At a crossroads...

[DionM]

Hi all,

I'm (still) a beginner at share trading. Have added a few nice stocks to my portfolio over the past few months as I pick a few I think will do well. I also have a few blue chips (BHP, CBA etc) that have done well.

Apart from the bluechips, I have a lot of small parcels. Typically I buy a parcel of between $500 and $1000 worth (all I can afford with a mortgage and young family) every now and then. This has served me well - most of the stocks I have bought have grown (some more than others), the "worst" still covers the brokerage to buy and if I wanted to sell as well, so I've not lost money.

So I have plenty of diversity ... but I think it's excessive.

As for what I buy ... well I have a fairly heavy mining/exploration bias at present, which may be attributed to me often looking at cheap (ie < 50c) buys.

But I look at some buys that have rocketed (ie doubled) ... and I think ... if only I had bought $10,000 worth instead of $1000.

So I am at a crossroads. I see 3 options:

1. Continue how I do at present. I "fund" this by spiriting away a portion of my salary each week to my trading account, so every few months I have enough to buy a small parcel.

2. Continue as above ... but wait longer and buy a slightly larger parcel (say $2k) and less often.

3. Borrow (say 50k-80k) and buy larger parcels ... and of course have to pay interest on the borrowings. In effect, the money I used to spirit away would pay for the interest.

So I guess I'm looking at ways to maximise what I am doing with the money I have. Borrowing is riskier I guess as it's all a loan ... at present it's just my own money. But I am 'tempted' to buy bigger parcels which means I need more cash ...and it would take me a long time to get a reasonable amount together to purchase a large parcel myself.

Does anyone have any thoughts on buying lots of small parcels? I read some of the threads and I often see people talking about parcel sizes that would be $20,000+ in value. Does anyone "tinker" like I do?

Some may ask what I am seeking out of share trading ... well my view has always been longer term - 5 years as a minimum (15-20 more likely), with the aim of having a nest egg to provide for my children - to help buy a house for them etc. I realise this doesn't suit a "loan" ... I would change my strategy to try and pay off the loan with profits and then the net result would be I keep the 'free carried' shares.

I probably should run some numbers through Excel but I'd be interested in any view or comments those on the forum have.

 

[brettc4]

Re: At a crossroads ...

DionM,

Before I start, I am also relatively new to trading (been investing for a while, but new to trading) so take from this what you want.

From your time frame of 5 years + I would be looking away from speculative stocks and be looking at dividended paying stocks. Try looking at anything in the ASX100 with a dividended yield around 4%.
If you limit yourself to these, you will then be able to us a margin loan (or other form of debt) to assist in obtaining larger positions.

I know the struggle of raising capital, I have recently been in this position myself and have made use of a margin loan to help buy positions in ARG and ANZ. The interest (as the money is used for an income producing investment) is tax deductible and the dividends effectively cover the rest.

Your current strategy is, in my opinion working at the moment because of the long term bull market we are currently in, but if we do have that downturn some people predict, I think you will find yourself in trouble with your holdings.

My last piece of advice, and something I am still working through before I start using any more of my capital, is to write yourself a trading plan. Pay particular attention to Money Management and remember the plan is god.

Brett