New investor requesting advice

[lachy89]

Hi all,

I am new to shares and this forum and I am requesting advice.

Background

First off I will give a brief background of myself. I completed an Engineering degree a year ago and have been saving since last March. Due to living away from home conditions I am saving a decent amount of money and want to get the most out of it.

My current account is 11000 + (approxmately saving 1200 per month).

My aim is to continue a medium term savings plan for the next 6-7 years (age 30). At which point I wish to have the option to purchase property.

I figure If I am going to be saving for the next 6-7years I may as well aim to get the best out of it.

Currently my money is accruing interest at around 4.7% throuch a savings account, but I believe I can improve this throuigh shares without a large risk.

Obviously I would prefer the largest return possible, but to begin with, my aim is 6-7% per annum with relatively low risk. I have been reading several books and forums and I believe that I want to focus on growth stocks.

Brokerage
Currently I am deciding between three different brokers;

Comsec, Nabtrade and CMC.

From my understanding (which may not be correct), Comsec provides the most stable platform but has the highest brokerage fees and the lowest interest. Nabtrade is the middleground, I have been reading that there has been some instability with their system, but they offer middleground brokerage and good interest on account. CMC appears to be the cheapest brokerage, relatively good interest on account, some instability but does uses an outside account source.

I plan to purchase shares as I am saving money and may make purchases around 8 times per year, I don't particularly want to sell too often, just grow my shares as my savings comes in each month.

Are there any recommendations with any of these brokers, or because my volume is relatively low it will make little difference?

Strategy

My overal strategy will be to buy and hold. collecting dividends and hoping for capital gains as well. Dividends are to be reinvested back into the shares (potentially the shares that generated them).

I plan to purchase solely blue chip shares with the majority in some of the big 4 banks. I may investigate the resourse, staples and infrastructure sectors over the next few weeks.

As I am completely new to shares I want to take a 'baby step' approach in terms of risk. Does my strategy make sense for a time time investor or is there another prefered method. (Keep in mind I don't paricularly want to invest in a managed fund, I enjoy my own research and want the sense of accomplishment with managing my own investment).

Do you recommend getting into the sharemarket now, or do you think with my inexperience it is best to research 3-4months in depth on specific companies before begining. I believe my strategy is robust and reliable enough that It may not be a problem to begin now, but some advise is appreciated.

Thanks for taking the time to read my thread and any advice is appreciated.

 

[springhill]

Hi lachy, welcome to ASF.

One option for you to think about.

I note you mentioned share dividends before capital growth. Indication you are more interested in dividends?

While dividends are somewhat reliable, capital growth can be less so.

My outlaws do pretty well out of 'dividend stripping'. Buying at an appropriate time before a dividend is paid, pocketing it and selling out at a short time later.

There is an app on iphone called ExDividends, basically a calender with companies listed paying divs on any particular day.

You reduce the risk of not being able to beat the market, your cash is safe in the bank most of the time while you increase knowledge of the markets.

I don't get involved in it and i am sure there are pros and cons which wiser heads on here may advise on.

 

[burglar]

... My overal strategy will be to buy and hold. collecting dividends and hoping for capital gains as well. Dividends are to be reinvested back into the shares (potentially the shares that generated them).

I plan to purchase solely blue chip shares with the majority in some of the big 4 banks. ...

Hi lachy,

Seems to me, you already know what you want to do!
So dip a toe.
See how you go.

 

[sydboy007]

Check out FIIG securities. They have a number of ILBs and fixed interest products offering around 6% yield. Relatively low risk.

You're time frame is probably just long enough to buy into the share market.

just one question though. Why do you want your money to earn 6%+ but you are looking to buy a property that would be lucky to yield 4% net of holding costs etc?

 

[tremmas]

Hi all,

I am new to shares and this forum and I am requesting advice.

Hey mate, welcome. Plenty of advice available here for those willing to find it.

Background

My aim is to continue a medium term savings plan for the next 6-7 years (age 30). At which point I wish to have the option to purchase property.

Obviously I would prefer the largest return possible, but to begin with, my aim is 6-7% per annum with relatively low risk. I have been reading several books and forums and I believe that I want to focus on growth stocks.

Sounds like a good plan to me. Remember capital preservation is key. Keep an open mind - there are plenty of property bears around that will try and convince you property is a terrible investment right now. But there are also plenty proving that if you do your research and buy the right places in the right areas then you can still make good money. And owning your own home brings a comfort and satisfaction to many that they just can't get from renting.

As to your comment about growth shares, I'll address that a little further on...

Brokerage
Currently I am deciding between three different brokers........

I plan to purchase shares as I am saving money and may make purchases around 8 times per year, I don't particularly want to sell too often, just grow my shares as my savings comes in each month.

Are there any recommendations with any of these brokers, or because my volume is relatively low it will make little difference?

Many here use Interactive Brokers, who have by far and away the cheapest brokerage. However, it is not easy to set an account up and has some different risks in terms of CHESS ownership (I'm not an expert here, but worth considering). Given you're only looking to do a relatively small amount of transactions per year I would still be looking at one of the Aussie brokers you mentioned for now (and throw Westpac in the mix too).

Keep a lookout for free brokerage deals that Westpac and Commsec offer pretty regularly for $600 free brokerage to new customers. They are available often and will save you $600 off your first transactions.

Strategy

My overal strategy will be to buy and hold. collecting dividends and hoping for capital gains as well. Dividends are to be reinvested back into the shares (potentially the shares that generated them).

I plan to purchase solely blue chip shares with the majority in some of the big 4 banks. I may investigate the resourse, staples and infrastructure sectors over the next few weeks.

As I am completely new to shares I want to take a 'baby step' approach in terms of risk. Does my strategy make sense for a time time investor or is there another prefered method. (Keep in mind I don't paricularly want to invest in a managed fund, I enjoy my own research and want the sense of accomplishment with managing my own investment).

Do you recommend getting into the sharemarket now, or do you think with my inexperience it is best to research 3-4months in depth on specific companies before begining. I believe my strategy is robust and reliable enough that It may not be a problem to begin now, but some advise is appreciated.

Thanks for taking the time to read my thread and any advice is appreciated.

Earlier you mentioned growth stocks, and here you seem to be focusing on the Big 4 + recognised blue chips. These comments seem to be at odds to me - the bigger blue chips are unlikely to give you exceptional growth but CAN be more stable in their dividend payments etc. Personally, I would hesitate to be buying the banks right now as they have had a good run, but over your time frame it could work out. A decision for you.

I would definitely recommend looking for less well known companies - have a look through the forums here for some ideas. But you will get much better growth (and often better yield) with smaller cap companies if you do your research and can recognise competitive advantage, earnings growth, dividend growth, low debt, good management etc. etc.

As to when to start, I'm a big believer that the best time to start is always now (but maybe not with all your savings...). You will lose money as you learn, but nothing helps the education process like actually having some money on the line. Just make sure you do lots of research on each purchase and can justify each decision you make, even if they are wrong.

Just my opinions, good luck getting started!

 

[ParleVouFrancois]

If you want low risk but sharemarket returns, have little to no financial/accounting background, and don't want to invest the required 10,000 hours to become a master at it (you indicate that you only wish to keep the shares as an interim savings vehicle to then go on and buy property), this is the DEFINITION of buying an ETF. If you half ass it with the sharemarket you'll most likely make below ETF returns, along with the additional hours of study and learning you'll have to put in, all to just lose out to an AFK strategy of buying a little bit of everything.

 

[bailx]

http://www.equitysmart.com.au

Highly regarded Prospect 's high Yield, Profit Compound enormous.( good Luck try demo )

 

[Gringotts Bank]

CMC uses BankWest accounts. BW is owned by CBA, so that's probably secure.

The platform is fast and reliable. They don't have WebIress, but their streaming data is pretty good. Support is useless and they have no interest in customer feedback. Account information is settled MANUALLY(!) at the end of the day so your account numbers will often look unusual during the day. They could be a market leader, but as I say, they take no notice of their customers requests.

 

[pixel]

Welcome to ASF, Lachy;

When I read "advice", the first thing that came to mind was "Forum members are never supposed to give advice." That's also why I left my reply and "comment" to a later time, after I had an opportunity to get my mind around what you've really been asking: An opinion from members, who have probably been dealing with shares for a few years (or decades as the case may be.)

You have a reasonable Plan
After reading your Plan, I believe you don't really need much advice. Do your own research, stick with your selection criteria "Blue Chips", and keep building a good portfolio. As an engineer, I'm sure you have enough Maths to know the difference between plus and minus: rising and falling value, profit and loss.

I trust you also know the basics of chart reading, so you know when to buy a particular share and when not to buy or even sell out of an under-performer. In that context, it is particularly important that you do NOT look for advice, not even read other people's opinion of what a share OUGHT to be worth.

Form a clear expectation in your own mind, write down the reasons why you bought this particular share, and review every once in a while whether the reason still applies, and your expectations are met. When the dots line up, you might as well start buying now.
(One thing I never do is buy more shares under a DRP, Dividend Reinvestment Plan. I much rather decide the price point, quantity, and timing of any top-up based on market behaviour.)

Choice of Broker
As far as Brokers are concerned, at 8 trades a year it really becomes a non-issue. If you're looking at the lowest entry costs, what does it matter whether you pay $15, $20, or $30 for each trade?! Look at the fine print, and you'll find that above a trade value of $15k or $20k, the charges will change anyway - and most brokers will then apply 0.11% (that is one-tenth of one percent, plus GST) per trade.

After reading the suggestions and your own considerations, I would throw Westpac into the mix. If you use their CMA to fund your trades, you'll get RBA cash rates on any cash balance, and the minimum brokerage is $19.95. Should you, at any time, decide to increase your trade frequency, you may even rise into the "Frequent Trader" category and qualify for bonus interest. I've been with them since last century; another feature I like about them is that I only pay one brokerage, even if my trade gets only filled in small nibbles over several days. I do, however, have to keep an eye on leftover part-filled orders and bump them up before they expire.
Their research facilities are also quite good, although I use my own system almost exclusively.

Good luck with your endeavours, and I hope you'll find the time to report on your experience.