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born2invest
18-12-2013, 03:07 PM
Hi all,

I recently read a book on investment psychology and it recommended keeping an investment blog/journal on all my thoughts and ideas about our investments in order to be able to look back and not let hindsight or outcome basis get in the way of logical thinking.


I'd prefer to keep it on an electronic version and thought it would be good to post here so I could get feedback from others on my decisions. I'll give a brief history on what formed my thinking and update it from time to time as I make more decisions.

Feel free to comment, question or just follow my "blog"

Thanks,
Elliot.

born2invest
18-12-2013, 03:14 PM
A bit of background on me:

- Live in Auckland
- Work in logisitics/supply chain and been working going on four years since graduating university
- 25 years old, male
- Have been saving/investing since graduating and working full time
- Follow Buffett type investing and use discount dividend model as main source of valuing companies

born2invest
18-12-2013, 03:40 PM
How growing up formed my investment ideas:

School/university:
- Had to work very hard at school to keep up. My older brother and younger sister cruised through school. I had to get extra classes and after hours learning to keep up at school and university.
- Was particularly good at science and maths. This led me in good stead analysing/forecasting and quickly identifying patterns and ability to grasp financial figures quickly.
- School taught me to outwork people. I wasn't going to out think them at first glance, but working at problems for longer than others allowed me to do well.

Parents:
- Parents were corporate employees working for large companies. They earned good salaries and held management positions before they have recently scaled back and now both work part time.
- Taught me that if I wanted what they have, follow their path of corporate job, upgrade house every 5-10 years and get bigger mortgage to pay off. I thought I could do better.
- They are both quite risk averse and have never invested into shares directly. Only investment is own home and company pensions (which now sit in term deposits).
- Both were very supportive and taught me to go after what I wanted and to talk to the right people to get what I needed or wanted.

Sports:
- Played variety of sports through school but was best at cricket (made and captained school and Auckland rep teams)
- Learnt people skills, how to deal with different personalities and get the most out of people.
- Most important skill I learnt from cricket was patience. I was an opening batsman played to my limited strengths. Some other batsmen of my age were extremely talented and could play a wide variety of shots on any deliveries. I could only really play 3 different shots well and had to be extremely pateint for the ball to arrive in those spots for me to do well. Slow and steady wins the race was my technique. This served me well in investing to wait for that "fat pitch" as Buffett calls it.
- If I had a weakness to certain things, I would stay later at practice, practice by myself or friends/family and work work work until it became a strength.
- I got dropped from the school 1st XI after working so hard to make it. This created a real "chip" on my shoulder and made me work even harder.

Reading:
- Prior to university, I hardly ever used to read books.
- During my first year of university whilst waiting at the airport to fly down to Palmerston North, I came across a book called "rich dad, poor dad" in the bookstore at the airport. I read it and it was extremely interesting. I went straight to the library once I arrived in Palmy and put it on hold straight away.
- This sparked an interest in finance and particularly stocks and property. I've since read 100's of books on the subject. It is not uncommon for me to have 30-40 investment books on hold at the library at any one time. I generally read 1-2 investment books each week if I can.
- I got a particular interest in value type investing and hang onto any word Warren Buffett and the likes have to say. I can honestly say read 30+ Berkshire Hathaway annual letters to shareholders was the best learning I've ever read on the subject.
- I came across words such as "mr market" "margin of safety" and "intrinsic value" and begun using a variation of the dividend discount model/gordon growth model amongst other things.

Harvey Specter
18-12-2013, 03:53 PM
- Most important skill I learnt from cricket was patience. I was an opening batsman played to my limited strengths. Some other batsmen of my age were extremely talented and could play a wide variety of shots on any deliveries. I could only really play 3 different shots well and had to be extremely pateint for the ball to arrive in those spots for me to do well. Slow and steady wins the race was my technique. off topic but my brother, a tail ended batsman famously earned himself a 40 minute duck while playing under 18 rep level cricket. Not sure if the other batsman managed to get enough runs to make his tactic be worthwhile.

- This sparked an interest in finance and particularly stocks and property. I've since read 100's of books on the subject. It is not uncommon for me to have 30-40 investment books on hold at the library at any one time. I generally read 1-2 investment books each week if I can. Any particular favorites? Any you have bought after reading them? Any you have re-read?

Snow Leopard
18-12-2013, 04:24 PM
I hope that this is not going to be another trilogy trying to cash in on The Hobbit hype.

Best Wishes
Paper Tiger

born2invest
18-12-2013, 04:26 PM
My first share purchase:

- Ryman Healthcare (RYM)
- early 2010 (I was 21 at the time)
- Bought for $2.19
- Sold two weeks later for $2.26
- Biggest mistake of my investments so far.
- I told my mum and dad that I'd done lots of research and opened up a sharetrading account and bought some shares. They therefore tried everything they could to get me to sell the shares which I did. I have since watched the share price climb to around the $8 mark, losing out on a 300% rise in 3.5 years.
- Things I learnt are to take peoples advice with a grain of salt but ultimately to trust my research and make my own decisions.
- After selling these off at a 'handy profit' I decided to use the funds to pay back some of my student loan, reducing the amount to around 30k.

born2invest
18-12-2013, 04:28 PM
off topic but my brother, a tail ended batsman famously earned himself a 40 minute duck while playing under 18 rep level cricket. Not sure if the other batsman managed to get enough runs to make his tactic be worthwhile.
Any particular favorites? Any you have bought after reading them? Any you have re-read?

Favourites would be "Buffettology" and "Why Warren Buffett looks to growth and management when investing".

born2invest
18-12-2013, 04:34 PM
Second "Investment":

- I set up an account with Rabodirect and "invested" my money into $1000 lots of term deposits at around 4.5% interest.
- I enjoyed seeing my savings grow but the interest was tiny for the time it was taking me to save the money.
- I intended to save this up a buy a house.
- I learnt from this that term deposits are not going to make you wealthy.
- I worked at ASB for 1.5 years whilst in this period and had lots of conversations with wealthy businessmen/women that came in who had invested into real estate and the stock market.
- My uncle has a few stock and property investments so I learnt through.
- My partner and I made an offer on a house as an investment property in late 2011 but this fell through at the last stage after 4 months on council consultations.

born2invest
18-12-2013, 04:38 PM
Third Investment:

- I did initial research on NZX and ASX companies to see what 10k could buy me after the house offer fell through.
- I read a few Warren Buffett books and found out he believed very strongly in Coca Cola.
- I saw Coca Cola Amatil were listed on the ASX and thought to myself that they are a large well known and stable company, I can't go wrong investing in them. They are getting back into alcohol, etc, they are a great company.
- After investing, the CEO said he would leave, directors began to sell shares, the share price was bouncing around.
- I didn't like the risks and the potential upside was limited with a slow growing company. I decided to sell, making around 11% or so on the company in 9 months or so of holding.
- I learn never to just invest in a company because it is well known and has done well in the past. The future is what counts.

gv1
18-12-2013, 05:51 PM
You are a gem.

toast2success
18-12-2013, 08:41 PM
How growing up formed my investment ideas:

- Was particularly good at science and maths. This led me in good stead analysing/forecasting and quickly identifying patterns and ability to grasp financial figures quickly.


Did you end up majoring in one of these or double major in one of each?

Great that you have done this and are aware of this at a 'young' age. I'm still trying to pay off 15 years + of living on credit cards. Awesome to see what you have done and hope it inspires others.

born2invest
19-12-2013, 06:39 AM
Did you end up majoring in one of these or double major in one of each?

Great that you have done this and are aware of this at a 'young' age. I'm still trying to pay off 15 years + of living on credit cards. Awesome to see what you have done and hope it inspires others.

I ended up studying agribusiness/horticulture at Massey. I enjoyed papers in import/export and supply chain mostly.

born2invest
19-12-2013, 07:43 AM
4th Investment:

- Once I sold out of Coca Cola Amatil, I had the $12k or so from the investment and another 6k to invest.
- I wasn't in such a big rush to invest it anywhere so I waited several months for a good opportunity
- Credit Corp Group (CCP) was a company I came across after scrolling through every single ASX listed company.
- I did all the research I thought I needed to do and put around $3k into the investment. I was very nervous when I initially bought the company because it was a smaller, less well known company. I thought every day about selling it so I could sleep better at night, but resisted the urge. I bought them at exactly $6.00 around April 2012 and I have held them since for a near 50% return on the investment thus far.
- I used the remaining 15k to put $10k into my student loan, reducing the amount down to about $15k outstanding and the remaining $5k into savings.
- I learnt from this investment that I should trust my judgement after I have bought the shares and that a 10% or so drop (like what happened soon after I bought them) is temporary, good companies will recover from the volatility.
- This company purchase was a big learning curve for me as it was a smaller company ($250-300 million market cap) when I first bought it. I'd always preferred big and best when it came to companies but this taught me that there is much better opportunities to uncover "hidden gems" that aren't widely talked about and that they could be a much better investment that big companies that everyone knows about and that is widely followed by financial media and investors.

born2invest
19-12-2013, 08:00 AM
5th/6th "Investments":

- After my purchase of Credit Corp Group in April 2012, I still had 5-6k left in savings. I kept accumulating money from my wages and my savings account kept growing. I couldn't find anything I wanted to invest into for another 12 months and I had about $18k in savings by March 2013.
- It just so happened that I needed both a new car (my old one kept breaking down, so spent $5k on a new more reliable one which I hope to keep for many more years), I had to spend over $2k on medical bills in order to sort out digestive problems that arrised and also had to pay $1k in a court claim and replace my road bike which cost $1k also after the court claim on a cyclist vs car incident was sorted through. This wiped out almost $9k of my savings so I was reduced to 10k left by April/May 2013.
- I decided to put this remaining $10k into a term deposit to earn 4% instead of 3% in my savings account. What a mistake this was!
- While my term deposit was locked away I saw the price of several shares plummet to good prices. McMillan Shakespeare (MMS) was one. Supply Network Limited (SNL) was another that dropped from $1.90 down to $1.25 or so. Another mistake was not breaking the term deposit and investing in the company at this rediculously cheap price. My term deposit finally matured in late July and I bought $12k worth of SNL for around $1.40. It is now trading around the $1.90 mark again, a 35% increase not including the dividends.
- Lesson I learned from this episode was that at the end of the day, the difference between 3% and 4% in a savings account or term deposit over 3 months on $10k is around $20-30. If I had bought SNL at $1.25 as opposed to $1.40 I could have made 50% profits as opposed to 35% so I essentially lost almost $2000 or so in potential gains by earnig an extra $20 on my term deposit. Lesson learned!
- Lesson is to keep cash available to use immediately when good oppotunities arise and not have it locked away in term deposits/fixed interest.

born2invest
19-12-2013, 08:16 AM
7th Investment:

- After my July purchase of SNL, I only had around $1-2k left in my savings account.
- I continued to save $1200 per month or so on average in my savings account and was ready to pounce at any opportunity.
- After my SNL purchase, I begun to look for a concrete forumla that allowed me to put a value on a company. After continuing to read various books, I started to become frustrated that they talked about intrinsic value, margin of safety, etc but never showed any calculations on how to achieve this. I started looking at discounted cashflow analysis, but found this too difficult to put into practice. I looked at book value, net nets, etc but these didn't seem to fit well with businesses with bright futures, just the bottom of the heap pure value stocks which I wasn't particularly keen on. I wanted to be a "sit on my hands investor" like Charlie Munger talks about. Make one good decision and sit on it for years to come.
- I found a university textbook at my cousins house who was studying finance at Otago. I had all these business valuation methods and talked about the pros/cons of each and simple examples of each. Dividend Discount Model is what I had been looking for.
- I spent weeks on excel after work tinkering with putting together a spreadsheet for all these different companies I'd been looking at to put a value on these companies.
- It worked out well, but all the companies I was looking at were 20-60% overvalued by my calculations.
- I waited from July to December and nothing was looking great. Savings were building up to just under $10k and I was looking everywhere for anything that would provide a return on the ASX or NZX. I looked at arbitrage possibilities but was always late to the party and the returns were minimal.

- Credit Corp Group was getting ever closer to my target price until a few weeks ago it dropped from from over $9.00 to $8.59 in one day. I decided to buy with $3k at $8.60 increasing my holding in the company.
- I also put a few thousand into my student loan, reducing the value outstanding to under $7k
- Lesson I learned from this is to put together a game plan or "formula" that works in concrete numbers that doesn't cloud my judgement or allow my emotions to get involved.
- I also learnt that having cash on hand to act quickly is essential to getting good opportunities before others see them.
- Third lesson was that not to overlook companies that I already own for further investment.

born2invest
19-12-2013, 08:22 AM
Since my first investment in early 2010 in RYM I've felt I've developed my investment skills immensely and continue to read and learn everyday. I've found that learning the basics of investing is the easy part. Controlling your emotions and acting with a clear, logical thought process is the hardest part to master. Not getting caught up in the "hot" opportunities of the day and sticking to what you know is the best lesson I've learnt along the way. i.e. not investing in momentum stocks, technology or mining companies but sticking to basic easy to understand industries like debt collection, truck/bus parts, banks, insurance, paints, retirement homes, ports, transport companies and all those boring (but profitable) things.

Harvey Specter
19-12-2013, 08:39 AM
Do you have an exit strategy?

Any reason why you are now focusing on the ASX? or is that just a coincidence?

born2invest
19-12-2013, 08:56 AM
Do you have an exit strategy?

Any reason why you are now focusing on the ASX? or is that just a coincidence?

Exit strategy is if I made the incorrect analysis when I first bought or the business deteriorates after buying (such as Coca Cola Amatil). If the business becomes overvalued significantly, I'd probably still hold it if the longer term outlook is still ok.

I don't aim for so many % increase then I sell, etc because then I just have to do all the work and look for another buy.

Just coincidence I own 2x ASX stocks. I would prefer to own NZX companies but haven't found any cheap enough recently.

born2invest
20-12-2013, 07:46 AM
I have a feeling you are about to get a stonking big lesson in the benefits of technical analysis.

To be quite honest. I couldn't care less what a squiggly line on a screen is doing.

percy
20-12-2013, 08:00 AM
To be quite honest. I couldn't care less what a squiggly line on a screen is doing.

Tis the time of year for Ho Ho Ho.!!!,and squiggly lines giving big warning signals,ho,ho ,ho.!!
Some lessons come at great cost,ho,ho,ho!!!! lol.

toast2success
20-12-2013, 08:39 AM
To be quite honest. I couldn't care less what a squiggly line on a screen is doing.

I haven't started investing so don't have any 'real world' experience but have started reading up on technical analysis and am interested to hear opinions on it. I was wondering do you find your decisions at this stage more based off fundamental analysis ? and at this stage of your investing journey what makes you shy away from technical analysis ?

born2invest
20-12-2013, 10:55 AM
I was wondering do you find your decisions at this stage more based off fundamental analysis?


I think my previous comment referring to technical analysis as a squiggly line makes it pretty clear.


at this stage of your investing journey what makes you shy away from technical analysis


Because I invest in companies, not a line on a screen.

born2invest
20-12-2013, 10:59 AM
squiggly lines giving big warning signals.

Please explain.

born2invest
20-12-2013, 11:23 AM
I'm not particularly interested in using technical analysis but I do like to expand my knowledge and know the basics of it.

Ok thanks I'll get some out from the library as it is always good to seek opposing views.

Wolf
20-12-2013, 11:26 AM
Born dont think of it as a squiggly line, more of the patterns of buying and selling by people because that is what makes it. Isn't the juglar/business cycles a squiggly line?

born2invest
20-12-2013, 12:03 PM
Born dont think of it as a squiggly line, more of the patterns of buying and selling by people because that is what makes it. Isn't the juglar/business cycles a squiggly line?

It is a business cycle. So yes, I suppose it is a form of charting/technical analysis. I chose the 7 year timeframe because 5 seemed too short and 10 too long. It made obvious sense to correlate it to the business cycle also.

born2invest
20-12-2013, 12:19 PM
Warren Buffet has two rules of investing.
#1 Don't lose money
#2 Don't forget Rule #1

TA is the best tool you have in order to ensure you don't lose money. I find it essential in protecting my capital, and minimising my risk. Combining FA (to choose stocks) with TA (to determine buy/sell timing) makes for super charged portfolio returns (at least in my experience). My biggest regret in life is not understanding the benefits of TA sooner, as I would have a **** load more money right now!

Buffett doesn't use technical analysis. Look at his purchases and then compare it to the charts of Coca Cola where he bought after the stock had risen substantially the prior few years. Look at Washinton Post where the stock declined 30-40% and stayed there for a year or so before he finally broke even after around 2 years.

Snoopy
21-12-2013, 06:25 PM
Since my first investment in early 2010 in RYM I've felt I've developed my investment skills immensely and continue to read and learn everyday. I've found that learning the basics of investing is the easy part. Controlling your emotions and acting with a clear, logical thought process is the hardest part to master. Not getting caught up in the "hot" opportunities of the day and sticking to what you know is the best lesson I've learnt along the way. i.e. not investing in momentum stocks, technology or mining companies but sticking to basic easy to understand industries like debt collection, truck/bus parts, banks, insurance, paints, retirement homes, ports, transport companies and all those boring (but profitable) things.


born2invest, I have been reading your investment diary on this thread with great interest. I have held 'big bank' shares over the last ten years based on the general logic that banks seems to do well in good times and bad and have tended to have dividend yields that outperform their own term deposits. However, I have never claimed to have understood bank shares and have spent are large amount of time over the last two years trying to do so.

I am pleased for you that you have grouped three classes of financial shares in the 'easy' basket. But I do wonder if your intellect is so much greater than mine (which in fairness I admit it may be) or whether you are showing just a touch of youthful exuberance with say your CCP investment. I go back on this forum to the days of the late Gerry Stolwyk who was a huge enthusiast in the finance (subset debt collection) sector. I missed out on the Baycorp boom (the hot share in this sector at the time, but one I didn't understand) but also missed out on the subsequent bust.
Collection House in Australia I recall charted a similar path. I wonder how CCP today compares with those two historic examples?

SNOOPY

winner69
21-12-2013, 06:32 PM
Snoopy - if you want to remind you of Gerry's exciting times I posted the old charts of CLH and CCP as well as RMG on the CCP thread (Page 8)

He was a good joker that Gerry

http://www.sharetrader.co.nz/showthread.php?5426-CCP-Creditcorp/page8&highlight=ccp

born2invest
23-12-2013, 07:31 AM
born2invest, I have been reading your investment diary on this thread with great interest. I have held 'big bank' shares over the last ten years based on the general logic that banks seems to do well in good times and bad and have tended to have dividend yields that outperform their own term deposits. However, I have never claimed to have understood bank shares and have spent are large amount of time over the last two years trying to do so.

I am pleased for you that you have grouped three classes of financial shares in the 'easy' basket. But I do wonder if your intellect is so much greater than mine (which in fairness I admit it may be) or whether you are showing just a touch of youthful exuberance with say your CCP investment. I go back on this forum to the days of the late Gerry Stolwyk who was a huge enthusiast in the finance (subset debt collection) sector. I missed out on the Baycorp boom (the hot share in this sector at the time, but one I didn't understand) but also missed out on the subsequent bust.
Collection House in Australia I recall charted a similar path. I wonder how CCP today compares with those two historic examples?

SNOOPY

Easy to understand for me basically means can I explain:

- how the business makes money to a 5 year old child?
(Yes, they buy bills people can't pay for less money and then try to get the full amount of the bill back for more money)

- Will the industry definitely be around in 10 years time?
(Yes, I worked at ASB for two years and the amount of people that have personal loans and maxed out credit cards is not uncommon, I don't see this changing anytime soon)

I don't claim to know the finer points of debt collection or the finer points of complicated banking equations. But I can understand the basic points of how they make money and if their product or services are likely to be around in the future.

born2invest
23-12-2013, 02:11 PM
I won't have access to the internet over the next 2.5 weeks so am going to put my net worth investment figures in here to compare year on year. These are all converted to NZD using a rough daily exchange rate. This is as at 23/12/2013

Shares:
Credit Corp Group- $6,862 ($8.85)
Supply Network Limited- $14,680 ($1.91)

Cash on hand:
Australian cash- $513
New Zealand Dollars- $543

Student Loan- $6,687

Total Assets- $22,598
Total Net Worth Investments- $15,911

born2invest
23-12-2013, 02:12 PM
Want to see what a portfolio return using TA looks like?

My Growth portfolio, 17 stocks, purchased over the last three years from 2010, current return is 123% (excluding dividends and the profits I just took on FXL, SGN and MNY).

Trading portfolio, return on the 11 stocks currently owned which were purchased within the last six months is 34%. If I include all shares in that portfolio bought and sold over the last 12 months, my return is actually 310%. That's across dozens of stocks bought and sold.

Returns like that don't come from buying single stocks and waiting years for the market to rerate it. TA is about timing, telling you when to be in and when to be out, when to buy low and sell high, so that your money is always working the hardest for you, rather than stuck in a stock that is going to take years to go anywhere, or worse, is in a downtrend. For me, trading without TA now would be like trying to run a sprint with my ankles tied together!

Well done. Congratulations.

Feel free to write your own journal on Share Trader also so we can learn from you.

born2invest
23-12-2013, 02:53 PM
Goals for year end 2014 are to:

- Pay off student loan completely
- Have net worth of $35k
- Hold minimum 3 stocks to increase diversification

I will review this in the end of December 2014.

toast2success
24-12-2013, 09:43 AM
Student Loan- $6,687


Out of interest, what made you invest when you still had a student loan to pay ? I was always under the impression (well I have bought into the idea anyway) not to invest until debt such as students loans, credit cards etc were cleared.

Harvey Specter
24-12-2013, 10:31 AM
Out of interest, what made you invest when you still had a student loan to pay ? I was always under the impression (well I have bought into the idea anyway) not to invest until debt such as students loans, credit cards etc were cleared.student loans are interest free so why accelerate payments unless you plan to go overseas (ie. Interest will be charged).

PartyPooper
24-12-2013, 10:57 PM
Just echoing the previous 2 posts best way to pay of a student loan is as slow as possible. If Minimum wage and inflation goes up that's great because your student loan stays the same and you pay it off faster.
Every year I studied I used the optional 1000 dollars in course related costs to add to my capital and lock in a term deposit or high interest savings account depending of what was better at the time.
In the end though with all the 60 hour weeks, I'm working I'm looking at paying off my student loan in about 16 weeks. Paying about 130-150 depending on my hours a week will be great having that available.

I'll probably start Kiwi saver when its paid of and increase my savings account payments per week from 50 to 70. Should still leave an extra 50 or so for some extra shares in SUM =D

Stranger_Danger
29-12-2013, 03:58 PM
born2invest - for what it is worth, and to show you that it takes all types to make a market, I'm currently easing out of my CCP, although I haven't sold any CLH yet and I think there is plenty left in FSA.

Taking CCP as an example, I started buying at 40 cents - although I believe the pre-bust high was something like $14! It does tend to back up the people who say you shouldn't buy and hold forever.

The reasons I'm starting to sell are

(a) I just like to sell things eventually. Selling is the hard part of investing.
(b) Debt collectors tend to blow up eventually. The numbers change incredibly quick when you've valued your ledgers on the basis of achieving one outcome, then you get a very different outcome.
(c) I believe a lot of debt collectors time has been spent collecting from people who could pay, but chose not to, knowing they'd get "a deal" by going through the process. A falling interest rate environment has helped such people.
(d) Debt collecting is way tougher when people simply can't pay, say, because they've lost their 250k mining job in the outback and are now driving a bread truck in the city because the miners aren't hiring.
(e) Debt collecting gets way tougher if we do get a period of housing prices falling, which I do see as a possibility in AU in the next 2 years.
(f) I've made my money and try not to be greedy.

I get why you're buying CCP. Everything looks ok. Balance sheet great, good track record from 2008 onwards etc.

I'm a funny dude. When things look good and everyone is happy, I worry. That is sort of where I'm at with CCP, but I don't feel it is overvalued - I just think we might get some outcomes a bit different to the 2008-2013 period, at some stage in the next year or two.

So there you go - each to their own. There is no one "right" answer when it comes to investing.

GTM 3442
29-12-2013, 10:56 PM
. . . I'll probably start Kiwi saver when its paid of and increase my savings account payments per week from 50 to 70. Should still leave an extra 50 or so for some extra shares in SUM =D

I am a little wary of Kiwisaver.

I see it becoming a political football over the next decade or so.

Initially a retirement savings vehicle, it has already been subverted into a mechanism to help raise the deposit for a (first) house. Who knows what the next "tweak" will be? And who by ? And when ?

The tax credit has already been halved. When we start getting Kiwisaver millionaires, expect it to be cut again.

We then come to the "exit" scenario. There has been some discussion over the past year about what to do on retirement, when member's Kiwisaver funds become available.

I suspect that a few horror stories of people blowing their nest-eggs will be used as evidence of the "need to protect people from using their own money for their own purposes".

I suspect that the fund management industry will lobby hard for withdrawals to be taken as an annuity. The past year has seen the UK print media full of annuity horror stories. Be warned.

I suspect that suggestions of a "withdrawal" tax will appear.

I suspect that politicians will listen to the suggestions, and that over time, Kiwisaver will become ever more restrictive.

Good luck with it. ;)

cyclist
30-12-2013, 09:30 AM
GTM. While those risks are certainly credible, they need to be weighed against the employer matching of contributions (except for company's where they have opted out via the employment contract). The employer contribution gives an immediate return on investment that outweighs the risks in my mind.

Having said that, it would be dangerous to use Kiwisaver as your only savings vehicle. Certainly only contribute the minimum required, and save a significant chunk external to Kiwsaver as well (which B2I already seems to be doing).

B2I. A great idea (and somewhat brave) posting your journey here. I am enjoying reading it.

fungus pudding
30-12-2013, 10:56 AM
Just echoing the previous 2 posts best way to pay of a student loan is as slow as possible.


But Michael Cullen assured us removing interest would mean students would be able to pay off the capital faster, and that is what they would do. Weren't you listening? :D

Aaron
30-12-2013, 01:28 PM
But Michael Cullen assured us removing interest would mean students would be able to pay off the capital faster, and that is what they would do. Weren't you listening? :D
Maybe if central banks allowed a little deflation it would get them moving.

Still an interest free loan isn't as good as being paid to go to university like our current batch of politicians were back in the good old days.

While I am hijacking the thread, GTM I think Kiwisaver is good as it stands even better when it was $1,042 a year but I agree you don't know how it will be changed but you can guarantee they will be forcing people to take an annuity in a few more years. Depending on the returns from your fund manager, paying off the mortgage faster with those funds might work out better in the long term.

born2invest
04-01-2014, 09:13 AM
Out of interest, what made you invest when you still had a student loan to pay ? I was always under the impression (well I have bought into the idea anyway) not to invest until debt such as students loans, credit cards etc were cleared.

Interest free so why not?

born2invest
04-01-2014, 09:18 AM
Yup, I have to admit I can not understand that either. I have a relatively small student loan $20k (accumulated over the last 5 years) and have absolutely no intention of paying any of it back (other than compulsory repayments) until I go overseas (when I will just pay the whole lot off). In the mean time I have significantly increased my share portfolio over the same time frame (earned a good return) and in effect made use of the free money the government offers students.

Is there a reason you have payed back the government B2I? The 2 reasons I can think that make sense would be psychological reasons (I.e. don't like to feel in debt), or some kind of ethical one where you feel you should pay the G back if you can. From my perspective both reasons don't make financial sense though, which, correct me if I am wrong, is the general theme of the thread...

Not wanting to come across as giving you a hard time here mate, just interested in your logic there. Good luck with your investments and Merry Xmas :)

I originally planned to not make any additional payments and just have my salary pay off 3-4k per year and have it paid off after 8-9 years time when I'm 30/31 years old.

I therefore built up a small portfolio with my savings and planned to continue doing this.

However, the student loan always was in the back of my mind nagging away at me and felt like a weight on my shoulders. I'm the kind of person that looks to tick off things in life and the student loan was always one that just sat there not getting much progress. I therefore looked to accelerate the payments to "tick it off" so to speak and move on with one less thing to think about.

In terms of fully rational thinking, it would make sense to not make any extra payments, this is something I thought about for months whether I should or should not make extra payments but in the end decided to for the above reasons.

born2invest
04-01-2014, 09:21 AM
born2invest - for what it is worth, and to show you that it takes all types to make a market, I'm currently easing out of my CCP, although I haven't sold any CLH yet and I think there is plenty left in FSA.

Taking CCP as an example, I started buying at 40 cents - although I believe the pre-bust high was something like $14! It does tend to back up the people who say you shouldn't buy and hold forever.

The reasons I'm starting to sell are

(a) I just like to sell things eventually. Selling is the hard part of investing.
(b) Debt collectors tend to blow up eventually. The numbers change incredibly quick when you've valued your ledgers on the basis of achieving one outcome, then you get a very different outcome.
(c) I believe a lot of debt collectors time has been spent collecting from people who could pay, but chose not to, knowing they'd get "a deal" by going through the process. A falling interest rate environment has helped such people.
(d) Debt collecting is way tougher when people simply can't pay, say, because they've lost their 250k mining job in the outback and are now driving a bread truck in the city because the miners aren't hiring.
(e) Debt collecting gets way tougher if we do get a period of housing prices falling, which I do see as a possibility in AU in the next 2 years.
(f) I've made my money and try not to be greedy.

I get why you're buying CCP. Everything looks ok. Balance sheet great, good track record from 2008 onwards etc.

I'm a funny dude. When things look good and everyone is happy, I worry. That is sort of where I'm at with CCP, but I don't feel it is overvalued - I just think we might get some outcomes a bit different to the 2008-2013 period, at some stage in the next year or two.

So there you go - each to their own. There is no one "right" answer when it comes to investing.

Thanks for the input.

I appreciate your thoughts but I've made the mistake before of listening to one or two people and who talked me out of investments so would prefer to keep them for the time being.

Schrodinger
04-01-2014, 09:24 AM
I know I shouldn't lead the young astray but you should consider getting a margin loan.

Keep it at very conservative gearing levels 40% is a good start. KW has good advice and I would set up separate accounts so you can diversify easier.

Generally if you research enough this will benefit you in the long term.

The most difficult part is when to sell. I have placed a CAGR between 25-30% minimum to make this easier.

born2invest
04-01-2014, 09:27 AM
I'm also in kiwisaver and just contribute 3% from my salary each year with employer matching. I'm with Superlife who I highly recommend for anyone in Kiwisaver.

I've been in since I began part time jobs at university.

It is more of a back up retirement savings plan and will be a nice bonus when I hit my 60's. I don't miss the $30 per week and it is accumulating quite well.

born2invest
04-01-2014, 02:03 PM
I know I shouldn't lead the young astray but you should consider getting a margin loan.

Keep it at very conservative gearing levels 40% is a good start. KW has good advice and I would set up separate accounts so you can diversify easier.

Generally if you research enough this will benefit you in the long term.

The most difficult part is when to sell. I have placed a CAGR between 25-30% minimum to make this easier.

Too risky for me. I couldn't sleep at night having a margin loan.

The companies I own and look to buy are generally quite small in market cap and margin lending is only around 30-40% or they don't provide margin lending at all.

born2invest
10-01-2014, 09:31 AM
By the way I am reading Ben Graham's "The Intelligent Investor" which I imagine you have read. What are you thinking about where we are in the market cycle at the mo? The more I read his book the more conservative I find myself getting, and thinking lowering my exposure to equities might be a good idea. What are your thoughts?

Yes I've read it. The points on Mr Market, margin of safety, avoid popular "trendy" stocks, avoid companies that are overly acquisitive, etc are excellent points.

In terms of the Intelligent Investor, Graham mentions to keep a portion of your portfolio in bonds even if you are quite an aggresive investor. I don't follow this advice and don't have any desire to purchase bonds. I'd rather keep my non stock "cash" in online savings accounts than bonds. I don't believe in balancing my portfolio either (i.e. keeping religiously to say 80% stocks 20% cash and balancing ever few months).

As far as the whole market goes, I don't really follow it other than comparing my returns occasionally to the NZX/ASX index to see how I'm going with my investments. If you want to look into seeing if the overall market is cheap/expensive the Shiller P/E ratio on GuruFocus is one I've looked at occasionally as articles I've read have referred to it many times. http://www.gurufocus.com/shiller-PE.php

I don't really follow the index or entire market for several reasons. Firstly is because I invest in companies not an index. I only care about how cheap/expensive the company is I'm looking to buy or currently hold. Secondly, if I spent all of my time following the index and the economy as a whole (macro economics) it would take up so much of my time I wouldn't have any left to research individual companies. Thirdly, if I constantly worried about the overall market going up or down I would buy and sell my stocks more often, which increases expenses with commission and tax.

I would caution against listening to "experts" in the media like the article you provided me. PHD students have done studies on these "experts" over a 10-20 year time frame and they are only correct in their predictions just over 50% or so of the time.

born2invest
17-01-2014, 12:07 PM
The reason I started this blog was to have a place to log my thoughts without hindsight or outcome bias.

This week for some reason I've been thinking a lot about selling my Supply Network Limited (SNL) shares. The prices I bought at were around the $1.45 on average and now they are up to $2.10 or so which is a P/E of 16 which I think is pretty much full value for SNL, perhaps even a bit over.

I don't know what started the thought in my head to sell them off. Perhaps the downturn in the mining/construction/retail industries sparked me to think that less transport and bus companies would be spending on replacement parts.

However, after studying the annual reports over the past few years, I've come to the informed conclusion that I will continue to hold. The management have concluded that their growth plans have been successful and that they are aiming for 10% plus revenue growth and 10-15% plus profit growth in June 2014 financial year. The half yearly report is out over the next few weeks also which I think will be an ok result for the company.

Seems a bit silly to write my thoughts down but various books I've read have recommended to write down my thoughts at the time they occur so I can look back at them in the future without distorting the information looking back in hindsight a few months in the future.

Any comments are welcome.

Harvey Specter
17-01-2014, 12:28 PM
I don't really follow the index or entire market for several reasons. Firstly is because I invest in companies not an index. I only care about how cheap/expensive the company is I'm looking to buy or currently hold.I may have already said this but you should benchmark your performance against the index. They way you know if you are doing well, can to better, or should just buy index funds.

born2invest
17-01-2014, 01:17 PM
I may have already said this but you should benchmark your performance against the index. They way you know if you are doing well, can to better, or should just buy index funds.

I was thinking of doing quarterly reviews at the end of March/June/September/December to see the returns I've got and also compare them to the NZX or ASX index so I'll let you know at the end of March how I'm going.

gv1
18-01-2014, 03:09 PM
I may have already said this but you should benchmark your performance against the index. They way you know if you are doing well, can to better, or should just buy index funds.

Hi harvey, which ones are good index funds?

lou
19-01-2014, 08:12 AM
This is a we bit off topic but I wanted to respond.


I am a little wary of Kiwisaver.

I see it becoming a political football over the next decade or so.
Sadly this will be the case. However kiwisaver is still a great scheme. Hopefully it politicians will strengthen it rather than water it down.



Initially a retirement savings vehicle, it has already been subverted into a mechanism to help raise the deposit for a (first) house. Who knows what the next "tweak" will be? And who by ? And when ? Possible but this is not necessarily a bad thing. The biggest accoplisment of kiwisaver is an increased saving rate. At least a house is a capital item unlikely to depreciate.



The tax credit has already been halved. When we start getting Kiwisaver millionaires, expect it to be cut again. In the grand scheme of things the tax credit is not that important.



We then come to the "exit" scenario. There has been some discussion over the past year about what to do on retirement, when member's Kiwisaver funds become available.

I suspect that a few horror stories of people blowing their nest-eggs will be used as evidence of the "need to protect people from using their own money for their own purposes".

I suspect that the fund management industry will lobby hard for withdrawals to be taken as an annuity. The past year has seen the UK print media full of annuity horror stories. Be warned.
The annuity industry will develop in new zealand people start exiting with substantial kiwisaver balances. This will be a free market action rather than a government enforced action.
It will be very difficult for the government to set up a compulsory annuity purchase because of the way kiwisaver has been set up. It is an independent scheme where your funds are held in trust rather than a government pension shceme.
The only logical way I could see the government doing a compulsory annuity would be for them to stipulate the government tax credit portion be used for the annuity purchase.



I suspect that suggestions of a "withdrawal" tax will appear.
I don't see this happening at all. The only way this would happen is if you did not pay tax on your contributions. We currently pay tax on our contributions.

lou
19-01-2014, 02:59 PM
Originally Posted by Schrodinger
I know I shouldn't lead the young astray but you should consider getting a margin loan.

Keep it at very conservative gearing levels 40% is a good start. KW has good advice and I would set up separate accounts so you can diversify easier.

Generally if you research enough this will benefit you in the long term.

The most difficult part is when to sell. I have placed a CAGR between 25-30% minimum to make this easier.


Too risky for me. I couldn't sleep at night having a margin loan.

The companies I own and look to buy are generally quite small in market cap and margin lending is only around 30-40% or they don't provide margin lending at all.

This is where technical analysis can really come in to its own. Often people will poop poop TA for not providing additional return over buy & hold but what they don't see is it often offers a better risk adjusted return. ie smaller drawdowns. If you combine this with the judicious use of leverage it can lead to a great return.

Lizard
20-01-2014, 12:50 PM
The reason I started this blog was to have a place to log my thoughts without hindsight or outcome bias.

This week for some reason I've been thinking a lot about selling my Supply Network Limited (SNL) shares. The prices I bought at were around the $1.45 on average and now they are up to $2.10 or so which is a P/E of 16 which I think is pretty much full value for SNL, perhaps even a bit over.

I don't know what started the thought in my head to sell them off. Perhaps the downturn in the mining/construction/retail industries sparked me to think that less transport and bus companies would be spending on replacement parts.

However, after studying the annual reports over the past few years, I've come to the informed conclusion that I will continue to hold. The management have concluded that their growth plans have been successful and that they are aiming for 10% plus revenue growth and 10-15% plus profit growth in June 2014 financial year. The half yearly report is out over the next few weeks also which I think will be an ok result for the company.

Seems a bit silly to write my thoughts down but various books I've read have recommended to write down my thoughts at the time they occur so I can look back at them in the future without distorting the information looking back in hindsight a few months in the future.

Any comments are welcome.

I think it is great to have a place to log your thoughts. Briefly, the forum had a section for blogs, but that disappeared again (maybe extra cost?). The forum is a good searchable database for recording thoughts, although it can be frustrating when you try to create a blog on one thread, due to fact that your "blog" and "comments" are not distinguishable.

As for SNL, it is getting close to a figure where I might feel compelled to sell some more to reduce risk. The upside could be a good result out of NZ operations with the improved exchange rate though, so may hang out for the half yearly or any earlier guidance.

winner69
08-03-2014, 07:42 AM
Hope you still logging your thoughts mate even if not sharing hem with us

Good practice ...though I gave up years ago