Automated investing in blue chip shares?

Hi All,

Firstly let it be known I am a complete novice when it comes to the share market, actually probably a level below novice.

That said I am considering starting a portfolio of blue chip shares.

I have been reading Noel whitakers making money made simple and he explains a method of using savings which can automatically go into shares, the dividends are then paid back into the portfolio to buy more.

The idea being I do a set and forget weekly transfer of my salary into purchasing shares, that overtime will grow along with the paid dividends I would recieve. Sounds simple enough but I would imagine there is a whole host of things I need to consider.

Can anyone comment? Is this possible? I had an understanding you need to pick shares via a broker? Or perhaps invest in a shares management fund but not sure I am keen on that?

 

If you're just getting started would recommend you look into LICs and ETFs. These products give you instant diversification and trade on the share market with minimal fees but you generally need $5K+ per trade to make it worthwhile due to brokerage costs. So perhaps let your savings accumulate in an online high interest savings account or offset account until you hit $5K and then purchase.

Managed funds charge crazy fees but you do get the flexibility to BPAY them every week without incurring brokerage (there is a buy/sell spread however).

 

I do this, weekly, into Vanguard via B Pay. Low fee index investing. If you buy Australian shares also take advantage of franking credits. Boring investing at its best. Read the rest of "other asset classes" forum.

 

As suggested by cat look at the ETF and LIC threads, instant diversification and lowest fees (< 0.2%).

I wouldn't be buying individual shares to start with as I did when starting. If I'd known about LICs all along my portfolio would be doing much better.

If you start with LICs and ETFs it is likely when you are no longer a novice you'll realise how great they are and stick with them.

 

Here they are...

Exchange Traded Funds (ETFs)

Listed Investment Companies (LICs)

 

Thanks so much!
Looks like I have a lot of reading ahead of me. I have started and must say its like learning another language!

Anyone know any good YouTube videos for a novice?

 

Commsec is a good platform for someone starting out,very easy to set up a watchlist,very easy to trade ,low costs ,but what i have found if you can build up a solid 20 plus asx top 50 public listed ,then hold reinvestment every cent back in each time add simple compounding,then it becomes very powerfull..

 

Check out the motivated money website - Welcome - Motivated Money

There are six or seven videos there that throw a lot of the ideas out there that are the same as the theory here.

It doesn't go into what to buy specifically other than the industrials index. LICs are promoted as an easy way to do this, specifically MLT, ARG, WHF, BKI and QVE as these are ones that have an industrials tilt hold less miners and REITs than the index.

 

This is what Thornhill suggests in his book as well. Lots of shares have a dividend reinvestment plan which buys you more shares rather than realising the dividend.

You don't need a broker, but you do need an online platform such as Commsec. Transfer money over via online banking as frequently as you wish and buy more.

 

Thanks so much everyone! I will be watching all those videos tonight

@D.T. is this something you do? From what i have read i like the idea of LIC's and i already bank with CBA. Is this something you can set-up from speaking to someone in the branch?

 

I really enjoyed that video, thanks.

 

what books are you reading now @albanga to aid in your study?

 

Still reading "Noel Whitaker - Making money made simple" but that is really an overview and basic principles not specific to shares.

It is likely I will spend some time watching the videos recommended in this post and then move onto all the threads.

 

LIC's really are the simplest investment you can make, the ones that @Hodor mentioned in his post have mostly been around for 50+ years and they pretty much remove the whole "picking a stock" part of the equation and reduce share market investing to pretty much "saving the money and hitting the buy symbol on your share platform". You then log on to the share registry and tick the DRP (Divdidend Reinvestment is the name for what you mention in the first post, DRP the shorthand and common name) or Bonus Share Plan (a bit more complicated and not as common as DRP but a different way of doing essentially the same thing, it's pretty much a tax difference you should ask your accountant about) box (or both).

Share trading and the more complex side of the share market are very much 10,000 hour exercises where you're going to need to put in serious time learning (both the easy and, more than likely, the hard way), but what you're looking for is pretty much a set and forget strategy.

The other part to think of is the brokerage, (buying costs equivalent for shares) that for most platforms remain the same for certain groups of transactions (so $1-$5,000 might incur say 15, and 5k-10k a bit more) so it's an important part to get the size of each purchase right to minimise this cost but it's also not something that should put you off buying a smaller package at a great price or timing on certain corporate actions that make paying the extra brokerage worth while.

Finally, like any other investment, important to map out your strategy in advance and work out what structure best suits it. If you're share trading and expecting high turnover and little to nothing on capital account a company may make sense (doesn't sound like your plan), if you're buying for long term capital growth then an entity type that gets the full CGT discount might be the go. If you're doing it for the franked income than a SMSF might be the go. The tax costs of choosing the wrong structure can quickly erode the returns you make.

 

Can do it online with CBA through your internet banking. Just have to electronically check some boxes. Too easy.

 

Just wondering, who is from Sydney here? Cause I'd like to do a physical face to face meetup on this topic... i'm like Albanga, I see a bunch of Acronyms....

 

I'm from Sydney and always up for a chat. Probably help to have someone less useless than me if you want to learn anything. Can sort out some acronyms without too much trouble.

 

A single LIC like MLT or BKI is ideal for this, maybe BKI as they have better investor communication/education. Tick DRP box and then just buy weekly/monthly when you have cash, keeping say $20k on hand for share purchase plans when they come up.

 

Wow so much brilliant information! I really do love this forum

I think LICs make a bit more sense to me so am interested in learning more about those.

I have been researching just share trading in general but what @wogitalia has said about broker fees seems to be commonly mentioned and that it's not worth buying in small doses as the fee will eat up your return.

If that is the case then is it not reccommended to automatically buy say $100 of shares a week but instead perhaps pay the $100 into my offset account until I have say $2000 and then use that to purchase?
This is possible but the exercise I am trying to achieve is getting the money straight out of the offset. If that makes sense?

Or do LICs work differently and I don't need a broker?

 

You can do better than this can't you?
Build up a buffer, split your loan, pay down the split, redraw the funds into separate offset, and there is your share money - using borrowed funds. Plus, less non-deductible debt.

I'm buying in 5k aliquots now. Makes for a pretty small % brokerage via commsec/e*trade.