Where to start?

[Sparksy]

Greetings all.
Being a newb to the finance forums i have decided its time to make my first post. Over the last few weeks i have spend a few hours weekly reading a few topics on the site and have realised i know bugger all about the asx and shares. I was hoping to get some decent advice on what i should invest in and also how to go about it, but currently i am struggling to take in much.

A few rules i have learnt so far:

1) Do as much homework on the industry and company your looking to invest in. Why the hell would you throw money into something you know nothing about.

2) Dont expect anything quick - investing is for the long term.

3) Invest what you can afford to lose, majority of people will lose the majority of their money initially.



My problem now is i dont have a clue what to invest in. I really dont know where to start researching a company (apart from annual reports) or what type of company to invest in. Im happy to invest in a company for a few years but i just want to know where i can find all of this information about the company.

Questions:

1) What books should i read? "Rich dad poor dad", "barefoot invester" and "why we want you to be rich" really didn't do much for me. Most of the content was explained to me in my final years of highschool or first few years of uni.

2) Where else can i find information other than annual reports and in magazines?

3) What magazines should i subscribe to? BRW? financial times? and what can i expect from these?

Please forgive my ignorance, but i am a uni student who has a passion for busines. Currently i have only a small amount of funds $2000 to invest, so im not expecting much at all. i just have a hunger to learn as much asap.

Any advice appreciated.

 

[constable]

Hi sparksy, heres a few tips that will help you on your way
- its not so much what you invest in its how you invest
- you need a trading plan including stop losses to protect your money, work out your entry and exit prices before you place the trade and then be disciplined enough to stick to them.
- look up fixed fractional positioning
- start trading medium term , short term trading is easy to get into, but all too often brutal. Read the gdn thread
- start by trading long term upward trends
- under no circumstances leverage your position
- be prepared to lose but accept a loss as it makes way for an oppurtunity to get it right
- research as much as you can but dont get married to a stock because of its fundamentals - always protect your money and trade price action first.
Have a good look around asf there is just so much info here and so many thoughts and experiances on where and how to start. These are just a few of the things that i found relevant but there are many truly experianced traders who have shared plenty already!
cheers and good luck c

 

[doctorj]

I'd suggest you use the wealth of free information available on the net - here at ASF and news websites etc rather than burning your money on a magazine subscription. If you're one that prefers reading things on paper than a screen (I'm one of them...) your university library should have a good range of relevant magazines to read.

Your next stop would be the beginner forum (this one). Try sorting the posts by number of replies by clicking "replies" at the top of the list of threads.

You refer to yourself as a would be 'investor', but I'm curious if you use it to mean trading. Many people with small capital bases prefer to trade as they believe it minimises opportunity cost relative to their capital base. For what it's worth, I tend to agree, but be conscious of the pitfalls of trading with a small capital base - that is not managing risk. If $2,000 is what you've got, that's fine; many have started with that and less (I'm sure many others will suggest you save more and come back and in terms of risk management they have a good argument) but don't use your small amount of capital as an excuse for poor risk management. You wouldn't be the first in this regard either and while it has worked for some (see just about any thread about uranium juniors for examples of those that haven't managed risk), many end up donating much of their net worth to Mr Market.

As for what books to read, try https://www.aussiestockforums.com/forums/showthread.php?t=5781 or https://www.aussiestockforums.com/forums/showthread.php?t=6762

Also another good thread is https://www.aussiestockforums.com/forums/showthread.php?t=6191 or https://www.aussiestockforums.com/forums/showthread.php?t=1277 or https://www.aussiestockforums.com/forums/showthread.php?t=4300

As for what to invest in, my first answer would be "yourself" as corny as that sounds. Having been reading for a few hours the past few weeks you're a long way off a point where you are going to feel comfortable risking your capital and getting your psyche where it needs to be for you to be effective.

Good luck!

 

[Sean K]

Hi Sparksy,

Welcome to ASF! It sounds like you are on the right track already with taking the first steps to investing.

I think the reseach you have done so far sounds pretty good and you should continue to read widely, including the Fin and Smart Investor Magazine isn't too bad either. (Sorry doctorJ, but I think I learn't a lot from them early. )

While we can't give specific stock recommendations here, your first foray into the market could probably be something blue chip, paying a dividend, in a sector not at the top of a cycle, or a consumer staple. (I'm sure others will tell you to buy a uranium explorer in Namibia! )

Next step might be to open an account and push the buy button! $2K's a good amount for a first buy.

All the best!

 

[doctorj]

I'm a big fan of Resource Stocks (www.miningnews.net) as well. Covers everything from gold to oil to hot rocks.

 

[ceasar73]

Great post sparksy - I am in the same boat as you. Its hard to know where to start.

 

[SteveM]

3) Invest what you can afford to lose, majority of people will lose the majority of their money initially.

I would change this to:

Invest what you can afford to.

I gamble with what I can afford to lose, but I expect a return on an investment or, at the vey least, to retain most of my capital, so a different mindset is required.

 

[juiceman]

Sparksey
Try re-reading Rich Dad Pore Dad, or Cash Flow Quadrent, again as i feel most of the answers to your questions are there
I feel you must have skipped a few pages
Invest in your own money skills then the sharemarket
Goodluck

 

[Pat]

Sparksey, what a great thread
I myself started trading in December 06. I was given NRMA shares (IAG) when they privatised (I think) some years ago when I was 17 or something. I opened a Commsec account, sold good old IAG for $2500 and bought MTN. Then sold MTN at a great time to buy, although made some $$$.

ASF is a great place to start. Most of my learning started here. Do as the above has said. Read fin review etc. search ASF....

And most importantly get a trading account, they are free! Here you can set up watch lists, get ann's (announcements), and watch market depth and price movement. It's interesting to see sellers come in, buyers snatch up stocks when a stock has bottomed, off screen buyers comming out of no where and the list goes on. It gives you an idea of the emotions that flow through the market.
Pat.

P.S.
I suggest you don't throw away the good old short term trade. Jumping on a run early can get some good gains. 1k in a couple of days is pretty good I think. So what, you get taxed on the whole lot but it's still $$$ in the pocket.

 

[Sparksy]

So many people with so many different views on what i should do. Thank you for the quick responses.
I will most likely start reading up on the internet and i may even purchase a few magazines to get me started. I'm not big on reading online. I get sick of sitting infront of the computer.
I've just joined a local cash flow club (rich dad poor dad) and will be attending meetings monthly so hopefully I can get some different information from there.

As for blue chip shares I think this will be a while away. So many terms are used on this forum which i dont understand, so I definately need to catch up to speed before I consider investing anything. Also I've got uni exams and then a trip to the uk through july so I wont have the time to put into learning about the market or any companies.


I just found out I've got a few NAB shares which will be given to me for my 21st birthday. I think they're in my name, but I dont have access to them until then? Its only a few months away, but I dont have a clue if ill hold onto them or sell. So much to learn in such a short time....

Once again thanks for the prompt replies. Excellent feedback!

 

[bvbfan]

BRW more managerial I thought, not worth it
FT too broad and more news than analysis and education I think.

AFR is good, (Shares was better)
Resource Stocks worthwhile too but bit pricey if I recall.

Good book on mining valuation I found is one by Victor Rudenno, Mining Valuation Handbook 2nd edition, which I think is in the ASF bookshop link, but can be had a little cheaper if you look around

 

[happytrader]

Hi Sparksey

You could start by making co-contributions to your super - definitely a win situation.

Cheers
Happytrader

 

[stink]

Hi Mate,

My advice is once you have a plan and a simple one to start with, get in there and commit your 2k to your trading education. In other words i think the best you can do once you have your plan etc is get into the market, you will most likely lose your 2k, but so what the lessons you learn will be more than worth it.

I am only still an amatuer myself and i think i spent to much time theorising etc once i had a go i started to learn very quickly. I have now moved onto trading currencies and am having much greater success then trading stocks.

Again get you money management sorted, be realistic, when you think you know money management you dont so read, read , read on the topic. MM is what will keep you above water while your learning.

Cheers Stink

 

[disarray]

i'm a noob as well. to get underway and trade with confidence i did the following -

1. decide how much i was willing to risk

2. open a share trading account with my bank

3. sign up for fat prophets for 1 year. i won't be renewing because i'm after a shorter trading cycle, but they were good to show me the ropes and point me in certain directions. lurking in this forum is probably just as good, but look at the poster before you take advice to spend money.

4. read stan weinsteins "secrets for profiting in bull and bear markets"

5. use yahoo charts with moving averages, rsi and volume. for eg.

http://finance.yahoo.com/charts#cha...ine;crosshair=on;logscale=on;source=undefined

when you know what that chart says, then go ahead and commit money to a trade. if you don't get it, save your money until you do.

6. download incredible charts from http://www.incrediblecharts.com.au/ for more indepth and up to date chart action.

7. detach your emotions

8. ???

9. Profit!!!

p.s. sparksy, your rule #3 is wrong. there is no reason to lose most of your money initially. i agree the money has to come from somewhere, and clueless people usually provide it, but if you go in with a "it's ok i expect to lose heaps of money" then you are primed for failure.

good luck man

 

[stink]

i'm a noob as well. to get underway and trade with confidence i did the following -


p.s. sparksy, your rule #3 is wrong. there is no reason to lose most of your money initially. i agree the money has to come from somewhere, and clueless people usually provide it, but if you go in with a "it's ok i expect to lose heaps of money" then you are primed for failure.

good luck man

Just to add my comment in regards to this was not saying that its ok to lose money, but be prepared to lose money initially. Again if you have sound MM principles then it will be no big thing and you should now how many losses you can take anyway.

I can stand at the crease and defend for a long time, its not that hard. However eventually i have to take a swing, each time i get out i learn something.

Cheers Stink

 

[marklar]

I myself started trading in December 06. I was given NRMA shares (IAG) when they privatised (I think) some years ago when I was 17 or something.

Likewise, I started out with a handful of IAG shares. Back in August I was looking for an investment alternative to cash, so I put some money in a managed fund, with the rest I opened a trading account, got my IAG shares transferred from issuer-sponsored and got going.

First few buys were very small parcels, not a lot to risk, but not a lot of gain. I learnt a heap from ASX and ASF, started doing better research and started buying larger parcels (4-5 times the size of my first trade.)

I've made some mistakes, exited some trades too soon, left some trades too long, but it's been worth the education. I found I needed "some skin in the game" to sort out what I wanted to do with my money, but I haven't gone overboard and put all my savings in.

m.

 

[ceasar73]

As I said earlier, Im in the same boat as sparksy. I have recently registered with ASF and I am loving it. ASF seem a fantastic source of information for a novice such as myself.

I believe that if one has a love and passion for something they will do well. So I say - Sparksy, if we develop a passion for this game, we will do well in the long term.If NOT - we are doomed and should get out ASAP.

good luck!:

 

[Bullion]

I'd also recommend joining the ASX share game.

Although It hasn't started this year, maybe in the next month or so, it is an EXCELLENT eye opener into the share market. I did this before I bought anything for real and found myself buying/selling way too much and wasn't going anywhere. By the end of the game I had made it to the top 200.

I'm still a noob, but other than reading, this I think is a great way to see how the market works.

 

[Julia]

As I said earlier, Im in the same boat as sparksy. I have recently registered with ASF and I am loving it. ASF seem a fantastic source of information for a novice such as myself.

I believe that if one has a love and passion for something they will do well. So I say - Sparksy, if we develop a passion for this game, we will do well in the long term.If NOT - we are doomed and should get out ASAP.

good luck!:

Sorry, Ceasar73, but I disagree with this. Passion and inexperience are a dangerous combination. You will get far further with an unemotional approach. Passion and emotion preclude objectivity.

 

[Julia]

I'd also recommend joining the ASX share game.

Although It hasn't started this year, maybe in the next month or so, it is an EXCELLENT eye opener into the share market. I did this before I bought anything for real and found myself buying/selling way too much and wasn't going anywhere. By the end of the game I had made it to the top 200.

I'm still a noob, but other than reading, this I think is a great way to see how the market works.

Agree here. But before even doing that, conquer your dislike of reading online and work your way through the ASX website. There is everything there about the basic working of the market, good summaries of fundamental and technical analysis, and generally much of what a beginner needs to know before putting up real money. Personally I think what is contained here is more useful for a beginner than much of the literature which is around, useful though that is at a later stage.

When you're feeling that you have an understanding of how the market works and a sense of the type of investing/trading you will be suited to, then I like Kennas' suggestion of buying a blue chip company. Given that you would be buying e.g. Woolworths, one of the big banks, Westfield etc for the medium to long term you'd be very unlikely to lose your money, should see some growth in the value of your investment and enjoy the dividends and franking credits.

You, or possibly one of the other posters, have said you don't understand some of the terms used in our responses. OK, we need to be clearer and not take for granted that you know terms which have come to all of us with experience. Just speak up and ask the question: there's always someone who will offer you the answer.

Good luck and don't get frightened off because there's a bit to learn at the start.