What can I do with $2000?

[Tysonboss1]

Before you can get out of your hole you have to stop digging,... A small leak gone un checked will sink even the mightest ship.

You are missing the One golden rule that is garanteed to lead you to financel freedom,

All you have to do to get rich and have freedom is,....

"spend less than you earn,.... and invest the differance in a mix of income producing and growth assets."

Clear any non tax deductable debt you have ( even if it means selling your car and eating baked beans for a few months)and then start again by taking out an investment loan that is tax deductable.

you are right you are only young once,.... so don't miss the opportunity to set yourself up for life. now is the best time in your life to get some net worth behind you,.... It will be alot harder when you are 30 with kids and a 10year old car that used to be fully sick.

 

[lbradman]

If you really just want to learn to 'TRADE'(ie not invest) and are willing to lose your $2000 in doing so then the first I would recommend is to learn about stop losses and the 2% money management. With $2000 you have the potential to have a portfolio worth $10000 if you just buy stocks with 5-10% margin giving you a buffer of $1000 for any drastic meltdowns in your porfolio and meet margin calls. Then when you make any trades you must strictly size your positions so that they will not lose you more than $200 (2% of $10000). Off course this means you can have atmost 5 open positions when you start but atleast this gives you the power of diversification( I recommend learning about shorting stocks so that you have say 3 LONG positions and 2 SHORT positions to counter balance each other). Then the worse that can possibly happen is you lose all 5 trades resulting in your balance dropping to $1000. But if you make enough to 'keep you afloat' then it shouldnt be a problem to restore yourself back up again.

My advice is to stay out of the market until January as it appears we are experiencing another secondary correction to the one we had in August so its not safe to be trading now even for the pros.

 

[Flying Fish]

Before you can get out of your hole you have to stop digging,... A small leak gone un checked will sink even the mightest ship.

You are missing the One golden rule that is garanteed to lead you to financel freedom,

All you have to do to get rich and have freedom is,....

"spend less than you earn,.... and invest the differance in a mix of income producing and growth assets."

Clear any non tax deductable debt you have ( even if it means selling your car and eating baked beans for a few months)and then start again by taking out an investment loan that is tax deductable.

you are right you are only young once,.... so don't miss the opportunity to set yourself up for life. now is the best time in your life to get some net worth behind you,.... It will be alot harder when you are 30 with kids and a 10year old car that used to be fully sick.

Can you please tell us more about tax deductable loans? thanks

 

[Junior]

On the issue of your debt, you may already know this, but there are a number of CR cards which offer 0% interest for 6 months on balance transfers. It may be worth moving your debt around WHILE you pay it off, this way you may be able to avoid paying any interest on the amount owing.

Tax deductible loans - If you borrow money which is then used for investment purposes, the interest will generally be tax deductible (i.e. used to reduce your taxable income)

 

[Flying Fish]

On the issue of your debt, you may already know this, but there are a number of CR cards which offer 0% interest for 6 months on balance transfers. It may be worth moving your debt around WHILE you pay it off, this way you may be able to avoid paying any interest on the amount owing.

Tax deductible loans - If you borrow money which is then used for investment purposes, the interest will generally be tax deductible (i.e. used to reduce your taxable income)

Is this like negative gearing? Do you have tpo be in the top tax bracket?

 

[adobee]

Interest rate on your credit card if overdue has to be around 17% ..
pay it off this is the best investment.. If I could guarantee 17% on any investment I would take every day of the week..

Else its close to the end of the year.. so head to Qld for schoolies and blow that money!

 

[shechidna]

Here's a suggestion Mogley.

There's a method for paying off debt called snowballing that increases incentive and gets you into good habits. It's on "about dot com" with a calculator to aid you, but I don't know if I'm allowed to post a link.

Basically you commit to an amount to pay off each pay-day, then put each debt in a column in a spreadsheet. Each pay you make the minimum payment on each column except the last one which gets the balance of the payment so it's paid off first. When that's paid off you put the extra money including what you would have paid on the finalised debt into the new last column which is paid off at a faster rate. You will have less incentive to take out further debts with this method. As each debt is paid off the feelings of accomplishment grow, especially if the spreadsheet is printed out and pinned up somewhere.

You will be better off financially to put the ones with the greatest interest in the last column, but you may find paying off any debts to friends or family members more emotionally pressing, and also some prefer to pay off the smaller debt first to get the feeling of crossing off the paid up columns.

Meanwhile there's a lot of good advice above. Use the library for trading books, including interlibrary loans as they can be really expensive to buy, and you will know which ones are worth buying for reference or further study by reading them first.

Entering simulated trading competitions is really a great way to try out your talents or lack thereof. Bear in mind that the winners appear to be taking huge risks they'd never dare to take with real money as they can't go broke in a competition.

It can take a while to get educated and into the swing so the debt paying time can be well utilised and then you will be so motivated there will be no stopping you.


Sheila

 

[Serpie]

Another point of view:

Forget paper trading. It doesn't teach you anything. Split your $2k into 4 x $500 parcels, then start researching. When you've found 4 companies that you like, take the plunge. Sure, the brokerage in and out will mean you've got to clear 10% before you make a profit, but if you pick your stocks well then that's not a problem.

The lessons that you will learn over the next few years will serve you well when you start getting some capital behind you (from a "proper" job) later on.

I started with $1k parcels. When you track a stock all day, and get excited about making a $50 profit, it makes you think twice about going out that night and blowing your hard earned $50 on entertainment.

It will also educate you (first hand) on the power that 17% profit has on your money, and gives you a new appreciation of the 17%+ interest that you're paying on your credit cards.

The $2k investment on your financial literacy will be the best $2k you ever spend. If you put it on your credit card then you'll learn nothing, and will only gain another $2k of credit.

 

[bailz]

If you want to trade CFDs make sure you have a stop loss set, you could lose $2000 in seconds..

 

[bailz]

OK..last reply was maybe a little brief to be any value to you..

I trade CFDs with about 5K in capital, and whilst they are great for better exposure and more gains, they are also magnify your losses.

I lost about $900 on the Hang Seng when I started...taught me a lot about setting a stop loss and if you do trade with one..don't keep moving it while you are in the trade because you have a fear of being stopped out. I moved the stop about 4 times, thinking the trade "must have to start going in my favour soon". Get out of bad trades where you intially planned to.

So my initial loss would have been around $200...in the end my loss was $900. The market is a cruel teacher.

I trade CFDs and are subscribed to a stock market report, I dont have the time to do my own analysis and prefer to rely on what they say and run the reccomendation through my own charting software for verification.

At the moment I am about even where I started about 4 months ago, still learning and still got a long way to go, I am just grateful I have been able to preserve my capital during my learning period. Captial preservation is the most important thing to me, no capital equals no more trading..

Good luck

 

[Tysonboss1]

Can you please tell us more about tax deductable loans? thanks

A Tax decuctable loan is any loan where the money has been used for investment purposes,

For instance if you borrow money to buy some shares, property or a business. then any interest you pay is tax deductable,.... so it is much better to hold debt against an investment than it is a personal item,

For this reason most investors will have there investment loans on interest only payments (meaning they are only paying the interest not actually paying off the loan) while they use as much of there cashflow to clear their personal debt like there home and car loan which is not tax deductable.

 

[wipz]

A Tax decuctable loan is any loan where the money has been used for investment purposes,

For instance if you borrow money to buy some shares, property or a business. then any interest you pay is tax deductable,.... so it is much better to hold debt against an investment than it is a personal item,

For this reason most investors will have there investment loans on interest only payments (meaning they are only paying the interest not actually paying off the loan) while they use as much of there cashflow to clear their personal debt like there home and car loan which is not tax deductable.

Your not 100% correct, the interest expense will be tax deductible when then loan is used to help produce ASSESSABLE INCOME. ie. Generate revenue. It is a little bit tedious when talking about shares as you will only be granted a deduction when the share generate dividend income. If you purchase spekky shares with a loan your interest expenses may not be allowed as there is no real link to the derivation of assessable income.

Cheers

 

[Tysonboss1]

Your not 100% correct, the interest expense will be tax deductible when then loan is used to help produce ASSESSABLE INCOME. ie. Generate revenue. It is a little bit tedious when talking about shares as you will only be granted a deduction when the share generate dividend income. If you purchase spekky shares with a loan your interest expenses may not be allowed as there is no real link to the derivation of assessable income.

Cheers

You can still claim the interest because it is an investment loss,... just like you would claim any capital you lost if you "spekky" share crashed and burned.

Any way the bulk of your portfoilio should not be held in "spekky" shares,... so your portfolio as a whole should atleast be producing some income.

 

[Francis Begbie]

Hey guys, sought of off topic but it's my first post and and didn't really want to make a new thread.

I have a portfolio of BHP, a couple of discovery companies, and Fosters.

I have had Fosters for almost 6 years now and haven't experienced a lot of growth and wondered what your thoughts on he stock are and good price to sell at???

I also want to start trading a bit more as i have another $2,500 i want to put in to the stock market and sell Fosters (thus buying another stock) and was wondering whether to go with etrade or commsec as i find it complicated to differentiate between them.

I want to buy into stocks with growth in them, and at 19 with such small capital, I am willing to take a loss and the risks. Looked into buying stocks such as cvi, cds, and the bluechip babcock and brown, but I keep waiting just too long and missing some steep price hikes.

Either way, I understand your not financial advisors, but where to from here??

Either way, any advice on my FGL predicament and whether to go with etrade or commsec is much appreciated!!!!

 

[Tysonboss1]

I myself would probally sell all the shares and use it for a deposit on a house in north brisbane, wait a year then once the house price has come up use the equity for a margin loan on a decent size share portfolio,...

Thats just me though,... I tend not to nickel and dime anymore with small amounts of stock,... I like to keep my portfolio leveraged at 80%.

If your not leveraged your really holding yourself back,

If your $10,000 investment goes up by 10% you have made $1,000.

If you use the $10,000 for a deposit on a $100,000 investment and it goes up by 10%, you have made $10,000 that means you have doubled your money, yes you pay a bit of interest but your dividends or rent will cover the bulk of that.

leverage is one thing that property investors have over the bulk of share traders.

 

[cmh888]

Ok my first post guys.

Unfortunately, $2000 isn't a whole lot of capital ...

It is if you pool your money. Why don't you get some family and/or friends together and start a trading group? You can spread your risk more comfortably that way and if you had enough members you could start with maybe $1000 each. Put the other $1000 onto one of your debts. Groups allow you to share risk, knowledge, strategies, research, etc. Because there are more than your eyes on your stocks, you won't be able to make foolish or rash decisions as you are playing with pooled funds. I think that is the way to go for you. Good Luck!

 

[Homer1]

With $2K?

Honestly - you should not thinking of trading stock. However, you can invest in stocks (buy and hold), but not trade (frequent buy sell with risk management).

I would suggest read Van Tharps book on Financial Freedom.

Remember - for trading you need to have sufficient capital to start. Now sufficient will be dependent upon factors like
1. allowable trade size (on ASX it's $500 minmum), but you have to make it worthwhile as well taking into cosideration buy/sell fees.
2. timeframe
3. your trading style

Well all this may sounds a bit mouthful but you need to understand the concept of expentancy and money managment along with trading timeframes to determine when you should start trading with how much.

Hope this helps

Homer1

 

[Hyperion]

You can still claim the interest because it is an investment loss,... just like you would claim any capital you lost if you "spekky" share crashed and burned.

Any way the bulk of your portfoilio should not be held in "spekky" shares,... so your portfolio as a whole should atleast be producing some income.

I tend to agree with wipz. You may only claim a deduction for expenses incurred in producing assessable income. If a company has never paid dividends, and is unlikely to pay dividends in the foreseeable future, you probably can't claim interest deductions on a loan to buy stock in such a company. If you loan is for part speccy stocks, part dividend paying blue chips, you may need to apportion the interest - which could get ugly.

 

[Tysonboss1]

I tend to agree with wipz. You may only claim a deduction for expenses incurred in producing assessable income. If a company has never paid dividends, and is unlikely to pay dividends in the foreseeable future, you probably can't claim interest deductions on a loan to buy stock in such a company. If you loan is for part speccy stocks, part dividend paying blue chips, you may need to apportion the interest - which could get ugly.

I would look into that,. I am pretty sure you can claim the interest just as you would claim the loss itself if the investment went bad,....

and if it didn't go bad then yes offcoarse you can claim it because if it hasn't gone bad then it should be making money.

There are thousands of privately owned companies out there that are techniquely running at a loss because there owners pull 100% of profits out as wages that would still be claim interest on loans.

 

[Hyperion]

Tyson,

"If you borrowed money to buy shares, you will be able to claim a deduction for the interest incurred on the loan, provided it is reasonable to expect that assessable dividends will be derived from your investment in the shares"

http://www.ato.gov.au/individuals/content.asp?doc=/content/00098082.htm&page=12&H12



It is somewhat easier for businesses to claim deductions:

You can deduct from your assessable income any loss or outgoing to the extent that:
(a) it is incurred in gaining or producing your assessable income; or
(b) it is necessarily incurred in carrying on a *business for the purpose of gaining or producing your assessable income.

Hope that helps

Hyperion