etc) but was wondering if this was a good strategy at all.

 

[Boggo]

I study finance so i know most of the basics and the jargon used but never really engaged in any real life trading. The only book i've read was "one up on wall street" by peter lynch which mainly focuses on fundamental trading. In practice, how is fundamental trading compared to technical ?

Also, in finance, we study many models to value stocks but obviously in real life these models dont really work. (dividend discount model etc etc..) So i was wondering if there was a general way to estimate the value of a stock ? ofcourse i'm not hoping for the exact price but just an estimate of how much i should be paying for a stock ? Would something like the dividend discount model be able to provide me with a somewhat estimation of a stocks price ? if so, how would i get the variables such as required return or beta ?

Not sure if you have heard of StockDoctor by Lincoln Indicators. They approach the fundamentals of each company by grading them on the risk of failure rather than success.
Their methods are definitely worth a look. One extreme example was their prediction that OneTel was doomed to fail was met with a resounding cry of "fertiliser" especially as the Packer's and Murdoch's were involved.
The share price went from listing at $2 in 1997 to around $13.50 in just over a year to the end of 1998 and by mid 2000 it was around $1.

It basically proved that the standard fundamental nonsense that is fed to the masses is usually out of date, usually what investors want to hear and usually serves the interests of those producing the information more than anyone else.

On this site I regularly see comments and "analysis" based on this type of reporting and I expect that probably 50% of them would say "One who ?" if asked about OneTel.

Would you hang your washing out to dry tomorrow because on the 17th last year and the year before it was a fine day or would you look at the actual weather pattern that has been forming over the last few days and work out from that with almost certainty what the weather will be tomorrow and the next day until the chart shows you when the trend is changing.

Have a read of any information you can get on the likes of the OneTel's, Harris Scarfe's and quite a few others and you will probably learn more than any text book can teach.

If charting didn't exist and the ability to read charts (technical analysis) didn't exist then we would be dependant on what each company is telling us this year (with their fingers crossed) about what will carry them through to the next reporting season.

Just my after around 15 years of sensitising my BS detector at my own expense

 

[jank]

First post so be kind.

Can one offset their investment expenses such as books, magazines, subscriptions, brokers etc against your taxes?

 

[KurwaJegoMac]

First post so be kind.

Can one offset their investment expenses such as books, magazines, subscriptions, brokers etc against your taxes?

Provided that the expense is related to you earning an income, then yes. However there are some subtle differences for brokerage costs depending on whether the ATO classes you as a trader or investor.

 

[jank]

Provided that the expense is related to you earning an income, then yes. However there are some subtle differences for brokerage costs depending on whether the ATO classes you as a trader or investor.

Well I have bought shares and I will be getting dividends from most of them. I presume this would classify as proof. I would be more of an investor than a trader.

 

[1Ryan]

Hi Everybody,

I am trying to decide how to unwind some investments decisions made under the 'guidance' of a financial planner.
I have a couple of questions and I understand the responses are not to be taken as advice however I would appreciate you're input.

The scenario:

Portfolio value is approximately $100,000.
Tied up in 5 different funds as per advice from a recently fired finical planner.
Risk profile is aggressive (I'm only in my late 20's).
My budget is cash flow positive.


Goals
- I want to move from managed funds to direct ownership however I am not confidant I can organise this in one step.
- I am investing for the long term.
- In the short to mid term I aim to achieve an index rate of return.
- Low cost and low maintenance while I learn as much as I can about how to directly invest.

Considerations
- I will have a minimal CGT liability if I sell at current values.
- Exit fees will be less than future managed fund under performance.
- I do not know enough about assessing individual stocks in order to pick “core assets” at this time.
- Because of my lack of knowledge it may be wise to reinvest my money into a couple of index funds consistent with an asset allocation that aligns with my risk profile.

Questions.

1. What are the risks when I move from managed funds to an index fund or LIC with the same asset allocation?

2. Is it silly for me to exit actively managed funds in order to purchase index funds leading to a situation where in future I will need to sell again with possible CGT in order to purchase directly.

3. Is it necessary to pay for a rating service such as Morningstar in order to access quality information to compare funds and companies.

Thanks for reading.

 

[Chasero]

Hi,

2 quick questions:

1) If I buy shares in company A for $10,000.00 at 10am, can I sell them at 10:30am? Then purchase more shares in say company B for 10,000.00 at 10:31am? (less brokerage of course) Or is there a delay for the funds being transferred or the shares being "settled"?

2) How do I get my HIN? I already bought some shares but I only received a NEW CHESS HOLDER statement from the ASX showing my 10 digit HIN.

When I try to check my holding on Computershare, it says it must begin with the letter H, I or N?

I have tried all 3 letters in front of my 10 digits and none of them work. Why don't they give us an 11 digit HIN with the letter?

 

[bellenuit]

Hi,

2 quick questions:

1) If I buy shares in company A for $10,000.00 at 10am, can I sell them at 10:30am? Then purchase more shares in say company B for 10,000.00 at 10:31am? (less brokerage of course) Or is there a delay for the funds being transferred or the shares being "settled"?

2) How do I get my HIN? I already bought some shares but I only received a NEW CHESS HOLDER statement from the ASX showing my 10 digit HIN.

When I try to check my holding on Computershare, it says it must begin with the letter H, I or N?

I have tried all 3 letters in front of my 10 digits and none of them work. Why don't they give us an 11 digit HIN with the letter?

1. Depends on the broker, but with CommSec yes you can. Technically when you buy shares your funds are to be available on the morning of T+3 for settlement and when you sell shares the funds aren't accessible to you until after close of business on T+3. However, unless you tell it otherwise, CommSec will net buys and sells that are close together (they call it offsetting).

Unless you tell us not to, we will offset payments when you buy and sell within a short time.
CommSec will transfer the net amount to or from your settlement account when you either:
Buy shares and then sell shares on the same day or the next trading day.
Sell shares and then buy shares on the same day or the next two trading days.

The above is from their Client Guide brochure (you can download as a PDF). There are also some examples given to help illustrate (see under the heading Payments and Offsets).

Apart from the finance aspect, you can also sell shares immediately after buying them even though settlement isn't until T+3 and theoretically you don't own them until settlement. Day traders do it all the time.

2. My HINS begin with the letter X. Give that a try.

 

[Chasero]

1. Depends on the broker, but with CommSec yes you can. Technically when you buy shares your funds are to be available on the morning of T+3 for settlement and when you sell shares the funds aren't accessible to you until after close of business on T+3. However, unless you tell it otherwise, CommSec will net buys and sells that are close together (they call it offsetting).

Unless you tell us not to, we will offset payments when you buy and sell within a short time.
CommSec will transfer the net amount to or from your settlement account when you either:
�� Buy shares and then sell shares on the same day or the next trading day.
�� Sell shares and then buy shares on the same day or the next two trading days.

The above is from their Client Guide brochure (you can download as a PDF). There are also some examples given to help illustrate (see under the heading Payments and Offsets).

Apart from the finance aspect, you can also sell shares immediately after buying them even though settlement isn't until T+3 and theoretically you don't own them until settlement. Day traders do it all the time.

2. My HINS begin with the letter X. Give that a try.

Thanks!

For question 2 it says:

Your SRN/HIN/Holder Number is 11 characters. The first character is an alpha character and begins with the an 'i', 'n' or 'x'. The remaining 10 characters are numbers. For example: i9999999999, n9999999999, x9999999999.

I've tried X, N, I, x, n, i, in front of my 10 digits and still no luck.


It's weird how they don't tell us what letter is in front of our 10 digits?

I might call them up on Monday. God failed 5 times again. I think I was thrown off their example, and that my HIN is actually only 10 digits. Will try again later.

So since I can't check my holdings on a share registry, does all the dividends directly go to the share trading account automatically?

 

[Julia]

Chasero, I wouldn't have thought it made a difference but have you tried making the 'X" a capital letter rather than the lower case you have suggested above.

I've just been assigned a new HIN because I've changed the trustee on my a/c and its ten characters following the "X" start with "00".

Best to phone your broker.