I have a collegue asking me advice on the share market and my advice was do some research as i cant tell them much.... What would you advise a newbie? What do you wish someone told you when you first started in the sharemarket? Thanks everyone i look forward to reading your comments!
What do I wish someone told me when I first started, from the top of my head here are a dozen or so items to get you thinking: - if you need the money in the next 5 years, you should not be putting it in the sharemarket - read, read, and read some more (indeed even when you "think" you are experienced still do this) - management definitely matters, and founder managers even more-so - turnarounds, often don't, well, turnaround - cashflow is king, almost everything else (like EBITDA is bull) - stay away from the small caps at least for the first few years - ignore talking head "experts" - it's your money, have a serious look at the track record of anyone before blindly following a tip - mining companies don't really have control their business outcome, they are at significant mercy of the underlying commodity price - be very careful chasing a falling stock down - the market is volatile and it will test you, no matter how risk tolerant you think you might be - Australia is a small market, you don't have to stay on the ASX - there are 2,000 or so companies on the ASX, at least 3/4 are rubbish investments - Australian companies often do not do well in offshore expansions, be cautious of any company announcements out of the blue about such plans - roll up strategies eventually run out of steam and when it does, so will the shareprice - you don't have to go all in, invest in parcels and see if your idea pans out before you stump up for the next purchase - be very, very careful about leverage, yes it magnifies on the upside, but it unfortunately also does the same on the downside - have your dividends go into a seperate account so you are not tempted to spend them, and you rather reinvest - start with something you understand, like a product or service you use every day, and something that has been around for years, and you cannot think of any reason why it will not be there tomorrow - get started, anything you buy will either make you money or educate you
Brilliant.... Love you guys here on SS Thanks Barns Is there anything anyone would ad from their experiences?
- you will loose money. - you will keep loosing money unless you learn from each trade. Random stats fly around that about 90%... of investors loose money. Most small caps over the long term destroy investors wealth. - how much you loose will depend on risk management. Must have small losses vs wins. - position sizing will have large impact on your losses and potential wins as well. - you need to spend hours every day (or weekends) improving your knowledge of the market. At first, focus on a few companies or a sector (eg. gold miners). - Start looking at technical analysis (charts) and the fundamentals (activity and cashflow of the company). Understanding charts are very important for short-medium term trading. Download 'Incredible Charts' (for free) and start looking at charts. You need to be able to determine if a stock is going up, down, or sideways over the long term. Avoid companies in longterm downtrends. Avoid companies with inconsistent or low relative volume. - Don't take someone's word (or tip) that a stock is a sure-thing. A stock can go from very hot to very cold quickly. eg. lithium may be hot right now, but its probably on its 3rd or 4th cycle in 10 years. For every resource boom there is a big bust. - you need to make your own investing decisions and stick to your own designed trading plan. also might want to look at this position sizing tool: https://breakingoutbad.com/tools. If, for example, you have $50K in a trading account. You dont want to loose say $10k on a single trade. It means you will get wiped out quickly if you make 5 bad trades straight away. Most people will not risk any more than 1-3% of their total portfolio on a single trade.
Get a decent broker and take their advice in 90% of the funds 10% of the fund do their own research and trade. After two years f they are doing similar than maybe take 25% under own stewardship.
Excellent, thank you guys, I have limited knowledge on the share market but my friend was insistent asking me questions and I'm glad i asked you guys even for my own sake as I am going to buy some more shares soon, still researching what to buy into
The share market is corrupt to the brim ... if you want to get in consider bank shares (that pay dividends) because banks are above the law ...
Start with a few blue chip stocks paying fully franked dividends and keep a bit of an eye on them over time to check how they are going.
I subscribe to the Value Investing school of thought. In a nutshell, we try to figure out what businesses should be really worth and buy them only when they're close to (preferably under) that price. I recommend you buy these books and read them cover to cover. The Intelligent Investor: The Definitive Book on Value Investing. A Book of Practical Counsel (Revised Edition) by Benjamin Graham and Jason Zweig The Little Book of Value Investing by Jason Zweig The Little Book That Still Beats the Market by Joel Greenblatt
I have been investing in shares for the last 30 years so I've seen ups and downs, crashes and booms. I really think you need to decide if you are going to be a trader or if you are going to be an investor. Both are so different from each other. There are long running arguments of which may be better so you can make your own mind up as to which is better. If you are going to be the trader then you really need to read and learn a lot about the technicals of sharemarket trading and Elliot Wave Theory. It is a very hard game to crack and only the well informed who stick to the rules win. And even those clued up guys get it wrong sometimes. Very few people become successful traders. There is a lot to learn, you need to be right on top of things. These people are well trained, well informed and do not take their eyes off the ball. Some do not care what the company is that they buy, they work off what the charts tell you and make their trades accordingly. There is a lot to it and it's best for a professional trader to tell you more as I am not one that's for sure. Then there are long term investors like myself. We buy shares depending on the companies fundamentals, what they are doing, what kind of dividends are they paying, do they have a new product that may change the world etc. For myself as a long term investor I am only interested in solid dividend returns from companies that will be around for a long time and that will keep on paying them. Mine is essentially a buy and hold strategy but I still buy and sell sometimes. For example CBA at $70 is a bargain to me. At $100 is far too expensive, I would buy at $70 but would sell at $100. Sometimes even the best companies shares prices just get well ahead of themselves and the original bargain has turned expensive so I might sell. A trader would most likely never a sell a stock that is climbing. As I pretty much run my own super fund my focus is on income. I need income from my stocks to support my wife and I's living standards. We are both retired, we could not live of 2% interest from the bank. If you tried that your buying power will decrease year after year as inflation will eat your bank balance. My average return from stocks is 7% (this is in dividends alone, not including gains or losses) and maybe even more as all the franking credits come back to you when your super is in pension phase. If you are going to be a long term investor then you need to know your limits and what can you withstand. Can you wake up one morning and find out that your share portfolio is going to half when the market opens at 10 AM. I've seen it happen twice, 1987 and the GFC. Even the best long term portfolio took a loss of 55% from top to the bottom during the GFC. Can you with stand this? If not then maybe you need to become a trader or just stay out. It's just what I've seen and felt over the 30 years, just an opinion. There are several other opinions out there and no one is either all right or all wrong. Good luck to you and your friend. Ling