Starting out thread, hints, tips... anything really

[whitey]

Hey, new here, just wanted some advice from people that seem to have it going on.

2nd year of full time work, trying to long term plan some savings/investments/portfolio. Have a partner, so two incomes, currently renting (cheaply). Have kiwisaver @ 2%, should i increase? I want to build a nestegg pretty much. 22 years old

[STRAT]

Hi Whitney
No magic answers here.

Questions need to be more specific and targeted at the right punters.

Welcome to Share Trader

[karen1]

Hi Whitey

You've already used the best tip - joined Share Trader! Loads of sound advice here, just go back through threads like this one, and Investment Strategies for starters. There are some fantastic posters on this forum, willing to share their knowledge/experience with patience.

Also many gems to be gathered among daily posts, even if not about a topic which particularly interests you, so take the time to read or at least skim each post until you get more familiar with the forum, and various posters.

If charts interest you, look up Phaedrus in the Members list. He no longer posts, but was well followed.

I might get shot down in flames here, but as Kiwisaver keeps getting tweaked, I would myself be reluctant to up the anti, especially at your age, but with the proviso that you need to have the discipline to instead invest what you may have increased that contribution to into something else on a regular basis. And that something else could be a host of alternatives - type Kiwisaver in the search box on this forum to see the thoughts of others.

And as Strat said, welcome!

[CJ]

I wouldnt increase kiwisaver, Do the minimum to get the benefits and no more (That money will be tied up for a long time though you may be able to get it out for a first home purchase)

Do you want to trade or be a buy and hold investor? Do you want to stay with NZ or invest in australia as well?

Choose a few of the bigger stocks to follow (not invest necessarily) in the papers and on this forum. That way you will see what factors influence price and what other investors are thinking about them. eg. the FBU (fletcher building) thread is quite active so you will see lots of peoples thought (buy and hold, chartists, fundimentalists etc) on whether it is a buy, sell etc.

[whitey]

ok so kiwisaver seems not the way. what about smartshares or a managed fund from rabo. i need something i can chip away at to atleast raise funds for that first investment. how much would i need

[karen1]

Sorry if I'm asking the obvious, but have you worked out a budget? It's a very good way of seeing what you can afford, whether it's to spend or save. With two incomes, is it possible you can live on one (or 1.5) and save the rest? With your lives ahead of you, and your attitude towards implementing a financial plan, you should do well, once you have that plan in place.

So, your "how much would I need" question might be answered with "how much can you afford". And I'm not asking for figures - no one here will do that.

Diversification is a much used word, and one to keep in mind. So some in shares, some maybe in managed funds, and definitely a few spread term deposits, maybe some bonds, well researched, would be my thoughts, but I'm sure others will have some better ideas.

You might like to add this site to your favourites: http://www.interest.co.nz/saving/call-account/
The panel on the right gives you some good choices.

[whitey]

Thanks Karen, in terms of a budget, nothing really in place as such. I operate on a 25/25/40/10 spilt with any money that comes in, 25% for each of us, 40% towards the bills and 10% towards savings. This is our first year living together and that spilt has worked fine, although we probably could save more and less towards the bills.

[karen1]

OK, that's a pretty good looking divvy up of finances! And if it's working for you, that's great. Budgeting is still a great thing to do, for long term planning. You can project a budget as far, or near, into the future as you wish, and if you are both focussed, take satisfaction in realising your projections. Although extremely difficult to do in the current climate, imo well worth the exercise!

You sound as though you are focussed on getting ahead, and good luck to you. I would also guess that you are awake to all the tricks of credit card use - pay the full amount owing each month, and bank accounts - make your bank work for you, not the other way round - make sure you are set up with accounts so you pay the absolute minimum or no fees. These two latter points I mention because you can lose a few hundred dollars and more annually if you aren't awake.

At your age, we worked spread term deposits to the max, but that was 40 years ago. Today, it's hard to find a decent rate, although if you've checked that link I gave earlier I note there are some reasonable rates under Building Societies atm. You would be surprised how things add up when you tuck away the odd $1000 here and there.
As for shares, don't know if you have any yet, but take a look at this for some sound suggestions http://www.sharetrader.co.nz/showthread.php?8562-Where-to-invest. CJ's comment above re stocks is very wise!

Also might be of interest to you https://www.asbsecurities.co.nz/section240.asp Bear in mind if you do your buying using an online broker the commission you will pay is considerably less than paying for the services of, for example, the likes of Forsyth Barr, Craigs, etc. Setting up an account with an online broker is very easy to do - I use ASB Securities, and find them very helpful if I need to talk to someone, otherwise I do it all online. Take a tour around their site, there is some pretty good learning material on it, as well as Direct Broking, and there will be others.

Another site I like is http://nz.finance.yahoo.com/q?s=FRE.NZ&ql=0 I've put it on the FRE (Freightways) page - under More on Freightways on the left you have a few options to learn more, like historical price, always interesting.

You will see a lot of the posters on ST have an addendum on their posts, DYOR - doing your own research is of course a good way to learn.

[buns]

Thanks Karen, in terms of a budget, nothing really in place as such. I operate on a 25/25/40/10 spilt with any money that comes in, 25% for each of us, 40% towards the bills and 10% towards savings. This is our first year living together and that spilt has worked fine, although we probably could save more and less towards the bills.

I wouldn't worry about earning returns to much at 22. It's bloody hard to do, and takes a lot of time to master. Simply put you have better things to do and I'm thinking you are doing these things if your spending 50% of your income on things other than bills and savings - good work!

Pull out a simple spreadsheet, assuming you earn at least average wages and budget sensibly - assume you can compound savings at 10% from Age 25-40 and you will easily achieve net assets well over $1m at 40 years old. (if you cant do this calc you need to read more books)

Thats plenty of money, and yes if you start now that may turn into another 100k or so, but the difference between $1m and $1.2m is nothing compared to $1m and an awesome youth full of sweet times.

Kiwisaver will do fine whilst you invest in double brown.

When you get to 25-26 or can't handle the hangovers no longer, start reading up on investing. By then you will also have 4-5 years of exp behind you which will add to your knowledge and skills for investing. Don't enter a game when the odds are against you.

[buns]

If thats not for you.

Find proven people, and read/learn everything they have done.

Note - Sharetrader is not the place for that when for $1 on trademe you have Warren Buffet etc.

[whitey]

hey buns thanks for your input, my double brown days are few and far between for personal reasons but i do have enough fun in my life. i prefer travel rather than wasted nights in town. could you suggest any recent material that concern someone in my starting position. i didnt stsrt this thread for instant results. just some direction to start

[shasta]

hey buns thanks for your input, my double brown days are few and far between for personal reasons but i do have enough fun in my life. i prefer travel rather than wasted nights in town. could you suggest any recent material that concern someone in my starting position. i didnt stsrt this thread for instant results. just some direction to start

Send me a Private Message with your address & ill send you my copy of "The Intelligent Investor", if your happy to do so.

This is the unofficial "investment bible", read it cover to cover, then reread it!

If you are serious about planning for your financial future, another book i would recommend is "Get Rich & Stay Rich", by Martin Hawes, alot of common sense stuff & explains it in plain english.

As Karen has already mentioned, there is plenty of information contained on the various threads within the Sharetrader site, so spending some time learning to navigate around the site, is time well spent.

[buns]

Your a kind man Shasta. However I slightly disagree with you handing off that book so soon.

I'm a huge advocate for anything Benjamin Graham, however think that book is a little to much for a newbie.

You easily forget what its like when first starting. This really hit home with me a while back as I did a complete circle with my investing thought. I started with all the Buffet, Graham books and didn't completely understand them, had to learn the hard way acting irrationally following price movements rather than value. Then went back and read them and fully understood everything.

I think this full circle thing happens a lot (in lots of disciples), as when people start something they always look for the easy way out or follow herd behavior. In this field that pushes you towards following general market sentiment and value companies using measures given to them which are mostly irrational or driven by price. The eager and untrained investor at this stage dosent even know this is irrational and probably won't doubt himself until he makes a loss. This is a critical point as it puts one at cross roads.

The typical paths are
1) Stop investing
2) Doubt your methods and seek change
3) Blame your failure on something or someone else.

As 1 and 3 are the easiest options these will typically be choosen, and in the long run will result in no gains from investing. I think option 3 is very common, as humans are very loss adverse. It's option 2 which gives that person the best chance in the long run, and with a little bit of reading they will realise the answer to this game is quite simple - it just takes a lot of hard work. Now at this point, one can be honest on whether the hard work is worth it, or whether they are smart enough to carry it out. If you don't do this, you enter a game where the odds are against you.

The smart will make money off you, thats how markets operate ('Mr Market' in the intelligent investor). Most of NZ love rugby, but most don't participate because they know they will get smashed. Investing is no different however many more are lured in, yet most get smashed.

Those Martin Hawes books are ideal for a newbie, they introduce the power of investing, and importantly explain all the asset classes and there risk/rewards. At first glance you don't think much of this, however understand 'the other option' is vital to understand your own discount rate/opportunity cost at which you need your chosen investment vehicle to exceed. I think this is the first thing one needs to understand before getting into valuation. You may get to this point and go no further, as I point out above you may work out that $800k savings at age 40 is ok - well you can do this risk free. So forget investing.

The intelligent investor is heavily built around this concept, or 'Margin of Safety' as Ben puts it. Without understanding it widely, you won't get full benefit from the intelligent investor.

[h2so4]

At 22 you can afford to spend your time reading the first 80 odd pages of any investment book that is thrown at you. If the material is too heavy after 80 pages chuck it and get another book. By the time your 23 something will have clicked, grasping some easy investing principles would be a great start. I have found Buffett books are great for that and you can listen to him on CNBC watch.

By 22 saving should be automatic, and rolling over term deposits is a fun thing to do. Involve your partner, we spend lots of time discussing financial dreams, in this case the whole is bigger than the sum. If it's "going on" for you, things have a way of falling into place.

To your investing success.

[Lizard]

... as I point out above you may work out that $800k savings at age 40 is ok - well you can do this risk free. So forget investing.

Does that take 2 good incomes and no kids? I'm mid-40's and, with family and circumstances, seem to be permanently stuck at $650k net worth... every year's "new year resolution" is to stop drinking the proceeds... :eek2:

(But I agree with the suggestions that "Martin Hawes" may make a good place to start reading)

[Stranger_Danger]

I agree that "The Intelligent Investor", whilst essential reading at some stage, is the wrong book for a newbie.

Many (from the Phaedrus school?) will disagree with me on this, but you need to develop a general interest in business and businesses BEFORE developing a specific interest in investing because, well, thats what you're gonna be investing in! As (I think) Graham, often quoted by Buffett, said, "Investment is the most intelligent when it is the most businesslike". The two are bound together, or at least, should be.

Something like "Where Are The Customers Yachts?" would be far more appropriate.

Whilst totally devoid of detailed analysis and specifics, it touches on a lot of things, will help to develop the pre-requisite cynicism, and has held up remarkably well over the years.

"Fooled By Randomness" by N N Taleb is also a "basic" book that gets you thinking, without overwhelming.

Ben Graham definitely needs to be read, but, honestly, read that as one of your first investment books and you'll be scared away for life!

Other than all the normal "how to buy stocks", "how to get rich", "how to buy stocks and get rich" books which I'm sure you'll hear about from a million sources, I'd recommend finding some time for business biography.

Reading about a range of successful (and unsuccessful!) businesses, and the people that run them, can really help you in both business and investments.

For the latter, "Typo : How I Lost Four Million Dollars" by David Silverman is one of favourite books. Whilst not about investing per se, a read of that should kill any remaining interest you have in being overly gung ho and keen...

[buns]

Of course there are tons of variables in this equation which could make the $800k to high or low. At 22 with next to no savings any number in the $800k ball park sounds so large, but really is very attainable with little risk if you work hard and act pretty sensible.

Even at $500k you can live a very nice and easy life. Its very important to understand this before you kick of investing, as once you have worked out what you can earn risk free, you should ask yourself "Do I need any more?", if yes - you then work towards finding out what rate you need to earn, and the possible ways to go about that. It is also a great intro to valuations, as you use similar techniques in valuing a company.

It will also make you consider the underlying variables behind the free cash flow, of both yourself and companies.

Again, I didn't mean to get down to exact numbers but Liz, keep inflation in mind, $800k in 15-20 years time will probably be worth close to the amount you mention.

[whitey]

[QUOTE=Stranger_Danger;364333
Reading about a range of successful (and unsuccessful!) businesses, and the people that run them, can really help you in both business and investments.
[/QUOTE]


That sounds like a really good idea, thanks for the suggest. Sounds like i'll start by reading some Hawes and tracking some shares and business from the next six month, while I go through a budget, possibly some term deposits and managed funds.

I've read through everyone comments and really appreciate the time taken. Looks like I have some reading to do :)

[shasta]

That sounds like a really good idea, thanks for the suggest. Sounds like i'll start by reading some Hawes and tracking some shares and business from the next six month, while I go through a budget, possibly some term deposits and managed funds.

I've read through everyone comments and really appreciate the time taken. Looks like I have some reading to do :)

The offer for the book still stands, when ya ready for it, let me know, Buns is right, its not an easy read.

I sometimes forget not everyone is an Accountant like yours truly!

[Stranger_Danger]

lol Shasta. Not surprised to hear that - only an accountant would call Graham easy!

[toast2success]

I too am a complete noob. sadly Im quite a bit older than yourself, so I commend you for taking action early.

I have read and read and reread a handul of Martin Hawes' books. To start with they could've been in any foregin language, as thata all it was to me. After reading them SEVERAL times I got a fint gist of what some things meant.

I have started reading the Benjamin Graham book and parts of it make sense. Well, enough of it for me to actually understand some of the words. So now I read it and have a handful of other books near by. When something comes up I dont get or haven't heard of I can look it up in nother book and try to decipher it.

Although the B.Graham is over my head as a whole I can see the value in it and will be re-reading it numerous times in the future.

I also found the forums here, Youtube and the local library good sources of info.

Sorry if I've missed it , but where are you based ? there may be a group that gets together near you. On that note, does Wellington have a get together ?

[shasta]

I too am a complete noob. sadly Im quite a bit older than yourself, so I commend you for taking action early.

I have read and read and reread a handul of Martin Hawes' books. To start with they could've been in any foregin language, as thata all it was to me. After reading them SEVERAL times I got a fint gist of what some things meant.

I have started reading the Benjamin Graham book and parts of it make sense. Well, enough of it for me to actually understand some of the words. So now I read it and have a handful of other books near by. When something comes up I dont get or haven't heard of I can look it up in nother book and try to decipher it.

Although the B.Graham is over my head as a whole I can see the value in it and will be re-reading it numerous times in the future.

I also found the forums here, Youtube and the local library good sources of info.

Sorry if I've missed it , but where are you based ? there may be a group that gets together near you. On that note, does Wellington have a get together ?

I'm happy to start up the Wellington catch ups again, ill be working & back in the market soon, so keep an eye on the relevant threads, & ill post details in due course.

Great point raised there, if the books are "too hard a read" thats probably a good sign you're not ready yet!

[h2so4]

I too am a complete noob. sadly Im quite a bit older than yourself, so I commend you for taking action early.

I have read and read and reread a handul of Martin Hawes' books. To start with they could've been in any foregin language, as thata all it was to me. After reading them SEVERAL times I got a fint gist of what some things meant.

I have started reading the Benjamin Graham book and parts of it make sense. Well, enough of it for me to actually understand some of the words. So now I read it and have a handful of other books near by. When something comes up I dont get or haven't heard of I can look it up in nother book and try to decipher it.

Although the B.Graham is over my head as a whole I can see the value in it and will be re-reading it numerous times in the future.

I also found the forums here, Youtube and the local library good sources of info.

Sorry if I've missed it , but where are you based ? there may be a group that gets together near you. On that note, does Wellington have a get together ?


Excellent.

Any reread is a restart and any knowledge gained is cumulative.

[whitey]

I live in Auckland, reading seems to be the key and i'll have to go to the library and find some of these names mentioned and do what soemone said and read the first 80 pages to see if I can feel the vibe

[POSSUM THE CAT]

Whitey Have a look at Kiwi Bank Notice saver bank accounts a bit more flexible than term deposits & good interest rates

[whitey]

Whitey Have a look at Kiwi Bank Notice saver bank accounts a bit more flexible than term deposits & good interest rates

they look like a really good option for me right now. thanks

[whitey]

Just to be clear read the Intelligent Investor (2003) which has the commentary by Jason Zweig (640 pages) rather than the original text by Ben Graham (reprinted 2005) which has no commentary and is only 269 pages.

Thanks for that, i'll keep you guys posted with my progress with the books

[Lizard]

My favourite book is still "One Up on Wall Street" by Peter Lynch. Suits my share collector style and appreciate the fact he explains more than one type of favourite stock play. Good starting point to develop an "active investor" style for those that enjoy stock-picking on fundamentals.

[STRAT]

Another option is to ignore all of the above and take up charting :p

[Lizard]

Another option is to ignore all of the above and take up charting :p

Yes, good idea. Those of us using fundamental methods need more chartists to push share prices to silly extremes. :p

[whitey]

Another option is to ignore all of the above and take up charting :p

Charting? what is this

[toast2success]

Oh, can I throw another question in the mix? I'm not trying to jack your thread Whitey, lots of great info in here so I thought I'd ask my question in here as well. More than happy to start a new thread if needed.

So ...I was keen to get a rough idea of the process one might follow in selecting their share of choice. Example to follow

Lets say I think 'wow I think the Services sector is going to be a boomer over the coming years, in particular the health sector, Im going to check out the health sector'.

So once this has been decided, what path do people take? As a noob I envision myself compiling a list of all the health companies within the Services sector and then getting ahold of their Annual Reports and financial info. From here it would become an analysis exercise that may take some time. Then choosing which point I will enter the market for the particular share.

Is this a realistic rough sketch of the path one may follow?

[steve fleming]

Yes, good idea. Those of us using fundamental methods need more chartists to push share prices to silly extremes. :p

Like any good golfer, you need a good long (term) game and good short (term) game.

You can get by with one or the other, but you aren't going to maximise the opportunities available to you without mastering both!

[shasta]

Oh, can I throw another question in the mix? I'm not trying to jack your thread Whitey, lots of great info in here so I thought I'd ask my question in here as well. More than happy to start a new thread if needed.

So ...I was keen to get a rough idea of the process one might follow in selecting their share of choice. Example to follow

Lets say I think 'wow I think the Services sector is going to be a boomer over the coming years, in particular the health sector, Im going to check out the health sector'.

So once this has been decided, what path do people take? As a noob I envision myself compiling a list of all the health companies within the Services sector and then getting ahold of their Annual Reports and financial info. From here it would become an analysis exercise that may take some time. Then choosing which point I will enter the market for the particular share.

Is this a realistic rough sketch of the path one may follow?

Re the Health sector, have a look on the ASX website - that has a sector by sector breakdown of the stocks, incl healthcare.

Otherwise Steve Fleming may well be worth following re healthcare stocks, like PGC, MLA off the ASX

Use the search function to find threads although started, no point reinventing the wheel, when there is so much good oil on this site.

[shasta]

Charting? what is this

It's a game for those who love to pay brokerage ;)

[Halebop]

Charting? what is this

Technical Analysis (http://en.wikipedia.org/wiki/Technical_analysis)

Sharetrader has a proud history of Technical Analysis (TA) vs Fundamental Analysis (FA) debates that often degerenate into name calling.

There are permutations of technical analysis that vary widely (in the same way that there are various ways to apply and use fundamental analysis). So two people who say they use "TA" may have wildly different techniques in their repertoire. Just like we see some appallingly misjudged fundamental analysis, TA can be horrible too. In short it is just a tool. Just like the builder with his hammer, it is the workman who is responsible for its correct application.

The math of FA and TA actually share much in common. Critics of either don't tend to be well versed in the application of statistical methods. I'm pretty much bemused by the Fundamental vs Technical debate as I use both and simply treat them as tools in my toolbox.

Efficient Market theory is the true arch enemy of TA, FA and most people here in sharetrader. (My interpretation, apologies to purists); This theory suggests that due to information efficiency all remaining outputs are random, rendering time spent on FA and TA useless because the market should already know anything you discover.

[shasta]

Hi all,
a newbie just arrived. A stopped markets holiday season, stink weather, and too much time wasting, online browsing got me here.
Figured this thread might be a good place to start. Read first two pages and then jumped to (this) last page to say hi.
Thought I'd throw some investing idea's into the mix.
Plenty of advise about doing some reading which is a good place to start. Include a book on goal setting early on.
Read something lite on "modern portfolio theory", and think about having an investment portfolio as a goal. Realise it won't
happen instantly, and needs to be worked on. Will have ups and downs.
Now, having set some goals, you may like to document them, set a strategy for getting them, and recording/measuring progress.

I use a very simple PEST system. Just a few note like scribbles covering a couple of A4 pages each Xmas-New year.
P = Purpose High level outline of goal, like get rich, or retire with some dosh, travel to Nepal...............
E = Ends Where I'd like to be by next review. Say, $20k on deposit in one year, and two new $10k shareholdings.
S = Strategy How are you going to do it? Budget for $3k per month in savings. New higher paid job? Plan to read a book on
charting this year to grow the skills base.
T = Targets Do some crystal ball gazing. Plan to have $10k on account by October, and buy some Mighty River Power
shares in govt sell-off, for example. One small step on the plan.

Keep some basic records of what you do, why you did whatever at the time of making the decision, and how it turned out; positive
or negative. You now have a basis for working out what works for you, and what doesn't. Refine the plan, the strategy, reset the the
goals as you knock them off or set new and different priorities. Don't forget KISS. "Keep it simple......" It's easier than getting bogged
down in un-neccessary detail, easier keeping to plan, and quick to review.

cheers, greater fool (my first post)

Just remember the market for all intensive purposes is a living breathing entity, & things change which you will have little/no control over.

I would always encourage anyone starting out to keep things simple, not because they won't understand, but because there really is no need for ANYONE to over complicate things!

Always good to have goals, but don't forget to ensure they are SMART ;)

S - specific, significant, stretching
M - measurable, meaningful, motivational
A - agreed upon, attainable, achievable, acceptable, action-oriented
R - realistic, relevant, reasonable, rewarding, results-oriented
T - time-based, timely, tangible, trackable

Making mistakes is part of the overall learning process, repeating them shows a lack of discipline (in my opinion)

Oh, & welcome to Sharetrader :D

[toast2success]

Re the Health sector, have a look on the ASX website - that has a sector by sector breakdown of the stocks, incl healthcare.

Otherwise Steve Fleming may well be worth following re healthcare stocks, like PGC, MLA off the ASX

Use the search function to find threads although started, no point reinventing the wheel, when there is so much good oil on this site.


Hi, thanks for the answer. I should've clarified, the Health sector was just used purely for example's sake. It could be any sector.

I was more interested in what approach people took once they'd decided to invest in a particular sector.

[shasta]

Hi, thanks for the answer. I should've clarified, the Health sector was just used purely for example's sake. It could be any sector.

I was more interested in what approach people took once they'd decided to invest in a particular sector.

The NZX threads tend to be about dividend paying companies & the ASX about oil & gas/mining companies, but if u look hard enough there is the entire spectrum of the market covered in there somewhere, you will pick up which posters cover what, fairly quickly on here.

Heres a link to add to your favourites gives you plenty of search options...

http://www.afr.com/

Bugger site, used to have different excel downloads, maybe someone can update the link for you, if ive got it wrong!

[Snoopy]

So ...I was keen to get a rough idea of the process one might follow in selecting their share of choice. Example to follow

Lets say I think 'wow I think the Services sector is going to be a boomer over the coming years, in particular the health sector, Im going to check out the health sector'.

So once this has been decided, what path do people take? As a noob I envision myself compiling a list of all the health companies within the Services sector and then getting ahold of their Annual Reports and financial info. From here it would become an analysis exercise that may take some time. Then choosing which point I will enter the market for the particular share.

Is this a realistic rough sketch of the path one may follow?


toast2success, what you have outlined is what I would loosely term a growth strategy. While there is nothing wrong with that per se, you have to remember that there are a lot of people in the market who have been around longer than you and 'know' that the health sector (for example) is a growth area. That means these sector investments may already be more expensive than the market in general. That in turn means that even if your reading of the macro situation is correct and at an operational level your health sector investments (for example) do well, you as an investor may still only get a mediocre return because you paid too much for your investments in the first place.

An alternative approach is a 'value strategy'. In this you invest in shares that have been battered down to a rock bottom price by the market yet you believe still have a realistic expectation that at some stage in the future these investments will both improve fundamentally and in a market popularity sense (a PE ratio rerating). This way you can gain twice when a recovery occurs. Of course the 'realistic expectation' is the important bit. There is no point in buying a share just because it is cheap if it is in a death spiral. There is a long history in markets of value investors outperforming growth investors except at the times of the biggest booms.

Nevertheless there is a middle ground called GARP (a growth at a reasonable price strategy) which can also work well.

SNOOPY

[Lizard]

Hi, thanks for the answer. I should've clarified, the Health sector was just used purely for example's sake. It could be any sector.

I was more interested in what approach people took once they'd decided to invest in a particular sector.

The biggest limit to investment return is not so much money as available time. We are probably all guilty of failing to recognise how key it is to focus the limited time available on finding and following the stocks with the optimum risk/return possibility.

Often "stock screening methods" don't get a lot of separate discussion, but they are implicit in what most people do and often not well thought through. For instance, for many people "stock screening" will start by following the posts of their favourite ShareTrader posters, their brokers newsletter or a magazine/newspaper article.

Within NZ, it is a pretty casual exercise to screen the 170 or so listed stocks. For starters, lots of people would cut them down to only the most liquid and largest market cap - something akin to the top 50. After that, it is not too hard to keep tabs on the lot of them and decide which most appeal. At this point, investors will have personal preferences as to what sort of investments they prefer - yield, growth, value, management, chart (price and volume history), etc.

However, get to any larger pool (e.g. ASX) and the really committed investor/trader will tend to have some larger system. This could be "bottom up" (i.e. looking for companies that meet the right criteria and then deciding whether they look interesting) or "top down" (starting with countries/sectors and looking for best prospects).

At company level, some will use scanning software to rapidly identify changes in price and volume and then buy (and sell) off the chart, perhaps knowing nothing about the company or business. Others will start by searching databases or tables for certain ratios - P/E (price/earnings ratio) has been the historical favourite for finding value.

One of the problems with investment is that a lot of investors looking at the same measures will tend to create a more efficient market in that area and the measure will stop working. For instance, if everyone looks for low P/E stocks as a screening tool, then low P/E stocks will tend to rapidly get picked up and analysed closely. Therefore P/E's are less likely to become depressed for no reason.

Another problem is that it is all very well identifying a measure you wish to use to screen stocks, but then you have to find a database or scanning tool that can find all stocks meeting that measure. So for most small investors, any first stage screening of stock databases is limited to quite commonly available data published in tables by the likes of NBR and IRG in NZ or by the AFR in Australia.

I mostly use fundamental tools for screening stocks (and use charts, badly, to time entries and exits when I have sufficient time free), but find different "tools" tend to be best for different phases of the business cycle/different markets. To get to the data I really want, I have to create it myself - something I can only keep up to date for about 100 stocks, so it is a pretty limited screening tool by that stage and relies on my limited pool having been well selected from the larger pool.

I go back to complete share tables a couple of times a year and sort by basic parameters to try and pick up any new shares I should add to my analysis, but the majority of my first stage screening still comes by reading something someone else has written or randomly checking out an interesting looking Stock Exchange announcement.

Referring back to your query again though, presuming you have decided on a "top down" screening and now want to distinguish between individual stocks in a sector, then it will depend a little how many stocks you need to cut your list down to before you look through in depth. If you need to quickly get rid of 90% of stocks, then I would suggest you could take a share table and run a ruler through the 25% that traded the lowest value over the past week. Then maybe a ruler through any with double digit % price declines in the last week (a safe move for a beginner anyway). After that, you might decide to take out lowest market cap or sort by div yield, Pr/NTA or P/E or simply race through the charts to spot ones that look most positive (obviously need to know a little about this area first).

Once you've got down to the 5-10 stocks you think you have enough time to analyse in depth, then it will come down to looking for your desired combo of value, growth and market sentiment. There are loads and loads of tools out there. There's a good thread called "PE Ratio" (http://www.sharetrader.co.nz/showthread.php?5495-PE-ratio&highlight=ratio) that covers some of the more sophisticated fundamental methods. However, once again, many of these will require so much time spent on each stock, that if you have not selected the right stocks in the first place, you will soon be mired in the slough of investor despond!

In the end, using your precious time will always come down to a compromise between number of stocks followed and depth of analysis on each stock followed. At their best, forums allow us to pool some of that analysis so as to increase both aspects. At their worst, they distract us from both....

[buns]

Great call

A lot of people like Ferrari's, and probably have the money to pay for one yet when you weigh up what a Ferrari will do for you against a Corolla, at a 10th of the price the Corolla is much more value hence most will go for that.

The equation is similar with shares. Just because you like something, dosent mean its worth buying.

And think about it more widely as well, if you like the health sector there is a good chance a lot of others do as well - hence the shares will probably be more expensive as a whole possibly at the expense of other sectors - think late 90's and IT.

However, liking something leads you to understand it and understanding is essential. If a health care stock is deemed by the market 10% over valued and you understand it to the point you think that will make returns of 25% on its equity for decades compared to the consensus saying it will produce 15%, that share is now undervalued.

Using PE's ignores this approach and accepts the markets prices are correct. This is not value investing. Price is what you pay, value is what you get. PE's value using price.

Don't just fall in love with sectors as well. Often bad sectors have some great buys in them as the market forces become exaggerated in downturns and the great companies which always looked just like another one, start to stand out. For instance retail is awful right? Right through the recession JBH made 40% ROE's and has made lots and lots of money for shareholders. All the downturn does is funnel the consumers to the company who best handles/has the key competitive advantage in that sector, for retail/JBH that is price.

[buns]

Just on Lizards comments.

Screening is really quite simple. You consider companies/industries you know about and no other. For instance Buffet has never known anything about tech stocks, he isn't saying they are bad investments overall. Just bad to him as he knows nothing about them.

About 80% of the ASX is of limits to me - I just don't understand most of those companies.

'Screening' is automatic in every facet of life except for investing. For instance, most don't know how to do there kitchen plumbing so don't do it. But if you come to the conclusion, I only need a average job done here, if I do it to a standard of 60% it will justify not paying a plumber. There is a 40% margin of saftey here...

Investing is no different, but the margins of saftey are much smaller because the market is much larger. Hence you really need to understand something to a high degree to create any margin of saftey.

[toast2success]

once again, many thanks. These answers are great. The mud gets a little clearer each day...until someone adds more dirt into my mud puddle

[shasta]

once again, many thanks. These answers are great. The mud gets a little clearer each day...until someone adds more dirt into my mud puddle

Use this site to find stocks of interest to you, in the areas of the market you are interested in.

Perhaps find a stock you like, & post questions on the relevant threads, that way those in the know will be able to direct you, to either more research or like stocks in that area.

General questions are great in this area, but when you have a stock ticker to follow, you will learn even more

[buns]

The best companies I've found are those that operate in predictable industries with moderate growth rates - they seek to grow smarter than their competitors, and do so quietly and consistently. Take a look at DTL in the IT services space, RYM in retirement, IIN in telecommunications. Unfortunately the last 4 years has dragged everyone down, but the strong companies will survive.

Unfortunately??

I thought it was a good thing? Same product, now cheaper.

[STRAT]

Yes, good idea. Those of us using fundamental methods need more chartists to push share prices to silly extremes. :p
And here I was all this time thinkin it was Forums like this one :eek2:

Happy New year Liz.

[STRAT]

Charting? what is thisHi Whiteny.
See Halebop's post on the previous page.
Thanks Halebop.

Whiteny.
Feel like Im butting in on an FA party here but the best advice I can give you is learn to read a chart. Not only will it help you with your entries and exits but it will help you gauge all the advice you get on sites like Share Trader. There are some clever people here but they are not the only ones with an opinion.

As you are looking for advice here on an internet site. Consider this.
If you like what you read from a poster then research the poster. Check out what the hold, held, when they bought and sold. What advice and opinions they gave. The chart will show their performance in a particular stock in black and white. There is a wealth of hind sight here worth putting to good use.

TA is a multi purpose tool for sure.

[Lizard]

Feel like Im butting in on an FA party here but the best advice I can give you is learn to read a chart. Not only will it help you with your entries and exits but it will help you gauge all the advice you get on sites like Share Trader. There are some clever people here but they are not the only ones with an opinion.

As you are looking for advice here on an internet site. Consider this.
If you like what you read from a poster then research the poster. Check out what the hold, held, when they bought and sold. What advice and opinions they gave. The chart will show their performance in a particular stock in black and white. There is a wealth of hind sight here worth putting to good use.


I second that. Despite the impression a forum may give, investing/trading ability is not linked to word length or sentence structure. Nor to self-belief and authoritativeness. :)

[buns]

Check out what the hold, held, when they bought and sold. What advice and opinions they gave. The chart will show their performance in a particular stock in black and white. There is a wealth of hind sight here worth putting to good use.

TA is a multi purpose tool for sure.

Yip, a great starting point. But why look around here? As no one here has managed a sprinkling on Warren Buffet's returns, so you should start with him. Buffet actually hasn't even averaged over 20% PA, but if you look around here you will probably find people advertise them selfs returning more. Double baggers (100% returns) are the norm, with 5 or 10 (1000%) baggers around as well....Yet you don't hear when people fall on the wrong side of these risky stocks, it does happen. Don't be mislead.

In your Buffet reading you won't find TA mentioned anywhere, if you dig hard you may find a quote from him on it, and he will pretty much state its a waste of his breath.

Berkshire don't use any kind of graphical information in any reporting either. I think it comes from the same thinking they invest with, in complete understanding is key. If you understand the raw data/tables the graph will make sense in your head, but sometimes that dosent work the other way as graphs can mislead.

This sounds kind of silly in a way as I endorse graphs quite a bit at work, however in the investing world why would you want to follow or do anything which those misleaders do when you have a impeccable track record? Charts being a common language in investing, much of which many have followed into poor results.

Its kind of like the different types of Animals reacting to hunters/people. Deer who have seen it all before are scared shiitless of any thing which looks like a human, knowing anything associated with them is fearful. It's engrained in them from birth that humans mislead them into death. So even when a friendly ranger tries to approach a deer, the deer runs quick fast.

I'm probably reaching, but Berkshire using graphs could be the ranger with the value investors being the deer.

[STRAT]

Yip, a great starting point. But why look around here? As no one here has managed a sprinkling on Warren Buffet's returns, so you should start with him. Buffet actually hasn't even averaged over 20% PA, but if you look around here you will probably find people advertise them selfs returning more. Double baggers (100% returns) are the norm, with 5 or 10 (1000%) baggers around as well....Yet you don't hear when people fall on the wrong side of these risky stocks, it does happen. Don't be mislead.

In your Buffet reading you won't find TA mentioned anywhere, if you dig hard you may find a quote from him on it, and he will pretty much state its a waste of his breath.

Berkshire don't use any kind of graphical information in any reporting either. I think it comes from the same thinking they invest with, in complete understanding is key. If you understand the raw data/tables the graph will make sense in your head, but sometimes that dosent work the other way as graphs can mislead.

This sounds kind of silly in a way as I endorse graphs quite a bit at work, however in the investing world why would you want to follow or do anything which those misleaders do when you have a impeccable track record? Charts being a common language in investing, much of which many have followed into poor results.

Its kind of like the different types of Animals reacting to hunters/people. Deer who have seen it all before are scared shiitless of any thing which looks like a human, knowing anything associated with them is fearful. It's engrained in them from birth that humans mislead them into death. So even when a friendly ranger tries to approach a deer, the deer runs quick fast.

I'm probably reaching, but Berkshire using graphs could be the ranger with the value investors being the deer.Buns. Dude. You are the king of Metaphors :D

Its human nature. even honest people play up their success and play down their failures.

[STRAT]

authoritativeness. :)That was a long word Liz. In a well structured sentence too.:p

[Lizard]

That was a long word Liz. In a well structured sentence too.:p

Exactly :) Just making it clear which poster I was referring to. :p

[STRAT]

Exactly :) Just making it clear which poster I was referring to. :p
I think not. You are one of the sharpest knives in the drawer and Im not the only one who thinks so.

[Lizard]

Thanks for the compliment, Strat. But I think that makes the point - you may rate my ability but I'm pretty frustrated with it here, still trying to edge my way, painstakingly, towards making that first $1m. Whenever some anonymous poster indicates that they've followed me into some dodgy spec trade, I know it's all going to go horribly wrong! :eek2:

[h2so4]

Thanks for the compliment, Strat. But I think that makes the point - you may rate my ability but I'm pretty frustrated with it here, still trying to edge my way, painstakingly, towards making that first $1m. Whenever some anonymous poster indicates that they've followed me into some dodgy spec trade, I know it's all going to go horribly wrong! :eek2:

Well who would do that? LOL

I worked out from one of your posts that you had at least 30+ years of investing still to do. Mistakes are part of the deal, get comfy where you are at. Success is about feeling positive NOW! about your expected outcomes not WHEN! you get that easy :) first $1m.

Oh yeah, I have added a disclaimer to my signature just incase anybody gets the wrong impression. LOL:)

[STRAT]

I worked out from one of your posts that you had at least 30+ years of investing still to do. :) first $1m.
:)In 30 years a million will get ya a bottle of milk, a packet of faggs and maybe a loaf of bread. :D

[Lizard]

In 30 years a million will get ya a bottle of milk, a packet of faggs and maybe a loaf of bread. :D

Oh great. And now it seems the govt super fund (http://www.stuff.co.nz/business/6239582/NZ-Super-Fund-value-declines-1-4-billion) is doing worse than I am, so will be no help at all... time to take up creative arts as a hobby! :D

(Must be nearly old enough for Maslow to let me self-actualise?)

[STRAT]

I'm sweet then, cos I'm lactose intolerant, have given up smoking, and am on a low carbohydrate diet ;-)Wow KW. You must be miserable. lol.
Seriously though. Good on ya for No2 and carbs are the No1 enemy of your waist line.