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21 y.o. with 25k wanting to start investing... any good tips/suggestions?

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Investing101

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Hi guys,

I'm new to this forum so I don't know if this is the right place to ask the question, so please let me know if it's not.

As the title indicates, I'm a 21 year old uni student in Australia and I'm interested in investing in some stocks, securities etc, but am not sure how to start. I have 25k sitting in a savings account and only earn interest from that. I don't have any major debts or student loans and my living expenses are minimal. I work part-time and have a Super fund with about 2.5k.

I'm not expecting people to tell me to "invest in x and y stock", but rather, I'm looking for some guidance or resources on investing 101 that I can use to educate myself in order to make investment decisions.

Given my inexperience and current finances, I'd appreciate it if someone could offer some tips/suggestions on where/how to start, how much I should invest (or whether investing is even a good idea) etc.

Cheers
 
When invited to do so, I'll happily give my opinion (if I have one). Take my reply (and any others) and then weigh it all up for yourself.




This will be a bit out of order, but anyway:

- How long to go (study) and what are you studying (just curious)?

- "no major debts" doesn't sound like zero debt. What is your total student / non-student debt?

- You've earned around 26k in your jobs. You said your expenses are low (great!) but just want to check; are you earning enough part-time (along with any help from parents etc) to cover all expenses until you finish uni?
Basically trying to figure whether that 25k is truly freed up or if there are any expenses / debt that needs to be taken care of. Finishing uni and getting your first job with zero debt is my aim here.

- Goals. I've already asked when you are finishing uni. What's your current living situation? For example, if living with parents, I'd assume you want to move out at the end of uni (bond, basic furniture, relocation costs). Also, what's you car situation (will you need to buy or upgrade?)


All of the above before suggesting where you could invest your money. The best investment you can make at your age is in your education and you're doing that; so well done. The above amounts to: where are you at, and what will you be doing over the next few years?
Great question, by the way.
 
Good on you for starting early in the stock market, wish i did.
Learn what it means to have an investing or trading plan before worrying about which stocks to buy though.
Ask the right questions and read some books first, then paper trade for a while to get a feel for the market.


Good luck.
 
Investing101 said:
Given my inexperience and current finances, I'd appreciate it if someone could offer some tips/suggestions on where/how to start, how much I should invest (or whether investing is even a good idea) etc.
Click to expand...
The trouble with so called investing in the stock market is the indeterminable length of periods in draw-down. That is when the stock/s of choice are at prices less than what was paid for them. For example a choice of banking stocks (which were/are good income (dividend) stocks) at most times of this year would be in draw-down now. It's a tricky game knowing when to buy, what to buy and when to sell. I still don't know. Swan dives are ugly. There is the upside and that is when we want to be on. I think buying my own home would be an investment goal first while observing and learning about stock market investment for the future. Buying quality companies at a discount or deep discount is a strategy some people use. It's called Value Investing. Gotta look at it as buying the company yourself so researching that company and some forward looking at the companies business is smart. Bear markets can last longer than thought.

It's not easy and that is by design.
 
If you're 21 and have some money to invest, then, no matter how modest your initial sum may be, you have a great opportunity ahead of you.

This opportunity is the chance to compound your wealth. I can't stress the importance of that enough.

If you were to invest your $25K now and make that $25K earn you 10% a year for the next 20 years, you'd end up with $183,201. At 15% a year for the next 20 years, you'd end up with $492,887. At 20% a year for 20 years - a rate of return that is still entirely feasible and that many value managers earn on average - you'd end up with $1,320,688. At 25%, you'd end up with $3,524,538.

This is the magic of compounded returns. The above figures assume a scenario where you would make no further contribution to your investment funds. That is very unlikely at your age. So, if you were to make regular monthly deposits of $500 a month for 20 years on top of your initial deposit of $25,000, then, at an average compounded return of 15% (which many investors achieve, not year-in-year-out, but on average), you'd end up with $1,250,864. At an average compounded return of 20% a year, you'd end up with $2,901,427.

If you were to keep doing this up to the age of your retirement - say, for the next 40 years -, then, at a compounded return of 15%, you'd end up with $25,419,394.

The point of highlighting this to you is to show you that:
  1. you can be seriously wealthy the longer and the higher that you are able to compound your returns; and

  2. you need to think of investing as the systematic process of compounding your wealth.
If you accept this idea of investing, then the only remaining question is whether you choose a fund manager to compound your wealth for you or whether you choose to do that yourself. If you choose to do it yourself, then, in my view, you need to learn how to value businesses (if your area of investment is to be stocks).

There are many ways to value a business and I'd be happy to offer some of my thoughts on them but if you look around the forum you'll find that it is a topic that many others have offered an opinion on. A good recent book on valuation that I would recommend is Deep Value by Tobias Carlisle.
 
Sign up at the ASX site, go thru the education section and then start making watchlists, watch what happens to your selections...learn from that.

http://www.asx.com.au/
 
notting said:
My suggestion -
DON'T LOSE MONEY
Click to expand...

Unless you know some superior investment vehicle that I am not aware of, it is not possible with investments, especially in the markets.

You WILL lose money, that I can guarantee.
 

https://www.thechartist.com.au/Articles/

joea
 

It takes more than fundamental or technical analysis

http://www.smh.com.au/money/investi...tal-or-technical-analysis-20110826-1je2h.html

joea
 

No tax huh?

20% year in year out for a noivice? Fat chance. And name me one managed fund who has returned this for even 10 years, let alone 20 or 40.

I think your estimates are extremely unrealistic and misleading.

Then again, Investing101 won't even make another appearance on ASF. Not even to read the detailed replies you guys have spent time on. This is the internet remember.
 
Gringotts Bank said:
... 20% year in year out for a noivice? Fat chance. And name me one managed fund who has returned this for even 10 years, let alone 20 or 40...
Click to expand...

You're betraying your ignorance:

  1. Stanley Druckenmiller: 30% over the course of 24 years: http://www.bloomberg.com/news/artic...after-30-years-as-hedge-fund-job-gets-tougher

  2. Walter Schloss: 20% over the course of 47 years:http://basehitinvesting.com/superinvestors/walter-schloss/

  3. Peter Lynch: 29% over the course of 13 years:http://www.investopedia.com/university/greatest/peterlynch.asp
In Australia, Roger Montgomery hasn't been investing for 10 years but his performance since August 2012 has averaged 25%. Of course, the period between 2012 and now is not particularly representative because we have been in a long bull market. Also, some will probably dismiss Montgomery as a lightweight and and a self-promoter. But in my view his method is sound and I expect him to average over future 10 year periods somewhere between 15% and 20%.

With exception of Montgomery, the managers above are no longer managing money. But it would be a mistake to think that 15% to 20% returns are impossible - especially for small time value investors. I can guarantee you that.
 

There's quite a number of performers mentioned in the Market Wizards books and most of them are for high net worth US residents only. Closed funds if you only have 25k and live in Aus.

Looking at Montgomery's performance, we only have 3 years to judge him on. Chart below looks like he just tracks the index. Like most fund managers - minimal work, maximal cream. If we had a chart which extended back to 2008, it's fair to assume he'd be tracking the index 40% into the red.

 

Actually he has been investing for more than 10 years and his returns at Clime were poor (also had a valuation subscription service at Clime -- sound familiar?). By my calculation his new fund has averaged 12.8% since 2010. I'm not sure why you'd expect him to average 15%-20% when that has not been his historical return.
 

There's five years almost to the day of his older fund at Montgomery, with a return of ~12.8%. See here: http://www.montinvest.com/apply-to-invest-montgomery-private-fund

Here is CAM's return when he was IM.

 
McLovin said:
There's five years almost to the day of his older fund at Montgomery, with a return of ~12.8%.
Click to expand...

Managed funds really are a ticket to print cash. Hire some dude to write an algo to track the index (easy), sit back and skim your fees off the top. Or get crazy and hire a decent quant and outperform the market by a few %pa.

The Kerr Neilsons of the Aus funds management word are rare. Has the midas touch, but still his returns are not that high. Many funds are around 9%pa.
 
Sorry for the tone of my post Rainman. It was too harsh.

A positive approach is great, if you can manage to maintain it. There's a tiny fraction of people who make big cash from the markets. But it is possible. Definitely possible, using a range of approaches.
 
Gringotts Bank said:
...Looking at Montgomery's performance, we only have 3 years to judge him on. Chart below looks like he just tracks the index...
Click to expand...

Criticizing a fund manager for "just tracking the index" is a fair criticism. But I think you misunderstand what "just tracking the index" means. The chart of Montgomery's performance that you have included shows that Montgomery is not "just tracking the index". He is outperforming it - and by a wide margin.

If Montgomery was "just tracking the index" his performance line and the performance line of the index would merge with each other and run together in more or less a single line.
 

I am not here to carry a candle for Montgomery.

While I am not aware of his returns at Clime, I accept your claim that they were poor. But do we know the extent of his responsibility for that performance? I don't rate John Abernethy, Clime's CIO, as an investor and I haven't been able to find any evidence that Clime's investment performance suddenly spiked after Montgomery left.

When all is said and done, I think that it's fairer to judge Montgomery's record now that he is running his own investment firm. Also, the older fund that you refer to has returned just over 16.5% after all fees since 2010, not 12.8%: http://www.montinvest.com/apply-to-invest-montgomery-private-fund.

I might add too that it's possible - just possible - that Montgomery is a better investor now than he was at Clime. He is probably not more than 45 years old and investment is something you get better at the longer and more thoughtfully you do it.
 
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