professional investing [Archive]

Halebop

19-06-2004, 02:17 AM

Actually Skinny I've just made the "transition" from working for others to working for myself to finally having my money working for me (I still seem to do a fair bit for it though!).

I've been investing since a teenager in the mid 80's. I have to admit I enjoyed a lot of blind dumb luck early on - nobody could lose money in '86. Quite a few did in 1987 but I sold everything a week before "The Crash" [insert drum roll here]. Wish I could claim it was expertise that made me pick the moment. It was just a lucky coincidence that I suddenly came to the conclusion that I had no expertise at all - just enough knowledge to be dangerous. I sold everything to start afresh. What a break!

I'm certainly not rich, my girlfriend still works and I have to make my capital work hard in order to pay my bills and grow the total - hence it's a job at the moment. But it's a job I enjoy and my days are spent in quite a relaxed and serene manner (My sometimes dodgy Woosh modem is the worst my days deliver lately). My life is now far different from various stints in low to moderate paid, high stress, low satisfaction J.O.B.s. Working for myself in different businesses has always been satisfying but proved quite stressful at times.

Now it's great fun to feel like you are living by your wits alone - a triumph of intellect over emotion blah blah blah.... you know what I mean. There's also a special (evil) satisfaction in having former bosses and colleagues envious of the relaxed lifestyle you lead! I guess I'm quite a shallow person because I enjoy this more than than I should...

As far as tips though, I do pretty much what most of those $30 self help books tell you to do:

* Dream Build (Creative Visualization). I do this most. Don't underestimate the importance of your dreams and emotions!
* Synthesize your dreams into goals and break down into chunks and timelines
* Review goals and performance and reprioritise regularly
* Drink good coffee, buy nice foods, have nice things. Life is too short to scrimp and be mingy. Although some of that "millionaire next door stuff" is wisdom, some is just boring too.
* Buy low, sell high.
* Help others / give back. Partly this comes out in me via some of my pessimistic analysis. People can be quite bad at estimating risk and look for reinforcement for their decisions. I sometimes like to deflate some of the threads here a little because I know some people invest merely on the basis that others said they should, without understanding there are consequences they sometimes can't afford.
* Come to Sharetrader and pick on anything Dimebag invests in. The debates make for an informed and entertaining diversion on a slow day.

But most importantly, don't take me too seriously, I'm not all that successful!

Good luck with your goals. I've come to appreciate your insight and wish you every success in the future. :D

OldRider

19-06-2004, 09:46 AM

Hi there Skinny: I closed off my day job some years ago,tired of the demands of working, believing we had a satisfactory balance of investments ,together with sufficient capital to retire, it has proved so and we now enjoy the freedom,living off investing has brought. Every day we make choices about what we will do. Still haven't reached the gvt pension age yet,though it looms closer.

I ran my own company during my working life, and nothing in the investing world has been so profitable over a long period as this was, but it was demanding & restricting, both in time & capital, but we made the decision to do this for a number of years then sell out.There were many fish hooks in this, from start right till final sale, but things did go well for us.

It gets down to what you like doing, I find pouring over a computer screen, as a trader might totally dull and tedious, still restricting and with some stress. To operate as an investor fulfills my wishes, I am prepared to hold a company for some time, can do my analysis to my own time frame, and rarely have to move urgently.

We travel frequently, mostly just locally and often as this week, just a few days round Tauranga and surrounding areas, investments can be left on hold. When we go overseas a small catchup on the internet weekly is all that is necessary, with very occasionally a call home to son to send off a cheque to take up rights, or something similar. With direct crediting of dividends,and internet availability of banking, management is real simple.

We retain the property my old company traded from,this gives regular monthly payments which together with dividend income, produces a consistent reliable income stream. This is sufficient for us to live basically -- upkeep of house, assets, and selves. The capital growth provides the extras-- replacements for cars, overseas travel, refurnishing with the odd painting or two, still despite having no real need or intention of further savings our worth is increasing.

Overall, our only regret is that we didn't move earlier, our investments have proved more than adequate, boredom is never present, the thought of returning to work does no happen,indeed I have turned down without thought several job offers.

It is not so much what we do these days, but the ability to choose what and when. If it rains we stay indoors and catch up on the spreadsheets, if the sun shines we go out and enjoy it, we are fortunate to have friends,children and grandchildren close at hand, these relationships are real life.

David Renwick

19-06-2004, 09:58 AM

I've recently discovered self-employment, and find Old Rider & Halebop's responses inspiring and encouraging, particularly in regard to conjouring up the vision then chasing it. That keeps me energised.
So far it's been more work and anxiety while I develop plans and actions that suit me but hugely offset by the upside of stimulation and challenge (and a bit of dosh too.)
My only regret is that I didn't do it sooner.

star

19-06-2004, 11:06 AM

Halebop & Oldrider

Your posts are very inspiring. I am a youngish professional, just finished my qualification exams last year. I did not have time to do research and invest in equity market before. From the begining of this year I start to spend a fair amount of my spare time to understand different companies and invest in different shares.

Even though I have not made a lot of profit yet, I see the potential. I also regret I did not do it earlier. My job is probably well paid but with high pressure and stress plus sometimes political fighting in corporate, I think it is much better to work for yourself. My dream is to semi retire at about 50 and manage my own portfolio. I need to work hard to achieve this.

Many thanks too those who have provided quality posts sharing their experience with others.

Risk

19-06-2004, 11:16 AM

nice topic skinny...I can relate to a lot of what halebop and Oldrider have said.
You do need to have a goal, and I suggest you put your 5 year plan in writing. It will help you to visualise and stay focused.

Personally, I had a normal 9 to 5 job, and the opportunity arose there to move into management. which was the little push I needed to quit my job and become self employed instead! (I have never been interested in management)

Once I was self employed, my whole mindset changed. I realised I was in control of my own financial destiny, and I also became more aware of opportunities around me. I think a normal 9 to 5 job suppresses that truth...at least it did for me, and I just became accustomed to a routine.

Once I built up enough capital thru self employment (and paid off the house), I began buying shares, and eventually that grew so that I did less and less contract work for others....
and now I just trade.

I am still of the opinion you should only trade with money you can afford to lose....otherwise you will have a lot of anxious times.

But I also believe anything is possible if you put your mind to it.

19-06-2004, 12:28 PM

Hi Skinny-I gave up full time employment a few yrs ago in my mid fifties.After quite a few yrs in different senior management roles I decided it was time for a better quality of life.

We built up funds by investing in a number of rental properties about 10 yrs ago and sold the last 2 in the last few months.

I concentrate in small/med size coys on the NZSX and hold 15 to 20 stocks that have strong earnings growth,high div yields,low PE's,etc.Approx 90% of funds are in this category which pretty much assures us a return of 20% plus pa.I earn sufficient from this to live comfortably and believe the fund will continue to grow.

I have an investment plan which I regularly review with set goals. I also complete a monthly P & L account.Having a plan is essential to keep you focused and not head off on a tangent.It gives a framework and discipline to what you are doing.

I am not a trader as I have no desire to spend my life on the computer.The sharemarket is something I have been interested in for many yrs so it is also a hobby.I probably spend about 20 hrs a week on it but can easily travel and leave it altogether.

I am pleased to have financial independence which had always been my aim.

Halebop

19-06-2004, 01:21 PM

I'm not sure being a trader ties you to the computer. Technology allows you to stay in contact with what markets are doing wherever you are. Although many of my shares end up being short term, this can still amount to many months. I certainly don't stay glued to my watchlist all this time!

I'd be interested to know what some of the TA's like Phaedrus does and how pro active they are in managing their investments. Although I use charts I tend to buy and sell based on a perception of value rather than relying on TA signals.

Capitalist

19-06-2004, 01:44 PM

Great thread Skinny :). Many are called but few are chosen to be full-time investors, especially in the younger age bracket. If it was easy anyone could do it--otherwise there wouldn't be 'dealer burnout', and very few dealers over the age of 40.

Find your passion: The work that stimulates, fascinates, and endlessly challenges you. Identify what you find meaningful and rewarding, and pour yourself into it. If your passion happens to be the markets, you will find the fortitude to outlast your learning curve and to develop the mastery needed to become a professional.

It is far better to struggle in the service of one’s dreams than to find instant success at meaningless work. The greatest joy in life, George Bernard Shaw once wrote, is being used for a purpose you recognize to be mighty. The greatest fields—those that are a calling and not a mere job—give one room to expand and develop oneself. There is only one valid reason for trading the markets, just as there is only one valid reason for being a psychologist, a dancer, or an architect: because it is your calling, the arena that best draws upon your talents and passion for self-development.

This, I believe, is the eternal allure of the markets. With a reasonable stake and an online account, each person can undertake his or her own gold rush and enact the highest entrepreneurial quest. Dr Brett Steenbarger, Trading psychologist

foodee

19-06-2004, 02:05 PM

Like OldRidder, KJ & others have given up work-enjoyed your posts.

The recurring message is ...'wish I had done it earlier...' My reason for not doing it earlier is due to lack of courage, and now over fifteen months into it life couldn't be better. I still get offers of work but my answer is 'nah! I am going fishing.' We travel round NZ for 4-5 months of the year but stay at home through the winter.
Our plan is simple and conservative. We have 2 years living expenses in cash, half on call and half on rolling shortish term deposits. The rest of our portfolio is a mix of cash, shares(mainly boring highish yield stuff like STU,NGC,CEN,TEL,LPC,SCT,EBO and a small 'play portfolio'-which is doing quite nicely at present) and one small commercial property( about to be sold).
We don't skip on things.
Enough of this rambling. For those out there vacillating on the issue-MHO is, if you want and can do it-go for it, for it is later than you think.

cheers

Halebop

19-06-2004, 08:43 PM

Some great advice and sentiments here from everyone! :) I especially liked your quotes Cap.

Given threads like the Property one and Investing vs Trading it is interesting to note that those who have offered something on their "investment style" above have achieved (or partically achieved) their goals using a variety of wealth building techniques. So the real story is that they followed the advice of Nike - "Just do it!"

I've been wading through the BRW Rich 200 in the last week or so. The same theme is there although statistically we can learn a few things from the "richest" amoungst us (I'm only talking money here, not all those other less tangible forms of wealth like happiness, ego, relationships, health etc).

Although the current list contains the highest proportion of "property" millionaires the bulk of these would more accurately be described as developers rather than investors.

Many of the rich use property and shares as a store of value after they have made their wealth, not as a means to attain their wealth. Most started businesses and later diversified into these classes.

Almost 5% of Australian households are millionaires (note the distinction between households and population). An incredible number. Their average wealth is $4.3m. I could assume that many of these same people would be inner city suburban homeowners and this was their way to wealth. The truth however (according to BRW), is that net millionaire households have only 24% of their assets in property. For the top 5%, there must be a lot of wealth tucked away in bank accounts, privates businesses and shares methinks. BRW made a point of highlighting the concept that "Millionaires like shares and invest less in property".

As a pointer on the affect baby boomers have, investment incomes as a proportion of total incomes in Australia has risen from 7.3% of income in 1960 to 8.9%, probably not a big deal. However, by 2010 this is expected to be 16%! Compulsory super and additional savings inspired by Baby Boomers will certainly leave it's mark on the landscape.

I think this points to continued strong investment markets regardless the categories or short term fluctuations. What happens when these same people are needing to cash up (or at least access to cash-flow) will be interesting. A flight to cash (and cash hybrids) and stable income producing assets would seem the order of some future day. At current yields this would preclude most forms of residential real estate but I can see continued demand for forms of commerical real estate and utility and monopoly style businesses. This probably bodes well for the likes of property managers, investment managers and quasi deal making/investment managing organisations like Macquarie as well in the longer run.

zyreon

19-06-2004, 09:22 PM

Interesting thread. I'm guessing i'm not as auld as the rest of u foolks. I currently have no job but then again i'm a full-time student, so I have the pleasure of looking forward to someday working in a "challenging" and rewarding (stressfull and depressing) JOB. :|

Currently my only source of income is trading profits and dividends. I made an epxeriment into property, even set up a Co. to do so (after getting all learned via a company law paper) now that Co. is what i use for trading [keeps my investing "portfolio re-structuring" profits seperate from trading profits].

anyways one of the goals on my list is to hit the $1mil. mark before turning 30. Well, you know what they say; anything is possible if only you have the desire to do it.

Go for it Skinny, without goals there is little possibility of creating meaning in life. Incidentally I believe that you truly can do anything, if you really want to do it, and by really wanting to do it I mean being in a mental state where excuse is not a part of your vocabulary....

Phaedrus

19-06-2004, 09:55 PM

I pulled the plug when my real job took over my life. I was working harder and harder, leaving little time or energy for other interests. I had nice toys but no time to play with them. The transition was easy, in that the decision made itself, and I have never had any regrets over it. I had been playing the sharemarket for many years, beginning with broker recommendations and moving on to using my own fundamental analysis. I became disenchanted with the sheer perversity of the market - prices falling on good news, rising on bad news, stocks rising (and falling) to crazy levels. I lost an awful lot in the 87 crash - it took me nearly 2 years to recover. I had had enough of "Buying and Holding" and resolved never to be caught like that again. I have evolved into a dedicated trend-follower, selecting my stocks using FA but making all buy/sell decisions solely on TA. My returns improved to the level that I was able to make enough money from the market to support myself, though of course when I quit work my total income initially dropped.
I trade long-term in NZ, medium-term in Aus and short-term in the USA, where trading costs are lower ($11/trade regardless of size, short or long). I tend to concentrate on stocks with a reasonable yield locally, because I rely on my NZ dividends to pay the bills.
Summing up, I can say that I trade primarily because of the lifestyle it affords me. I can spend more time with those that are near and dear to me, I have time to play with the dog and time to play with my toys and time to smell the flowers.
Once you reach the stage of not wanting more or better houses, cars, boats etc, you are off the hook, and free to enjoy what you have.

Capitalist

20-06-2004, 08:56 AM

Halebop--Brett has articles about trading psychology available for download here http://brettsteenbarger.com/articles.htm that may interest you. He belongs to another list I belong to and I think he is wonderful :)

Risk

20-06-2004, 10:20 AM

quote:Originally posted by Halebop
Many of the rich use property and shares as a store of value after they have made their wealth, not as a means to attain their wealth. Most started businesses and later diversified into these classes.

I think that statement will surprise many beginners to trading, as there is too often the false belief that you can easily become rich through trading.
It is easy to lose a fortune through trading, but not so easy to make one.

Like Phaedrus, I must also add that the primary reason that I personally trade (and became self employed before that) is not for the money, but for the lifestyle. I can choose exactly what I do and when I do it. At least once a year my family and I take extended holiday breaks, where I dont even think shares as I'm too busy trying to catch that elusive Snapper...

oh, and you dont have to be old to take that initial step. I'll be in my thirties for a few years yet...and some people reckon life begins at 40!

20-06-2004, 10:26 AM

Phaedrus-I particularly liked the last sentence in your post.

skinny

21-06-2004, 08:56 AM

Thanks for the replies everyone :)
Like Halebop I was struck by the differing investing styles and asset allocation choices. Goes to show you don't need to religiously follow any set rules to make a go of it. Common themes seemed to be you work less than you used to and enjoy what you're doing more - very encouraging :D

To be fair I actually quite like what I've been doing for a living for the past 10 years now and it pays extremely well but it’s simply not sustainable - this is the 1st weekend I haven't worked in a month now and most weekdays it’s rare to be home before 9. No violins please! It helps that my wife is also a bit of a workaholic and to date its been 100% our choice.

We’ve played around with 'what if' scenarios a fair bit trying to practically figure out how much longer I need to work in order to make a go of it given our existing financial asset base and expected returns. Probably will manage it by working part-time first, and as Phraedus and Oldrider point out a lot depends on how much you would like to live on and whether you are prepared to forget about the Joneses... A great thing about NZ is that you can live very well by international standards on relatively modest incomes.

Well enough rambling from moi!
Hope this thread keeps going and thanks again for all the words of wisdom.

ragwort

21-06-2004, 02:12 PM

Great thread.

I have recently completed professional exams and am now in what some might describe a priviledged position having an ownership stake in the firm for which I work for and earning a reasonably hansome salary. I cannot stop thinking that I would love to one day be a professional investor. I guess the trick is now to put to use the years of study to accumulate enough capital to get started. I find the comments by the likes of Phadreus et al very inspiring.

Tim

21-06-2004, 04:41 PM

Very interesting thread. Have tried to build capital by using diversified portfolio and higher risk stocks but have been savaged on overseas investment. Interesting how many small stocks go wrong. Will have to work a lot longer.
Would have been better to focus on property to build up capital but thats hind sight. Learnt it is better to focus on low risk large stocks that produce good dividend growth.

thereslifeafter87

21-06-2004, 05:31 PM

Tim, I don't think thats the best approach.

Historically, small caps always outperform the large caps. What you are suggesting as the right course of action, is a course that will see you missing out on immenesely profitable opportunities because you chose the wrong stocks.

You can focus on smaller stocks without them being high risk. Compare ATR 6 months ago to MUL six months ago (both on the ASX) and you can see the difference. Both had large potential upside, but ATR had real earnings, was already profitable ,and had a track record of increasing earnings as opposed to MUL which could either do extremely well or terribly. ATR could have reported lower earnings, and the price may have dropped some (although both these events were unlikely), but the downside was limited. DPC is a NZ example of a small coy that has also done well.

A small company I haven't invested in on the ASX even though it has great upside is OTI. The fact it operates in somewhat of a commodity industry (producing car batteries), and relies on the price of lead (another commodity)renders it too speculative in my view (at least at the moment).

Investment is about avoiding losers almost more than it is about picking winners. But if you pick the big stocks, your upside is so limited that your losers tell on your overall returns that much more.

P.S. Great thread guys. However, I do think though that a lot of people are limiting their goals. I am yet young, but I want to be extremely wealthy, not just well-off and time rich.

I see one path to doing this. That is accumulate capital through working for someone else, and invest that capital while I work (millionaire by 30). This is the first step. The second step is to finish work (avoid the hamster wheel that is keeping up with the Jones's), and either start a business, or invest in a promising one (I'm talking private equity not stock market (unless its a majority shareholding or backdoor listing)). I aim to have Net worth of between 10-100 mill by age 40. I figure, there isn't really any other game in life that is worth playing for me(I got too small for rugby, and Im only good at most things I do - not really good or excellent) so why not go all out and achieve as much as I can in the game of business? And, if you are going to work hard whatever you do, why not do it in an area where your potential returns are huge?

I don't want to be a millionaire next door, thats boring. Anyone can be a millionaire. I'd rather be a Branson, or a Watson (but with some ethics), or a Hart.

When I was growing up I wanted to be an All Black. Other kids wanted to be a Warrior. Now, I'd rather own the All Black's (leaving aside the contentious issue of private ownership of NZ rugby teams)or the Warriors.

Do others on this forum (apart from Dimebag) have these dreams also?

Capitalist

21-06-2004, 05:46 PM

Yep, and look at the big C in US. Growing @ 20% pa. Staff borrowing up large to buy shares--always a good sign ;). Big and boring is the way to go if you like to sleep well at night :).

Gryffyn

21-06-2004, 05:53 PM

Big C?

Tim

21-06-2004, 06:09 PM

Who is big C??

Capitalist

21-06-2004, 06:25 PM

Citigroup y'all. The largest financial institution in the world. SP will double in 5 years with a tiny amount of risk, given the diversification of earnings. Hence the staff interest ;)

Gryffyn

21-06-2004, 06:33 PM

Doubling in 5 years is not an outrageous compound return :-) A bit less than 15% which is only marginally above average share indices. Low risk aspect - if true - makes it more attractive.

Capitalist

21-06-2004, 07:08 PM

So [?]-- still will be USD80+ . Pays a very good dividend too :D

It's ok to go on about penny dreadfuls--they may be sexy but are outside the risk profile of most. Everyone says they are not risk averse until they start losing money, in my experience.

Gryffyn

21-06-2004, 11:01 PM

Even then most people convince themselves otherwise. Was it Buffet who said the number one rule was not to destroy value? Lower returns that never fail gotta be better over the long term than some big winners and some big losers that take most of ya money.

What is the big C look like if you factor in predicted NZ$ rises? Or are you talking a shirt term play?

thereslifeafter87

22-06-2004, 07:41 PM

Cap, I'm not talking about penny dreadfuls.

I'm talking about coy's with solid revenue bases, and competitive advantages. Penny dreadfuls were what I was avoiding.

Even if you are only 50% right only 50% of the time (no thats not an error, think about it a little bit), then you will still get a bettwer return that someone who invests in Citigroup even if all your expectations pan out Cap.

With shares you are limited to the loss of 100% of your capital (unless you use leverage). Your potential upside is unlimited.

So I can lose 50% of my total investment in one share, but that is more than offset by my 200% gain in another share.

But, if you pick the right stocks and get good at it, then you will end up with a much better success rate than 50%.

Tim

22-06-2004, 08:49 PM

Sounds good in theory but in reality to pick these winners long term is nearly impossible. 95% of full time fund managers cannot beat the SP500 over this period. How can an idividual do this?

Halebop

22-06-2004, 09:05 PM

Do what the 5% did! [:p]

zyreon

22-06-2004, 09:50 PM

you ask how can an individual do this?

if the answer was readily available, everyone (on the assumption of rationality) would cotton on to it and thus render it useless.

trading is a win-loose game. more often than not.

skinny

22-06-2004, 10:07 PM

Interesting debate on small vs. large caps in picking the market beating portfolio!

One thing to keep in mind is that most studies on their relative performance concern US markets where 'small' is not as we know it. The median market cap on the Russell 2000 small caps index is around NZ $1000 million on todays exchange rate. There is only around 11 companies on the NZX with market caps bigger than that! FPA, FPH, WPT, TWR, IFT, KIP, SKC etc would all comfortably fit on the US small caps index.

For me size isn't everything [:p]

I reckon its better to think of your investments in terms of earnings growth potential (such as in a DCF analysis), irrespective of what the market cap happens to be...

thereslifeafter87

23-06-2004, 12:55 AM

Skinny, I agree. But, the smaller the company, the higher the earnings can go.

Tim there's lots of reasons the fund managers can't out perform. Read Lynch's 'one up on wall street'. He gives yo ua few. (btw he did outperform again and again). Also, the big fund managers don't touch small caps, and they have much larger portfolios to deal with.
Scale makes investing harder.

skinny

15-07-2004, 09:00 PM

Going through this thread again and reading the one started as a laugh by Phaedrus one thing that struck me was that the strategy of focusing on sectors has not been mentioned. I've read studies that suggest that around 30% of returns can be attributable to being in the right sector(s), which is non-trivial. Picking sectors is also very popular with the 'real' professionals - from active fund mangers who rotate in and out of sectors as the business cycle evolves to long-term investors like Buffett who only invests in companies he believes are in a viable growing long-term market.

In NZ a pure sector rotation strategy is probably not feasible given the lack of depth and breadth of stocks on offer. However, I'd be interested to hear view points on whether people still think about the sectors they are getting into when purchasing stocks, and whether buy or sell decisions are made on the state of the cycle and/or the currency.

cheers

clearasmud

15-07-2004, 09:23 PM

Skinny,Picking winning sectors is money for jam unless your assumptions are wrong, therefore its good diversify somewhat.So why not find other cos with bright future,vigorous manment and still low pe and nta.
Don't deal with dodgy people and i sleep well at night.
NZ has a great little share market but Australia is needed to find enough winners.
Also small cos of today are tomorrows medium size cos.Small is exciting and rewarding
There is no substitute for fundamental analysis (work) and thinking for yourself.
Buy the way how are you doing.I'm following you with interest.

skinny

16-07-2004, 05:10 AM

Hi clearasmud. I'm fine thanks, just had a few days break at the beach and feel well rested. I don't know about following me too closely though! I've only been investing seriously on an active basis for 3 years now and am still very much a novice in the game - which is why I keep on posting all these questions [:I]

I like illiquid small cap growth stocks too (hold OTI, AFC and TAY for example) and they've done well but its not my stock investing universe. The 'sector' I most like in NZ are stocks that are successfully expanding offshore (like MHI, NPX, TUA and RPL). I'm also regularly index investing (Korea and the world MSCI) and have played the US this year on a sectoral basis (energy), taking profits with the currency swings. All approaches seem to be working out OK but I think I need a few years yet to stress test the strategies and see what works best for me.

cheers

ananda77

16-07-2004, 11:24 AM

Hi Skinny

Kindness to you; may you be successful and happy

Between 1981 and 1994, I was involved in 4 business ventures, as an employee, part-owner, and owned the last two. I bought my first business for 26k and sold it for over 320k seven years later. The next one was a dog and I sold that one as well albeit with a loss.

I basically believe, that there is a time in life when one has to put together a financial basis for later years.

To achieve this, one has to work hard, stay totally focused, disciplined, be objective, has utmost confidence in one’s own abilities, and refrain from getting involved in emotional nonsense.
A mindset of kindness and generosity also pays dividends.

Above all, one needs to know of what it is that one wants.

Since you are thinking of becoming a full time investor, do it NOW, if that is what you want to do to achieve your aspirations. Why waste precious time??

To make the transition easier:

First: work out the funds you need to cover your absolute necessities

Second: Find a part-time job flexible enough to allow you to cover your absolute necessities and give you enough time to follow the market

third: try to cover all other outgoings/luxuries with proceeds from the market

16-07-2004, 11:43 AM

THE KING says ananda77,
Fourth Rule: Dont get Divorced. :D

Regards THE KING

ananda77

16-07-2004, 11:46 AM

The King:

I thought I covered that one with: Do not get involved in emotional nonsense!

16-07-2004, 12:01 PM

THE KING says ananda77 you must be very young or contain NO blood because you cannot divorce emotional nonsense! [8D]

Regards THE KING

ananda77

16-07-2004, 01:05 PM

The King:

O.K. The King, I could not help myself but to see the funny side of your post;

:) :) :) :) :) :) :) :) :) :) :) :) :) :)

but may I point out that beneficial financial outcomes, if there are any, of divorce settlements can flow both ways.

Regards Ananda77

16-07-2004, 04:07 PM

THE KING says as a lot of members would know divirce never ends the way one would expect for both parties. :)

Regards THE KING

skinny

16-07-2004, 08:07 PM

Ok folks I'll try and avoid the divorce court!
Ananda - good suggestions, I have in fact been working on a plan along the lines you put down. Well done with your previous business, a 1200% return on your initial investment is certainly pretty good going :)

Major von Tempsky

17-07-2004, 12:17 AM

I chucked in the job a bit over a year ago now and life is much more satisfying and rewarding.
Tennis, badminton, cycling, computer chess, French, reading, the family, and value investing - I don't trade.
The only rule to follow is that if you don't have a natural interest in economics and investment you're wasting your time and you should get a job.
Read a few books on Buffett, think about it, and then put it into practice in the NZ context. Bit pointless investing overseas when NZ coys have such good ratios compared to overseas and imputation tax credits. You also save yourself any overseas exchange movements grief by concentrating on NZ.
If you have a natural interest, read widely, think about it all the time then you don't need to follow a whole lot of artifical forced rules about report writing, reviewing, agonising &.Diversifying too much and investing overseas are losing games.
Save hard, reinvest, minimise your taxes, don't follow the herd, think for yourself, don't ask for anyone else's opinion unless you are genuinely puzzled and/or they have specialised information. Even then don't accept anyone else's opinion unless it agrees with your own after you have considered it further for yourself.
Develop an instinctive, automatic and arrogant contempt for financial planners/advisors, brokers, accountants, funds managers and people who get rich by writing books telling others how to get rich.
Be your own person.

craic

17-07-2004, 12:24 PM

quote:The only rule to follow is that if you don't have a natural interest in economics and investment you're wasting your time and you should get a job.

Can't agree with you here I'm afraid. I have a bit of a love affair with numbers right through to physics and even read and try to understand quantum physics but economics leaves me cold. More interested in the mechanical world than the theoretical world of the economist. I can never work out why they all work for salaries, usually at tertiary institutions instead of going out there and making a fortune with their knowledge. They then gain fame and mediocrity by publishing their criticisms of the doers.

On that note let me recommend to one and all, a trip down to the shops to buy a copy of Bill Bryson's " A Short History of Nearly Everything" It is the best read I have had for a long time and I am eternally grateful to the offspring who gave it to me for Xmas or something.

Major von Tempsky

17-07-2004, 01:21 PM

Sorry to disappoint you Craic old chap but I'm an economist, I don't work for a salary but for myself, and I've been out there and made a small fortune, enuff to retire comfortably rather early and set my sights at making a rather larger fortune. There's been a number of economists who have made their fortunes....how bout Lord Keynes for a start.

craic

17-07-2004, 02:30 PM

MVT - My point - I "do not have a natural interest in economics" and I have made a small fortune. Had I known how easy it was a few years ago, I would have had a much larger fortune. There are exceptions in all walks of life and i'm sure even a few economists, including the fellow you name and yourself have done well. But the herd?

Halebop

17-07-2004, 02:35 PM

quote:Originally posted by craic

...Can't agree with you here I'm afraid. I have a bit of a love affair with numbers right through to physics and even read and try to understand quantum physics but economics leaves me cold. More interested in the mechanical world than the theoretical world of the economist. I can never work out why they all work for salaries, usually at tertiary institutions instead of going out there and making a fortune with their knowledge. They then gain fame and mediocrity by publishing their criticisms of the doers...

I feel the need to come to Skinny's defence here.

Forget what economics is for a moment and look at the mechanics of it. Economics asks people to look at what has happened or auger what will happen on horribly incomplete data. To create a model that emulates "real life" would be as complex as... well... real life. So economists have to take shortcuts, no matter how complex they make their methodology, to give a prognosis. This is an art as well as a science.

Then we have the cheek to ask Skinny what the dollar will do or how much milk powder will we sell? And we laugh or get upset when he gets it wrong. Impossible. I suspect this is why (at least on the record) there are so few one handed economists and why the ones who do give an opinion can be wrong as often as right.

Organisations must plan and act. To do this we need data, intelligence and assumptions. Right or wrong, economists give an insight into the impossible and improbable. I personally love theoretical excercises over "real world" mechanics. Admittdly this is balanced by analysis papraysis but those who take the time to know their subject are better equipped to plan, act and react, even if their initial assumptions are incorrect.

skinny

18-07-2004, 03:40 AM

Halebop, thanks I think ;)
I remember in my first year at grad school the macro lecturer telling the class economics is just story telling. I couldn't see the connection at the time being as we were bogged down solving head splitting mathematical models but having worked a few years now in the field I think there is a lot in it!

Craic - most economists who aren’t in academe work for the Government or a bank, are risk averse and quite well paid hence they don't tend to risk their own capital and go on to great wealth. But there are a few in NZ who've moved along to be fairly well off by NZ standards, such as Gareth Morgan & Rod Deane. There are also a lot of very successful people who have economics degrees at least – from Mick Jagger to Warren Buffett.

I don't agree with MVT that you have an interest in economics to be a successful investor but I hope it helps [:p] Actually, MVT with your wee bit of history there I think I know who you are and I'm sure we've had a yarn in around the terrace before. Anyways, its not just in NZ where you can find good ratios - across the ditch and Asian markets are full of them and even in the US you now have blue chips sitting on p/e's under 15, for example C (Cap where are you ??) is now on 10! With the TWI nearly back at historical peaks I figure its worthwhile accumulating offshore assets at the moment.

Tim

18-07-2004, 10:13 AM

Skinny, earlier you said you use index funds, which ones? vanguard? ishares? WINZ mimics the world index. Is this the best from a nz perspective? Curious

skinny

18-07-2004, 09:56 PM

Tim, the principle of index investing is that you should go for the product with the lowest fees as possible. From what I've seen offered in NZ this means you are better off buying products directly in overseas markets - I use ETFs (i-shares) as they offer the sectoral breakdowns/overseas markets I want. From memory Vanguard is the absolute cheapest though if you are after plainer Western broad market fund.

http://finance.yahoo.com/etf

Another thing to consider if you just want a broad world market index, are investing for the long term, and are earning a NZ income is that for tax reasons you could be better off investing in a registered NZ super scheme. Their higher mgmt fees can be more than offset by the reduction in your taxable income (best to check this is still the case though). The provider I used when I was in this situation was planit.

http://www.planit.co.nz

I think they still have the lowest mgmt fees in NZ and offer a world MSCI passive index fund, which you have the option of hedging to the NZD if you wish. You can also switch from equity funds to lower risk cash or bonds if you feel markets are ready to snap at very low switching cost.

Capitalist

20-07-2004, 09:47 AM

Who said don't invest overseas? ;)

You could have done worse than investing in the new Iraq Stock Exchange--in only five sessions trading volume has nearly quadrupled, and the value of some stocks has surged more than 600 percent!

http://www.washtimes.com/business/20040718-115717-4867r.htm

Shamrock

20-07-2004, 10:05 AM

Thanks Cap, but it doesn't fit my risk profile.

bull....

20-07-2004, 03:22 PM

There are so many ways to lose and so few ways to win make sure you plan and can stick to it.

Tim

20-07-2004, 06:52 PM

Thanks Skinny. Interesting points. How do you purchase Vanguard, via Australia?
Are NZ super schemes taxed at 33 cents/$ on any profit?

skinny

20-07-2004, 07:58 PM

Tim, I looked at getting vangaurd products in Australia last year but they were not available for non-residents - I actually wrote to vangaurd in Australia and asked if they would set up a similar range of products in NZ and got a we'll see sort of answer....
So, it may be an easier option is to buy them (or certainly an ETF) in US markets, perhaps by setting up an account through Ameritrade as Phraedus and others here have reccommended.

The tax advanatge of a NZ superfund is that your contributions reduce your taxable income, so I think its still the case you can avoid the top marginal tax rate, for example, by contributing all income over 60k to a scheme. In principle a further tax advantage of a passive fund is that only the dividend flows are taxed (at 33%), the capital gains are not.

patsy

20-07-2004, 08:07 PM

quote:Originally posted by skinny

So, it may be an easier option is to buy them (or certainly an ETF) in US markets, perhaps by setting up an account through Ameritrade as Phraedus and others here have reccommended.

The US regulations do not allow buying and selling mutual funds to non-US residents - you are allowed to trade ETF and stocks directly but no mutual funds. However, interestingly enough, that restriction applies only when buying/selling mutual funds online but does not apply when doing a telephone transaction with an operator. I've had an account with www.fidelity.com for almost ten years and have transacted MF over the phone with no problem but restricted to doing so over their web site. When you coose a broker, make sure that they offer telephone service if you wish to buy Vanguard et al.

Tim

20-07-2004, 08:48 PM

Thanks Skinny and Patsy. I have used a British listed trust Edinburgh USA Tracker but has not performed the index and Foreign Colonial which has extremely low mangement fees, .2% and is managed. I will try to do a comparison with vanguard and ishares but different currencies make this difficult.

skinny

23-07-2004, 12:20 AM

Interesting set of articles on garethmorgan.com reporting the views of (mainly) professional fund managers and executives.

1. portfolio rebalancing http://articles.garethmorgan.com/column.php?id=935

2. changing allocations with the cycle http://articles.garethmorgan.com/column.php?id=933

3. residential property holdings http://articles.garethmorgan.com/column.php?id=913

Quite a wide range of views on the 1st one, for #2 the 'consensus' is don't do it and for #3 the share of property in wealth holdings generally reccomended was certainly lower than what most kiwis hold.