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Stock market advice for beginner

Discussion in 'Other Asset Classes' started by moridog, 26th Mar, 2016.

  1. moridog

    moridog Well-Known Member

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    My DD is asking about how she would go about purchasing some shares, I have a very small amount of shares and from memory, got a prospectus sent out. She has a small amount saved up from her part time job as she is obliged to save half her wages which are pretty low. Any tips or advice out there?
     
  2. jaybean

    jaybean Well-Known Member

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    The first thing people say is think about your risk profile and go from there. Are you young, brave and can take on lots of risk? Conservative? Well think about your risk profile and dial it back a notch. I used to think I was a risk taker till I lost a small fortune, then it really, really makes you reassess things. Now I realize I sit between conservative and moderately risky. But it cost me a lot to find this out.
     
  3. ottg

    ottg Well-Known Member

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    Simple question but a very complex answer. If she wants to know the mechanism how to purchase meaning via stock broker or directly via Internet then its simple: her bank or eTrade or similar.
    If she wants to know what to purchase it depends: on her level of knowledge about the stock market, or if she wants to do trading or long term investment or index funds self or prefers if someone else will managing her portfolio. All options requires a different level of knowledge (no different to the propoerty market). In short the moment a person invest in a share and cannot clearly substantiate why they did it, then they speculate. If the answer includes: "I'm hoping, not sure or may be" then shares investment may not be for you!
    This provides insight in what it may take:
    Specific Balance Sheet parameters used for fundamental analysis - Aussie Stock Forums

    Just by reading that forum may already be of great help - however its mostly for traders (although they may deny it)
     
  4. radson

    radson Well-Known Member

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    Just buy some VAS
     
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  5. Bran

    Bran Well-Known Member

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    Look at the stock resources thread here

    I've read Motivated Money, A Random Walk on Wall Street and An Economists Guide to Investing from that list and feel faaaaaaar more knowledgeable than before. Then read the threads on shares, LICs, ETFs on here and interrogate in detail those postings by @austing, @The Falcon and @radson in particular...

    I bought single stocks, then realised I wasn't going to be diversified enough so bought some VAS, then thought that LICs might give me a little less mining/banking heavy options... In combination with my financial planner who has selected some multi manager funds, I'm hoping to cover a few bases and pour in.
     
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  6. austing

    austing Well-Known Member

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    Tell DD to read this Other Assets area of forum. Nearly everything she needs to know has been discussed previously. It might seem boring for her but hell she will be way ahead of 99.9% of others her age and potentially on her way to early retirement.

    However if above all too time consuming then hard to go past AFI, ARG, MLT, VAS for OZ and VGS for International (being young some allocation to overseas growth good). That way she can just keep adding to these and forget about it. Relatively safe, diversified, Set and forget whilst being able to enjoy her youth. Or applies to any age group for that matter. At this age don't complicate it and perhaps ignore any suggestions about NTA issues. Regular investing eg dollar cost averaging in the above over the long term will sort it all out without getting bogged down with well meaning advice (eg NTA). This will only confuse and over complicate a very simple and amazingly effective approach.

    This might be a worthwhile read for young investor ideas but don't treat it all as gospel:
    http://andreadavies.com.au/wp-content/uploads/2015/07/Serviette-Strategy-Bonus-Report-v1.3-1.pdf

    Not liscenced to give advice.
     
    Last edited: 26th Mar, 2016
  7. The Falcon

    The Falcon Well-Known Member

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    I think more than stock selection the right basic education now is critical for a young person starting out. For want of knowing a better alternative id suggest two books as a gift ;

    - the richest man in Babylon
    - Motivated money

    Read in conjunction. Once done, then we can talk about particular vehicles. Without the foundations it won't be easy for her to stick with it as a youngster...and ignoring noise and sticking with it is key..
     
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  8. Blacky

    Blacky Well-Known Member

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    Do this while she reads and learns more.

    Probably the more she learns the more this will appear as a stroke of genius rather than just good luck.

    Blacky
     
  9. moridog

    moridog Well-Known Member

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    Forgive my ignorance, what is VAS? Apart from a piece of plumbing I mean, and, I should have been clearer, she is 14, she earns $8.95 an hour. I have at least one of those books, I will dig it out, not sure if she can purchase in her own right, I doubt it?
     
  10. The Falcon

    The Falcon Well-Known Member

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    Problem is youth lack patience and an awareness of how quickly time passes. Hence compounding is boring, and the temptation is to try to shoot the lights out with a get rich quick trading scheme. Then give up.
     
  11. The Falcon

    The Falcon Well-Known Member

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    My maths tutor gave me both richest man in Babylon and one of jan sommers books when I was 16...which I quickly flicked through and then ignored.

    The man is a genius, has his own national law firm now with 70 lawyers (note, not 70 employees...70 lawyers) and piles of property.

    Geez I should have listened to him more closely...but that's youth hey :)
     
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  12. Blacky

    Blacky Well-Known Member

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    Absolutely forgiven... However, all the more reason to buy it over anything else.

    Vas is a vanguard ETF. It is a fund which tracks the Australian stock market. So what ever the ASX does (up, down, sideways) is what this fund does.
    Tick the dividend reinvestment box - this the dividends purchase additional stocks rather than being paid in cash.

    It's easy, simple and cheap. And will generally outperform an inexperienced investors stock picking capability.

    Not sure how old you need to be, given the low sums might just be easier to open in your name for they one being. It will have some impact on your tax but this is likely to be very minimal.

    Blacky
     
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  13. Blacky

    Blacky Well-Known Member

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    Your math tutor, or the richest man in Babylon?
     
  14. The Falcon

    The Falcon Well-Known Member

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    My old maths tutor, perhaps overstating it after all, I am on holiday :)
     
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  15. austing

    austing Well-Known Member

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    :D Love it, hilarious.
     
  16. mimosa

    mimosa Member

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    How much savings are we talking about? At 14 and on $8.95/hour I am thinking not much, unless she has another source of income like pocket money. I applaud her interest in shares (and you seeking out information for her) but just be aware that each purchase of shares will likely cost at least $20 in brokerage. If she has more than about $1k then the brokerage is not too bad.

    I would also recommend setting up a 'high interest' online savings account to store her money until she has enough to make each share purchase worthwhile. Or, instead of shares if she decides to wait a few more years before buying shares. Lots of options for online accounts, but one example is ubank (part of nab).

    She could also set up a pretend portfolio to get a feel for how it works, IF she will pay attention without skin in the game. Sharesight.com.au is good for tracking portfolios.

    Teach her about compounding, dividends and franking. Oh, and that shares can go down instead of up and that performance is no guarantee of future performance.

    I would probably go a LIC such as ARG, MLT or AFI rather than an ETF. Probably a bit easier to understand and I think the tax return might be a bit easier - holders of VAS, does the dividend and eoy tax statement include foreign income?
     
  17. moridog

    moridog Well-Known Member

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    She has $1,000. A big enough sum to do something with, she works every weekend, one or two days. Thank you, I will look into that. She is just starting to have a think about boys so she is realising that current presentation is no indicator of future performance :)
     
  18. Hodor

    Hodor Well-Known Member

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    VAS tracks the asx300 is all Australian and is the same for tax purposes as the LICs.

    Either VAS or one of the LICs mentioned would give a great start imo.

    If she saves half her cash and uses dividend reinvestment I'd say she should have a good little portfolio by 18 and will have seen how compounding growth will work. Nothing like having skin in the game to get interested.
     
  19. The Falcon

    The Falcon Well-Known Member

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    Once educated I actually favour a small basket of stocks which is far more interesting (and likely to keep her interest while learning about business and the stock market) than a LIC or ETF. Then as she gets older she has genuinely learned stuff through experience and can choose her own route. I'll do this with my blighters once they are old enough. Granted you will need to have an idea and be involved to do this. Problem is I think 18 is min age for brokerage acct ? I'll do ours as sub account in family trust.
     
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  20. Hodor

    Hodor Well-Known Member

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    I got my first shares when I was younger (around 12 maybe), I got Bank of Melb before the Westpac take over after hearing a segment on the radio about shares. I remember looking up a broker in the phone book and speaking to them on the phone, organising a check from money I had saved from a paper route and then setting them to DRP. If I remember correctly to get around the whole age problem I applied for and received a tax file number - not sure if this would still work.

    When Westpac bought them out my family told me DRP was silly, I wouldn't really make much at that point I lost interest in shares as other things became more interesting and I believed there was no point.

    Now I'm getting all nostalgic and derailing things.

    Anyway a bit of support will likely go a long way (so it is great to see you offering it). Looking back maybe @The Falcon is right about individual holdings been more interesting.
     
    Last edited: 26th Mar, 2016
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