Teenager Wants to Start Investing!

[philworld]

Firstly let me say, well done for taking an interest in your financial future. I was about your age when i started taking an interest in investing. Just remember to have fun still in your youth, money isnt everything

What makes you think a car park space wont decrease in value? Do you have any historical data as to what car park prices have done? What if a new building and/or car-park is built next to where you buy? How quickly can you sell it if you need to?

I had a quick look and most of the ones i could find in Melbourne return about 5 - 7% net. So if you have a loan then you are basically paying the bank just to hold onto it one you take your interest rate into account. It might be an OK investment if you had the spare cash, but i would think it is hard to get out of if you need to, and the returns are not spectacular

Hi and thank you
I understand your concerns.
I would need to do more research.
I don't want to stick extra money onto the loan each month though. I want the investment to mostly sort itself out financially once I get started.
Would you guys have any other idea on your mind that may suit my situation?

Hi philworld,
Welcome to ASF!

My children want to inherit a sizable portfolio!
But none wish to discuss shares or other wealth creation.
So I take delight in seeing young people have a go.

Most importantly, I'd like to see you survive.
"He who fights and runs away, lives to fight another day"!

You would've heard the same stuff before but, everyone is different.

Thanks everyone again for your support. This is my first time on a forum of educated people and it feels good to be able to talk about something without need rage and the etc.

 

[burglar]

Would you guys have any other idea on your mind that may suit my situation?

Index shares!!

You can buy index shares while you decide.
They follow the index (a collection of blue chip companies) of your choosing.

E.g.
ASX200, top 200 companies on the ASX
or
ASX20, top 20 companies on the ASX

 

[FlyingFox]

Hi and thank you
Would you guys have any other idea on your mind that may suit my situation?

Why not take the opportunity to think about risk vs reward etc and investing in general.

You have X amount to start of with. How much of that are you happy to risk? e.g by buying shares property etc. What are your rewards for it?

How much do you want to preserve? Put that in a bank account with good savings rates. Ofcourse there are consequences of this as well i.e inflation.

Also what levels of risk... blue chips with dividends, small caps or stocks which may make a lot of capitol gain.

How would you like to balance all that?

+1 to burgular

 

[YMI]

Hi Phil
Not meant to be an advice but from my own experience…

My mom was a huge fan of investing money in houses and properties and I owned a house from the age of 9 or 10, can’t remember… hang on, the house was managed by my parents and owned by the bank. IMO banks don’t want you to become insolvent, their business is money not houses nor other businesses or even car parks. What they really want is that you pay interest for a looong time.

To cut a long story short after some 15 years the house was paid off, incl. the bank interest I calculated that about 50% was paid by my parents and 50% by myself and the final price was about 200% - in other words, the bank earned the value of the initial price in cash.

Some years ago the estate market worsened in the region and I sold it for about 60% of the value it had five years earlier. The car parking space may not decrease that much in value (although you never know as prawn86 mentioned) but as I understand from your financial situation, you would need to give all earnings to the bank, maybe even more and that would be a shame.

I would try to find something where I am involved, I make the decisions and I can afford it and not depending on the bank too much. Stock market could be an option if you’re prepared to learn a little about how it works first. A good thing is to test your trading skills with a ‘realistic’ virtual trading account, so you don’t risk any actual money and if you start getting successful after half a year or so you can invest real money. Optionsxpress offer a free virtual account, however it’s for US equities only.

Another idea would be to invest in funds instead, that is perhaps less risky. Or the index shares burglar mentioned. One strange thing I noticed but don’t take my word for it, the graphs of the S&P/ASX 200 and S&P500 look very similar but what happens to the S&P5oo seems to be a few hours earlier most of the time because it’s US – could that be an advantage?

Good luck!

 

[sydboy007]

ETS are a good option. fairly cheap in terms of management expenses and they provide a good form of diversification

I've used a couple of ishares ETFs in my SMSF

IOO - global 100 companies

IDH - high dividend shares. Limits 20% to any sector and 4% to any share, so it should be less concentrated in the financial stocks compared to a lot of other high yield funds.

I'd also say having a weekly stocks night could be good. Drinks and pizza. Agree to pick 1 or 2 stocks you are thinking about. Give the reasons why you think it's a good investment. Could also maybe have a competition where you can invest 50K. See how the investments pan out over the year. Some practice before risking real money could cut down on costly mistakes. Minimising loses is far more important than maximising profits. if you loose 20% of your capital you have to make a 25% gain just to get back to where you were.

Could be good to enforce a rational approach to investing. Do I sell when the shares have fallen? Why do I want to sell? Is my original reason for investing still valid. If yes then hold your nerve, if no then sell.

These are skills I had wished I had learned a couple of decades ago.

 

[philworld]

Index shares!!

You can buy index shares while you decide.
They follow the index (a collection of blue chip companies) of your choosing.

E.g.
ASX200, top 200 companies on the ASX
or
ASX20, top 20 companies on the ASX

My main concern with this is my lack of knowledge.
I did play that stock market game and ended up with a portfolio worth something like 52k (from 50k after 10 weeks)
EDIT:The game seems to continue after it is finished? My portfolio is now worth 55k
Code Holding Current value Current price
AMC 400 $3,228.00 $8.07
SHL 300 $3,999.00 $13.33
WES 300 $11,055.00 $36.85
CPU 400 $3,596.00 $8.99
CSL 150 $8,085.00 $53.90
COH 150 $11,865.00 $79.10
AMP 450 $2,164.50 $4.81
NWS 300 $7,350.00 $24.50
CRZ 400 $2,936.00 $7.34
That was pretty fluky and I just bought the ones that looked alright to me

How would you like to balance all that?

I do not need ANY liquid funds.
I want to put my money somewhere where it will take care of itself at a low risk and I am willing to sacrifice some reward for that piece of mind. (For some reason I stress a lot and I already have more white hairs than both my parents added together)
This doesn't mean however I am not willing to put in the work.

I am also happy to set up a fix term deposit in the bank but I'm sure there are other options that can grow my wealth more substantially with low risk.

Hi Phil
Not meant to be an advice but from my own experience…

My mom was a huge fan of investing money in houses and properties and I owned a house from the age of 9 or 10, can’t remember… hang on, the house was managed by my parents and owned by the bank. IMO banks don’t want you to become insolvent, their business is money not houses nor other businesses or even car parks. What they really want is that you pay interest for a looong time.

To cut a long story short after some 15 years the house was paid off, incl. the bank interest I calculated that about 50% was paid by my parents and 50% by myself and the final price was about 200% - in other words, the bank earned the value of the initial price in cash.

Some years ago the estate market worsened in the region and I sold it for about 60% of the value it had five years earlier. The car parking space may not decrease that much in value (although you never know as prawn86 mentioned) but as I understand from your financial situation, you would need to give all earnings to the bank, maybe even more and that would be a shame.

I would try to find something where I am involved, I make the decisions and I can afford it and not depending on the bank too much. Stock market could be an option if you’re prepared to learn a little about how it works first. A good thing is to test your trading skills with a ‘realistic’ virtual trading account, so you don’t risk any actual money and if you start getting successful after half a year or so you can invest real money. Optionsxpress offer a free virtual account, however it’s for US equities only.

Another idea would be to invest in funds instead, that is perhaps less risky. Or the index shares burglar mentioned. One strange thing I noticed but don’t take my word for it, the graphs of the S&P/ASX 200 and S&P500 look very similar but what happens to the S&P5oo seems to be a few hours earlier most of the time because it’s US – could that be an advantage?

Good luck!

My dad has talked to me about buying me an apartment but I would need at least $20,000 for the deposit.
Should I just save up and buy one of those?
It seems like a good investment to me as because of how cheap the house is, it would be able to get pretty good rent meaning I don't have to stick too much extra onto the loan. In this case I wouldn't mind paying the extra money because houses ALWAYS rise in price (in the long run at least).

I like the idea of virtual trading. But I am lost on how I can educate myself on the subject. I am also coming up to VCE and may or may not have enough time or effort to make this happen.

Thanks for your responses.

 

[FlyingFox]

My dad has talked to me about buying me an apartment but I would need at least $20,000 for the deposit.
Should I just save up and buy one of those?
It seems like a good investment to me as because of how cheap the house is, it would be able to get pretty good rent meaning I don't have to stick too much extra onto the loan. In this case I wouldn't mind paying the extra money because houses ALWAYS rise in price (in the long run at least).

I could attach the charts for you but I am lazy.

Google UK property prices
Google US property prices

Last but my fav Google Japan property prices

Bet you they were saying that in Tokyo in 1989. 15 years is a long time.

 

[George Washingto]

In this case I wouldn't mind paying the extra money because houses ALWAYS rise in price (in the long run at least).

Might want to rethink this statement, this is most definitely not always the case.

I like the idea of virtual trading. But I am lost on how I can educate myself on the subject. I am also coming up to VCE and may or may not have enough time or effort to make this happen.

Thanks for your responses.

In my opinion, the best way for you to start educating yourself would be to spend some of that money buying some good, conservative investment books. Good places to start:

Common Stocks and Uncommon Profits.
The Intelligent Investor.
One Up on Wall Street.

Another excellent free resource available on the internet are the Annual Reports written by Warren Buffett for his company Berkshire Hathaway.

This should give you a good grounding, and illustrate the importance of investing long term, in good quality companies and the differences between 'trading' (speculating, gambling) and investing.

Also, keep in mind that anything that involves leverage (i.e a loan) will both magnify your potential returns and potential losses. The bigger the loan, the bigger the increase in risk. I.e having a $50,000 loan on a single car park is hugely risky in my opinion. You are highly leveraged into a singular asset, that is located in one precise location and it comprises 100% of your portfolio.

 

[philworld]

I could attach the charts for you but I am lazy.

Google UK property prices
Google US property prices

Last but my fav Google Japan property prices

Bet you they were saying that in Tokyo in 1989. 15 years is a long time.

Sorry if I offended you with my statement. I was trying to make a point that in SE Melbourne, an apartment like that is UNLIKELY to depreciate in the long run. I was being too general and exaggerated.

EDIT: However my dad did bring to my attention that in the future when apartments are going to be more popular with larger families, the demand for these small one/two bedroom apartments may be significantly lower.
And we have seen what has happened with the flooding of all the inner city apartments in Melbourne. (too many apartments settling around the same time, too much supply > insufficient demand > suppressed prices)

But thanks for pointing out my mistake

Might want to rethink this statement, this is most definitely not always the case.



In my opinion, the best way for you to start educating yourself would be to spend some of that money buying some good, conservative investment books. Good places to start:

Common Stocks and Uncommon Profits.
The Intelligent Investor.
One Up on Wall Street.

Another excellent free resource available on the internet are the Annual Reports written by Warren Buffett for his company Berkshire Hathaway.

This should give you a good grounding, and illustrate the importance of investing long term, in good quality companies and the differences between 'trading' (speculating, gambling) and investing.

Also, keep in mind that anything that involves leverage (i.e a loan) will both magnify your potential returns and potential losses. The bigger the loan, the bigger the increase in risk. I.e having a $50,000 loan on a single car park is hugely risky in my opinion. You are highly leveraged into a singular asset, that is located in one precise location and it comprises 100% of your portfolio.

I will look into those sources, thanks a lot.
You seem to have a good point about the loan but what are the risks? Can't I just sell it (not as easy as said that done of course)? Isn't that just like someone spending all their money on a house except I am under a lot less financial pressure and the asset doesn't appreciate much(if at all)?
Again, I assume I am nowhere near as educated as any of you in this area so please do not take any offense from what I say.
I am here to learn

Thanks

 

[George Washingto]

I will look into those sources, thanks a lot.
You seem to have a good point about the loan but what are the risks? Can't I just sell it (not as easy as said that done of course)? Isn't that just like someone spending all their money on a house except I am under a lot less financial pressure and the asset doesn't appreciate much(if at all)?
Again, I assume I am nowhere near as educated as any of you in this area so please do not take any offense from what I say.
I am here to learn

Thanks

A hypothetical situation to illustrate risks:

Buy 60k car park. 10k savings 50k loan.

In a year demand for car parks in that location significantly declines and the car park stops generating income.

Car park now worth 30k.

Sell and use money to pay off loan.

You are now left with no savings, no car park and 20k worth of debt.

So, you can see that leveraging/taking on debt in this case removes the ability to just sell the asset and move on.

 

[philworld]

A hypothetical situation to illustrate risks:

Buy 60k car park. 10k savings 50k loan.

In a year demand for car parks in that location significantly declines and the car park stops generating income.

Car park now worth 30k.

Sell and use money to pay off loan.

You are now left with no savings, no car park and 20k worth of debt.

Thanks for your patience.

I understand what you mean now .

 

[YMI]

...I wouldn't mind paying the extra money because houses ALWAYS rise in price (in the long run at least).

I like the idea of virtual trading. But I am lost on how I can educate myself on the subject. I am also coming up to VCE and may or may not have enough time or effort to make this happen.

Thanks for your responses.

You're welcome
I like your optimism unfortunately the 'ALWAYS rise in price' wasn’t true in my case but the reason why the value of houses declined in my region was foreseeable and it happened over years but I was young(no experience) and my mom had exactly the same opinion that houses always rise in value and she kept saying 'the prices will recover soon...' but I do actually think investing in real estate is one of the better ideas and lower in risk. However, I also think it’s important that a fair portion of the price can be paid with your current savings. If you’re going to rent the place out IMO the rent earnings should be high enough to pay the mortgage rates and any extra money you earn can be used to pay off the loan even quicker. Perhaps your parents are willing to borrow you some money interest free

Stock market is probably not a good idea if you just pick some random stocks and bet your money on them. You need to understand/learn reasons and situations why and when investors buy shares or sell – and that is hard to know, I am still trying to figure it out.

Real estate market is somewhat similar I think, not quite as hard to understand maybe. For example the house you want to buy has no shopping centre nearby but for some reason you believe that they’re going to build one in near future – that can increase the value. Or a run-down house in a rich area is perhaps cheap to buy, then renovate it and sell for three times the price. A negative example would be if they’re planning a rubbish tip close to it or a freeway right next to it.

 

[George Washingto]

Thanks for your patience.

I understand what you mean now .

For what it's worth, I believe the best course of action here would be to find an Australian index fund with the lowest fees tracking the ASX200 or 300 etc, reinvest dividends and leave it long term (10 years at least ideally).

However, don't let other people tell you what to do, you should research and come to a conclusion yourself.

 

[burglar]

... Minimising loses is far more important than maximising profits. if you loose ...

Normally I am not a "spelling Nazi" ... but for the most important of words!!
"Losses" is not the same as "Loses" and
"Lose" is not the same as "Loose".
I have no loose change, I lost it playing two-up! You dig!:

As you were!

 

[Julia]

Could someone please link me to the thread or summarise why "risk averse" investors don't do well?

Here is the Storm Financial thread.
https://www.aussiestockforums.com/forums/showthread.php?t=13176&highlight=Storm+Financial
If you read through this, you will see the havoc that can occur as a result of leverage.
If you believe the people who went along with this stuff, they were sold it as a safe, low risk scheme.
They said they were risk averse.
It's hard to see how anyone who is risk averse would be prepared to borrow against their home to buy into the sharemarket, then leverage up again by taking out a margin loan on the shares purchased with that borrowed money.

So it's not so much a matter of "why risk averse investors don't do well" but surely if you defined yourself as risk averse (meaning you are not comfortable with risk) you'd hardly do as described above.

On that, in one of your later posts you mention that you stress easily. Think about how you will feel if you buy a bunch of shares, using your own money plus what you have borrowed, there is another sharp fall in the market and the value of your shares drops by anything up to 50% in a short time.

Ask yourself how you would feel and what would be the actual financial results of such a situation.

Congratulations on your polite approach. It's difficult to ask the 'right' questions when you don't know what you don't know. So far, imo you're doing well.

 

[burglar]

Normally I am not a "spelling Nazi" ... but for the most important of words!!
"Losses" is not the same as "Loses" and
"Lose" is not the same as "Loose".
I have no loose change, I lost it playing two-up! You dig!:

As you were!

Sorry I was terse, just returned from a funeral !!

Life is short.

 

[Sir Osisofliver]

Hi Phil!

Here's some info (i'm in a rush so dot points it is...)

• Read the thread in my signature
• Right now you have an awareness that you don't know much - seek to change that BEFORE you risk capital
• Know thyself - how risk averse is "Risk Averse" your level of risk aversion will change with knowledge and experience.
• What's the plan? Without a plan you plan to fail.... find a measureable goal and time period.
• Know that you are on a journey that will last you the rest of your life, enjoy it

Cheers

Sir O

 

[odds-on]

Hi Philworld,

Have you thought about alternative investments? E.g.Art, stamps, classic cars...

Have you thought about running your own little business? E.g. Delivery routes, lawn mowing, burger van at sports events..

A friend of mine made a nice income on the side selling antiques on ebay. He specialised in a specific area and selling to the US market.

Cheers

 

[philworld]

Hi Phil!

Here's some info (i'm in a rush so dot points it is...)

• Read the thread in my signature
• Right now you have an awareness that you don't know much - seek to change that BEFORE you risk capital
• Know thyself - how risk averse is "Risk Averse" your level of risk aversion will change with knowledge and experience.
• What's the plan? Without a plan you plan to fail.... find a measureable goal and time period.
• Know that you are on a journey that will last you the rest of your life, enjoy it

Cheers

Sir O

Hi Sir O, thanks for your time.

Your thread was actually one of the first I visited. I will swim through the sea of knowledge gradually . Thanks.

I agree that I lack knowledge and I appreciate the fact you have read my comments to come to this conclusion(I'm assuming you did). I will do my homework and ask others for help., thanks for your advice

I do not have a clear cut plan as of now. However my goal is to have an investment set up by the end of the year. The plan is to make it a long term (around 10 years or more) investment. I am willing to stick extra money in if need be.

Thanks again for your help.

Hi Philworld,

Have you thought about alternative investments? E.g.Art, stamps, classic cars...

Have you thought about running your own little business? E.g. Delivery routes, lawn mowing, burger van at sports events..

A friend of mine made a nice income on the side selling antiques on ebay. He specialised in a specific area and selling to the US market.

Cheers

Hi!
I have certainly though about the eBay business. I am still looking for products I could possible sell and It is something that I am interested in doing. However I do understand that this can be quite time consuming and isn't very easy to operate.
I know a 16 year old who sells barbeques on eBay and makes $300 (profit) a week.
I know it can be done.
But I personally believe it is about finding the right product and that is where I am having trouble.

This is something that is much closer to me and seems a lot more realistic. I can also get a lot more direct help from my dad (business man).

Would anyone have any ideas?

Thanks again and sorry about my delayed reply.

EDIT: spelling/grammar

 

[burglar]

... Thanks again and sorry about my delayed reply.

Don't be sorry ... you are in the beginners lounge. There are no stupid questions here and there are no deadlines.

... Would anyone have any ideas? ...

https://www.aussiestockforums.com/forums/showthread.php?t=25573&p=733940#post733940