Complete Newbie with a number of questions

[toast2success]

Hi all,

I have been dropping in from time to time and thought I'd join up. I couldn't see a intro section so I'll get that out of the way by putting my goals out there:

I want to invest for 3 main reasons:

1) I have hit an age where a number of friends are buying or have bought houses and I am still the one paying off debt from credit cards etc (yep I like to learn the hard way at times ) I need to sort my @#% out and get my finances sorted. NO EXCUSES!!
2) I want to be able to have a supplementary/passive income that I dont need to work for , thus providing me more time to the things I want to do
3) I want to retire before 'the retirement age' (I am close'ish to half way to 'the age')

So where do I stand? well with more debt than anything and no assets....but 2012 is a new year and I'm ready to rip into it.

Onto the whole share thing....

I've been on the sidelines long enough I feel and now want to get in amongst it all. I do not have a clouded mind and am fully aware of the risks at hand.

I have ready Martin Hawes 'Shares' book a number of times in the past few weeks and am also reading Buffetology.

I have opened a share trading account and also started reading up on analysis (seems quite intense but no doubt worth it)

So I guess I'm going to need to take more of an aggressive stance given my age and goals.

I'll limit my questions as I imagine I will have many in the near future.

so question #1....

If you could give a beginner one piece of advise what would it be ?

[fungus pudding]

Hi all,

I have been dropping in from time to time and thought I'd join up. I couldn't see a intro section so I'll get that out of the way by putting my goals out there:

I want to invest for 3 main reasons:

1) I have hit an age where a number of friends are buying or have bought houses and I am still the one paying off debt from credit cards etc (yep I like to learn the hard way at times ) I need to sort my @#% out and get my finances sorted. NO EXCUSES!!
2) I want to be able to have a supplementary/passive income that I dont need to work for , thus providing me more time to the things I want to do
3) I want to retire before 'the retirement age' (I am close'ish to half way to 'the age')

So where do I stand? well with more debt than anything and no assets....but 2012 is a new year and I'm ready to rip into it.

Onto the whole share thing....

I've been on the sidelines long enough I feel and now want to get in amongst it all. I do not have a clouded mind and am fully aware of the risks at hand.

I have ready Martin Hawes 'Shares' book a number of times in the past few weeks and am also reading Buffetology.

I have opened a share trading account and also started reading up on analysis (seems quite intense but no doubt worth it)

So I guess I'm going to need to take more of an aggressive stance given my age and goals.

I'll limit my questions as I imagine I will have many in the near future.

so question #1....

If you could give a beginner one piece of advise what would it be ?

No 1. Learn to live beneath your means.

[toast2success]

No 1. Learn to live beneath your means.

:)Im onto that one (after a loooong time). Been doing it for the past couple of months, pretty grim but it's my fault so I accept the consequences

[Halebop]

Welcome to the forum t2s.

I suspect we won't be in a rewarding market for a while but for someone looking to accumulate there is plenty of value about for the patient. Your new found 'accumulator' status should be rewarded.

Congratulations on the choice of spending less than you earn. It hurts at first but the pain soon fades, particularly as you see you balance sheet grow.

There are a lot of tools/methods/philosophies investors use to make their investment decisions (just start a thread on fundamental vs technical analysis if you want an education in dogma). My advice: Whatever approach you take, trust the tools and then back yourself.

Good luck!

[toast2success]

Thanks for the response Halebop..nice little insight there... 'I suspect we won't be in a rewarding market for a while but for someone looking to accumulate there is plenty of value about for the patient'.

[buns]

Before you even begin to consider investing you will want to read 10x the number of books (1.5 already by the sounds of it) you have. Or simply, boost your knowledge as much as you can to make more educated choices.

As it stands, the educated merely make money from the un educated in any market situation - get on the right side of that equation. One big thing is, the educated investors understand accounting backwards - that dosen't happen over night so you might want to start there. Some will say you don't need to, but they aren't really investing, more trading or gambling. Take your pick.

I wouldn't take much from that Hawes book, he is wealthy but his share investing methods are mostly irrational.

[Lizard]

Maybe. Or just start. Most of us "just started" back in the days when "fundamental research" meant looking up the white pages at the Post Office to find out the company address and then ringing them to ask for a copy of the Annual Report.

Things have changed a bit. Sometimes we forget how fast they've changed.

[lou]

No 1. Learn to live beneath your means.

I second that.

What I would suggest is automate your savings so when your pay comes your savings go out to a separate account.

If you wonder home much to save the more the better but that is often hard to justify and you would end up cheating and dip into your savings.

Since you don't have a mortgage yet work out how much a 95% mortgage would be including capital repayments then subtract your rent and the difference should be what you are putting away each week.

[KW]

Here's how I started.
1. Read the first 3 books in the Rich Dad Poor Dad series (the rest of them are filler). It is very useful for motivation and adjusting your mindset. Kiyosaki advises you to direct as much money as possible to paying off your debts, then when they are all paid, put the same mothly payments into an investment account. You will never miss the cash that way.
2. Read the Intelligent Investor by Ben Graham. You wont need another fundamental analysis text. Add to that a technical trading manual. Start by focusing on active investing for the long term, and not speculative trading. No-one gets rich quick.
3. Focus on dividend paying stocks, and always invest the dividend money. That way your income compounds over time, and brings forward retirement day. Warren Buffets biography (The Snowball) by Alice Schroeder is very good, and will elaborate on this and other long term investing rationales.
4. Realise that becoming wealthy is more of a psychological mindset than it is skill - you need your head in the right place, hence motivational books like the Rich Dad Poor Dad books are of great benefit, along with a few books that focus on trading psychology (books by Drs Brett Steenbarger and Alexander Elder)

[CJ]

Pay off your credit card. No point thinkng of investing until while you are paying 20% interest - you wont be that good in your first year, if you ever get that good

[belgarion]

3) I want to retire before 'the retirement age' (I am close'ish to half way to 'the age')


Find a job that you love doing and this goal - an odd, cliched one IMO - can be replaced with a more meaningful one. My ol' boy is past 70 and he's still practicing medicine at the highest level albeit down to 35 per week. Me? I'm a computer geek and can't see myself retiring at 65 either.

If you can't find a job you love doing - find another one. The salary becomes a form of "passive" income ....

[h2so4]

:)Im onto that one (after a loooong time). Been doing it for the past couple of months, pretty grim but it's my fault so I accept the consequences

Doesn't have to be grim dude. Put your spending habits into time frames. In other words ask yourself what would this money I'm saving compound to be worth in 20 or 30 years time? You might be surprised.

Spend to be happy :) but do it intelligently.

[buns]

In short he is saying a pint of beer actually costs $20

Sometimes compounding is to powerful for me...

[KW]

Called the opportunity cost of money - if you spend it today, what is the real price you are paying? If I spend $1000 on something, as opposed to investing the money, in 10 years time that item would have cost me $10,000 (note, example only as I cant be bothered doing the real math). If you can think this way, you can better manage your money to only buy what you really need, as opposed to every piece of crap that is made in China and lasts for 12 months. It changes your shopping habits, and allows you to save money without really feeling the sacrifice because you no longer want to buy that item because its 'not worth it'. Money has more value to you for investment than it does for spending. Thats how I feel about it anyway.

Interestingly, people have no problems assigning the same rationale to house purchases, ie. its going to cost me $500k now but in 10 years it will be worth $1mil. Boy what a bargain. Although they do seem to forget that the interest and repayments on the $450k mortgage are going to amount to $900k in the same time frame, making their actual gain not $500k but $50k (still no real math).

[h2so4]

Called the opportunity cost of money - if you spend it today, what is the real price you are paying? If I spend $1000 on something, as opposed to investing the money, in 10 years time that item would have cost me $10,000 (note, example only as I cant be bothered doing the real math). If you can think this way, you can better manage your money to only buy what you really need, as opposed to every piece of crap that is made in China and lasts for 12 months. It changes your shopping habits, and allows you to save money without really feeling the sacrifice because you no longer want to buy that item because its 'not worth it'. Money has more value to you for investment than it does for spending. Thats how I feel about it anyway.

Interestingly, people have no problems assigning the same rationale to house purchases, ie. its going to cost me $500k now but in 10 years it will be worth $1mil. Boy what a bargain. Although they do seem to forget that the interest and repayments on the $450k mortgage are going to amount to $900k in the same time frame, making their actual gain not $500k but $50k (still no real math).

Forget the interest you pay to buy the house. That $50000 you used for the deposit compounded over 30 years at say 15% equals $3.31million.:eek2:

[KW]

Hey, do you have a website that calculates compounding interest - its not the first time I've needed to figure out the future value of stuff. Preferably one that takes into account monthly payments.

[fungus pudding]

Hey, do you have a website that calculates compounding interest - its not the first time I've needed to figure out the future value of stuff. Preferably one that takes into account monthly payments.

Google is your friend. search 'compound interest table's and you'll find dozens to pick from. Also use the rule of 72, it takes two seconds to learn, and you can carry heaps around in your swede for instant maths.

[buns]

I know we are just throwing around examples

But 15% for 30 years is close on Warren Buffet rates. Aim for half of that and you would do well.

[belgarion]

Rule of 72 (http://en.wikipedia.org/wiki/Rule_of_72) ... (giving google a break ;) )

[KW]

Did I mention that I enrolled for first year maths (stats) at Uni, but had to drop it immediately after attending the first lecture, as I did not understand one word that was said for the entire hour? :-(

[belgarion]

LOL KW ... I know exactly what you mean. Stats lecturers have a way of making an incredably important subject sound about as interesting as reading a latin dictionary backwards.

[fungus pudding]

Rule of 72 (http://en.wikipedia.org/wiki/Rule_of_72) ... (giving google a break ;) )

Forget that site - too complicated. Rule of 72 simply says the % yield divided into 72 gives the number of years for investment to double. e.g. An 8% return will double the principal in 9 years. (8x9 =72).
To double money in 15 years you need a yield of 4.8%. (72 divided by 15 = 4.8)
Not deadly accurate, but near enough.