Advice regarding shares

[newtothis27]

advise regarding shares

Hi

I have an account with Statewest Credit Society who have merged with Home Building Society. I have been offered the option of either AUD$3200 or 237 Shares in Home Building society.

I am not in need of the cash at the moment so i would like to invest it but have never done anything like this before. Should i take the shares with Home Building Society or re invest them else where.... Is there anyone out there who had experience with investing and shares that can give me an idea of what they would do.

Also is it worth me getting a financial advisor to make these decisions for me or would the charges involved not be worth it if i only have $3200????

Any advice would be greatly appreciated!

Many Thanks!

 

[Realist]

Welcome.

It's never to late to start learning about shares..

Well I know nothing about this bank or home building society, but that is often a good thing. Familiarity can be a bad thing when buying shares (ask any Telstra shareholder).

First of all $3200 is pretty much exactly what 327 shares would cost. So there is no real advantage in going with the shares. That is the key point!! Unfortunately you can't just take the shares and cash them in immediately for a profit. So if you take the shares you'll have to wait and wait for any profit.

The ex-dividend date is June 22, if you do not own shares before then you miss out on the 24 cents per share dividend ($78 given to you). Secondly the day after June 22nd the share price will drop around 24 cents. So if you are given the shares just after June 22nd you could be losing on this deal.

Looking at their financials they seem overpriced at the moment. And this takeover or merger confuses things - it is hard to tell, but to me I would not buy them until I saw how this takeover affected their profits!

Banks all seem a bit over priced at the moment actually.

So my answer is :

If you have alot of spare cash, are willing to forget about $3,200 for the next 10 years, reinvest the dividends, and hope it turns into $10,000 10 years later, then do it!!

If you need the money, have any debts or owe any money to anyone, or want to invest in something else just take the cash. There is no real advantage in this offer in my opinion.

 

[newtothis27]

many thanks for your advice. I think i will probley take the cash and get my self a financial advisor to re invest it wisely for me! Do you know of any good financial advisors ???

 

[Realist]

Well don't get a financial advisor to advise on investing $3200. Because what they will charge would make it not worth it, just put it in a high paying interest account.

If you have more money to invest then yeah go for it!

Pay off your mortgage and any debts first if you have them though.

Sorry I don't know any financial advisors, and prefer to do it myself anyway.

 

[Sean K]

I reckon you should take that cash to Crown and put it all on black. Then leave it there for 9 more spins. Whalah! $3M!

Or, save another $2K and buy some international fund in something that allows you to chip in that much and then add to it regularly.

Or, have a holiday!

 

[Julia]

Well don't get a financial advisor to advise on investing $3200. Because what they will charge would make it not worth it, just put it in a high paying interest account.

If you have more money to invest then yeah go for it!

Pay off your mortgage and any debts first if you have them though.

Sorry I don't know any financial advisors, and prefer to do it myself anyway.

Agree 100% with Realist's comments. Why not put the cash in a high interest account and begin making yourself familiar with at least how the share market works. If you go to the Australian Stock Exchange's website, www.asx.com.au, you will find a very comprehensive amount of education.
Then if you feel you are interested in becoming involved, perhaps buy $3000 of a good blue chip stock when it's in a downturn.

Good luck.

Julia

 

[3 veiws of a secret]

I bought my first shares in London ....Bougainville on a monday morning 1976'ish,rang my mate @ Phillips and Drew (stockbrokers) and boastfully said when shall I sell them. Reply -"Mate have you read the front page of the Financial Times........No I reply !!!!!!!....it says the troops have marched into the mine the shares are plummeting!!!!!!! ......."
So I left it at that and waited for the 3.15 phonecall back to my mate that afternoon.
"What's the latest on the Bougainville shares ....he replies The bad news is its dropped to 53 pence....good news is its gone up to 54 pence."
So the moral of the story is, no matter how much you analyse the subject in where you put your money,something else might hit you unexpected.
I went onto sell those shares at a handsome profit,which funded my next nerve wrecking episode in commodities,shipping oil out of Iraq during the Iran/Iraq war....when the ship rounded Straits of Hormuz I was up 3500 %....never saw so many champagne corks fly in such a small office! Even Lord Winbourne (spelling) popped his head round the door to see the commotion. Great days!!!!!

 

[RichKid]

..........
Then if you feel you are interested in becoming involved, perhaps buy $3000 of a good blue chip stock when it's in a downturn.

Good luck.

Julia

tsk, tsk Julia, hope that's a typo, remember the old rows people have had on ASF over buying in a dowtrend? I won't go there again but newbies should be aware that many people advise against it.

 

[Ageo]

You could learn CFD's.

Index CFD's have no commission so can you trade $1 contracts.

I made over 11 points today for jumping onto 2 swings.

with 10 contracts thats only $10 which only requires $500 margin. $10 x 11 = $110

I would prefer that.

But you will need to learn 1st

 

[Realist]

many people advise against it. (buying in a downtrend)

Okay, so when would you buy an investment property, at the bottom of a downtrend, or in the midst of an uptrend? (obviously not at the peak of an uptrend)

I can not see how investing (not trading) in a share worth $100 is not a good buy for $80? I don't care if it has just gone down or up, trends are completely irrelevant to me. You value something, compare it's value to its price and decide whether you buy it or not.

Trading is different, but with investing I believe trends are pretty much totally irrelevant.

A share price is merely people's opinions for the most part, judging an investment on other people's opinions is not wise!

Alot of people thought Cisco was a good buy at $100 and a bad buy at $8. the reality is the company was pretty much the same over this time. People perceptions changed. Those buying on trends would buy Cisco at $100 those buying on value would buy at $8. Tis obvious who is right in this instance.

The only time to buy a blue chip is when it is undervalued, or fairly valued, and that occurs usually only in downtrends, so I agree with Julia. A downtrend is a good time to buy a bluechip.

 

[professor_frink]

buying dips works well until it doesn't.
How do you differentiate a dip from a possible trend change? A company that's undervalued can head south with the rest of the market when sentiment changes.

 

[Sean K]

Newtothis27,

I am not a financial advisor or some oracle that knows the future, but I can tell you this: If anyone is telling you to buy anything right now they are bonkers!!!

At least wait until the end of the month until the next Fed rate comes out, or there is some sensibility about the market. The last thing a newbie needs is to see their one and only stock pick go down, down, down. Unless you are prepared for it! ANY stock on the exchange can be smashed for the slightest reason at the moment. Nothing is safe.

If you must do anything at the moment, I stick with my sugestion 2. Buy a managed fund with a regular investment plan and watch how it goes.

On the other hand. Go black!

 

[RichKid]

...........

The only time to buy a blue chip is when it is undervalued, or fairly valued, and that occurs usually only in downtrends, so I agree with Julia. A downtrend is a good time to buy a bluechip.

Apart from the other arguments, it appears that you are buying because it's undervalued rather than because it's in a downtrend. If a stock is 'valued' at 10 and the sp starts to rise and we buy at 4, 6, 8 then at every stage it's going up but it's still undervalued so it need not be a downtrend. I guess it all depends on your method.

Just thought I'd mention it so newbies realise there are many ways to profit from buying stocks.

 

[Realist]

it appears that you are buying because it's undervalued

Yes!!

Why not buy a bluechip if it is undervalued? It can go down more, but longterm it should go up, and you should buy bluechips for the longterm.

 

[professor_frink]

Yes!!

Why not buy a bluechip if it is undervalued?

If we are heading into a bear market(not that I'm saying we are heading into one now so back off all you perma bulls! ), then it doesn't matter if you think it's undervalued now, you won't make much money.

It can go down more, but longterm it should go up, and you should buy bluechips for the longterm.

True. Depending on what "long term" is will determine if this is a good idea or not. If long term for you is 20-30 years and it remains a good company for that entire time then it shouldn't really matter if it spends half of that time showing a loss or not, as it "should" go up before you sell it. Look at the bear market in the U.S in the 1970's. A decade of range trading + high inflation= lower wealth for share investors.

 

[Julia]

tsk, tsk Julia, hope that's a typo, remember the old rows people have had on ASF over buying in a dowtrend? I won't go there again but newbies should be aware that many people advise against it.

No, Rich, it wasn't a typo at all.

Perhaps my terminology was somewhat wanting but I stand by the principle as a long term buy and hold investor.

If my investment time frame is 10 or 20 years, and I am considering buying a blue chip company with a solid record of capital growth and reliable and increasing dividends, e.g. the big banks, Woolworths, Westfield, etc, then I think it makes sense to take advantage of a temporary drop in the SP to purchase the stock or add to existing holding.

Perhaps my use of the term "downturn"/"downtrend" was inappropriate.
I stand corrected.

Similarly I understand and agree with buying into an established uptrend.

However, if I have been a happy holder of, say, CBA for ten or so years, and it comes off its high of, say, $47, and it's possible to buy it at $40, why wouldn't you do that, if your investment time frame is at least the next 10 years?

Let's remember that the question was originally put forward by someone who is new to shares and investing. Hence my suggestion of a quality blue chip stock to start with, to allow familiarisation with the process with the least possible anxiety from volatility. Then I was suggesting that it would make more sense to buy said stock at a time when it is off its high.

Have I explained myself now?

Julia

 

[RichKid]

No, Rich, it wasn't a typo at all.

Perhaps my terminology was somewhat wanting but I stand by the principle as a long term buy and hold investor.

If my investment time frame is 10 or 20 years, and I am considering buying a blue chip company with a solid record of capital growth and reliable and increasing dividends, e.g. the big banks, Woolworths, Westfield, etc, then I think it makes sense to take advantage of a temporary drop in the SP to purchase the stock or add to existing holding.

Perhaps my use of the term "downturn"/"downtrend" was inappropriate.
I stand corrected.

Similarly I understand and agree with buying into an established uptrend.

However, if I have been a happy holder of, say, CBA for ten or so years, and it comes off its high of, say, $47, and it's possible to buy it at $40, why wouldn't you do that, if your investment time frame is at least the next 10 years?

Let's remember that the question was originally put forward by someone who is new to shares and investing. Hence my suggestion of a quality blue chip stock to start with, to allow familiarisation with the process with the least possible anxiety from volatility. Then I was suggesting that it would make more sense to buy said stock at a time when it is off its high.

Have I explained myself now?

Julia

Crystal clear Julia! Didn't mean to put you on the spot: I had a feeling that's what you meant but thought it was worth fleshing out for newbies. Part of the reason I asked is because fundamental strategists often use TA terminology and it's easy for someone to forget that the underlying strategy is a FA plan despite the use of TA 'terms of art'.

Sometimes people don't know what's making them the money- they may think that they made money by buying cheap stocks (ie cheap as they'd fallen from a previous price) when really they were buying undervalued stocks. So when they lose it they'll be just as clueless. If people have some basis, as you do, then it's a different story as you can assess and test your methods (at least i hindsight) but still we need to have an idea that the strategy will be profitable, but that's another story, I'm sure Tech's expectancy threads will do for starters.

 

[Realist]

If we are heading into a bear market

I for one will admit to never knowing when we are heading into a bear market.

I'm not sure anyone else knows either.

Alan Greenspan was quoted about 35 years ago as saying "I can safely say now is a good time to buy stocks" a few weeks before one of the longest bear markets ever in the 1970's.