My plan - appreciate any feedback!

[Jester]

Hi all,

I've decided to enter the ASX, and want to again thank everyone for their efforts on this forum. Its been a great learning resource so far and one of the better forums I have come across.

A little about me.

I left my run a little late sadly, so missed out on the big boom. I am mid thirties, with no assets to speak of. I currently have about 80k to my name, about 70 of which is in cash.

So its not the best place to be in, but given I can't change the past, I can only look to the future. My plan moving forward is this.

Lock up 65k in a term deposit, as it looks like IR are on the way down. I have read of the possibility of a credit crunch due to the Euro crisis, so not sure whether that would have the propensity to increase the demand for cash from the banks, but at any rate the TD would only be for 6 months, so I would have a chance to revisit if higher rates were on offer at that point.

I have abut 10k in a separate account which is growing about 1.5k a month from my savings, which is what I will earmark for shares. about $500 a month goes into a FHSA so that I can purchase a ppr in a few years time.

My plan re: shares is to wait for a significant market dip, given the volatility currently out there, and buy blue chip shares. The ones I am considering is NAB, Woolworths, wesfarmers, and coca cola to keep LT and Rio Tinto to keep for about 12 months then sell at a profit. I picked Rio Tinto as they are still fairly safe, but resources tend to be more volatile then most, so should offer reasonably safe options to buy low and sell higher.

I would like to make 5k a year in shares to begin with, but honestly don't know if this is a realistic goal or not given my amounts and the current state of the market.

I am very accepting of any advice that could be provided by those here with a wealth of experience if you have the time.

Thanks in advance

 

[Knobby22]

Sounds a good plan to me.

 

[CanOz]

Statistically you can beat the market by selling in April and buying in November. The current issue of TASC has the research.

CanOz

 

[waza1960]

A good well thought out plan except personally I would stay away from mining stocks (RIO) as they are historically high ATM and if world/china economies take a dive you will be on the wrong side of the trade. I'm sure there would be plenty of stocks to look at after some simple scanning that would be a little safer

 

[Lone Wolf]

I'm not much of an investor, so no comments on your plan. Just some general questions for you to ponder:

What do you consider a significant market dip? ie. When exactly will you buy?
Are you ok with the possibility that the dip might keep going and turn into a big downtrend after you buy in?
What if a significant dip doesn't occur in the near future? Are you happy to stay on the sidelines while the market rallies?

Also, I'm not sure anyone can give you an expected return on your money. But I'd say 5k a year from an initial investment of 10k is expecting too much. For the long term holds you will make whatever dividends they are paying. For your RIO trade, no one can say how much you will make or lose on that trade.

 

[Assasin]

Certainly not an expert but the best advice I recieved 5 years back was: Buy blue chips (especially ones you have stated) if you want to SAVE money and buy small-caps if you want to MAKE money.
Not saying it's easy but far more rewarding.
Good luck with your plan.

 

[robusta]

Just a question on term deposits, are the rates competitive with the Ubank at call online savings account?

Sound like you have a nice base to work from with that monthly savings rate as a inexperienced investors have you considered dollar cast averaging into a basket of ETFS?

 

[explod]

Where to start.

Do not do anything for awhile, perhaps a month or so.

But, read, read and read.

And you have picked one of the very best places in my view.

Look at and read through the threads here on ASF about,

Learn about charts and Technical analysis, an ASF poster tech/a is well worth following. When you understand a bit read back over all of his posts.

World economics at the moment, about the currencies, reasons for movements in the US dollar, the effects of a high Aussie dollar on company profits.

Read up on the story of gold which will again lead you back to the values of money and currencies.

Look at companies that produce an item in demand, I have found looking at the hottest product then identifying the best company in that sector and then looking at the comments on the forum about those companies has been a good lead in.

I am not pushing this stock or making any recommendations but I am invested in a stock call Maverick Drilling (ASX - MAD) which I first noticed someone had in the ASF stock tipping competition. I checked it out in every way and got on at .63 cents, it is now $1.30 and my research indicates it is going a lot higher. There are a lot of good stocks like this at times but you need to learn about them all and only enter when you are sure of yourself.

There are also a lot of threads for those starting off if you do some searching. Look at the advice given to them and also perhaps send them a personal message and see how they have faired.

All the best as a investor but remember read you head off.

Many years back I lost a lot of money by listening to others, financial advisers in particular would you believe. You have to make the decisions so you have to know from the top down yourself. And a great adage when you do have an investment, "when in doubt get out".

And on this thread now or on any other thread, ask questions.

 

[So_Cynical]

Sounds like a mediocre plan to me Jester, way to conservative but perhaps that's what your comfortable with and staying within one's comfort zone is very important.

As Assasin has pointed out, the blue chips are not where the good money is to be made, its' the smaller sized stocks that yield the best and move the most with only a small increase in risk.

And really...your going to buy into a major dip with 1000 voices telling you not to buy in general that's not what conservative investors are comfortable with.

Good luck

 

[Tyler Durden]

I have abut 10k in a separate account which is growing about 1.5k a month from my savings, which is what I will earmark for shares. about $500 a month goes into a FHSA so that I can purchase a ppr in a few years time

Maybe I am interpreting this wrong, but how do you get $1,500 return a month on $10,000?

 

[Joules MM1]

Maybe I am interpreting this wrong...

yes

.... is growing about 1.5k a month from my savings,

 

[Joules MM1]

I am ...accepting ...any advice that could be provided by those here with ...experience ....

avoid the cycle of books, blogs n blah blah

you clearly are asking to be taught,..... great!

find someone who can teach, has runs on the board, has results that are measurable, maybe is prepared to produce an equity curve*, someone who's traded for at least 12 years as they will have seen and transacted through almost all phases of market activities and had their metal tested, someone with a proven history and never shy away from asking the important questions, especially ask the questions that you feel sound dumb because a good coach will understand and have seen all the dumb moves traders make, a good coach is always respectful......

Nick Radge: "Trade for long enough and you'll see everything"

finding a good coach is a daunting enough task....... if you go it alone in finding a tutor/mentor/coach, in my humble opinion this is your safest course.....protecting your capital is your major role and shall always be your biggest priority, i mean, if you lose your capital doesnt matter how much you know......the world is now full of "expert" traders who troll the chat sites of the world.....

prepare a list of questions, all questions are valid until dealt with, the (more) specific you can get the better your results as you are the ultimate arbiter of your account, you take all the responsibility......

there is a direct correlation to how much you spend on the correct education versus how much you expect your capital to earn and how you safe-guard that capital......by that i mean, if you spend 2 grand on an online course that teaches baloney meatballs you get baloney meatballs and if you spend 500 bux on a course with someone who can show you results, trade in front of you or has been promoted to you by someone who has nothing to gain, then the odds are pretty good youre looking in the right decision......

another important thing to know is that the auction process is like no other activity you'll ever do......there is no real common sense because if there was a common sense everyone would have it, there are certainly simple functions and simple approaches that are easily over-complicated by many and there are similarities to sports because your opponent is real and price is dynamic .....you require a coach/mentor who can teach you a regime whilst also explaining nuances, subtleties and how to align yourself with those ideas as they appear.....

here are some rules:
your education must not come in a shiny box
your education must not be a whizz-bang set of indicators
your education must not be a square-time-ratio-discovered-sick-bloke in-the-30's
your education must not show you last months/years charts with amazing traders results
your education must not come from a book or dvd or recorded seminar
your education must not be soley based on one approach (fundamental or technical)
(the last one i still insist on even tho a strong case can be made that i am wrong)

your education must include one of these: a plan, a strategy or a consistent blue print
your education must include quantifiable money management
your education must include how to shape risk via statical analysis so you see how risks increases/decreases
your education must include how you manage your time
your education must include how you manage your business !


the point is, that you first need to narrow down how best to protect, how to be defensive and make your goal to understand the auction process and in time the capital growth comes to your business of one.......

you'll hear a lot about psyche and stuff (the sports analogy) you'll delve into that at some point and on that, when seeking the right education, you need to trust your own innate sense of when someone is talking bollox to you as its the one instinct that you have now that'll protect you going forward, trust that instinct.......

most people who see the words "find a mentor" usually do the opposite because finding books and dvd's and public chat sites are waaay easier for gratification.....

ill give you a clue........on any given day go into a search engine and type in the code of an index like our XJO or the DAX and see how many hits that have the same charts with the similar diagonal lines with similar indicators and some with real eye-popping colours and you know what, nearly all those people have no real trading plans, they have great concepts, brilliant theories and no trading plan.......theyre stamp collectors....they've skipt the education and gone straight to wherever it is they are!

* equity curve; there's a chap (Druss at Top$tocks) by the name of Geoff who goes by the twitter handle of FX_Day_Trader who openly shares his trades and has an equity curve that's regularly updated......

Futurestrader71: "As a trainer for new traders, most of my time is spent tracking results and dealing with psychology with new traders, it is the biggest thing, my recruitment plan does not allow for existing trading experience, because, they tend to have enough trading experience to pick up a lot of baggage......those issues are very expensive......the name of the game is practice......you come up with a plan and you practice, document, adjust your plan, practice some more.....

my fave rule i heard a long time ago and consistently abused was; thou shalt not kid thyself ......

 

[ENP]

"Far more money has been lost by investors preparing for corrections or trying to anticipate corrections than has been lost in the corrections themselves."
-Peter Lynch

It is good that you want to wait for a crash/correction to pick up good stocks for cheap. However, in the meantime, there is value in numerous stocks even though there is no 2007 type crash in the markets. Market corrections generally come along every 5-10 years but you could have lost out on a lot of gains in that time.

For example, Warren Buffett bought Coca Cola after it had 500% growth in its share price over a relatively short time frame. He bought it at a P/E of 15.

Also, the thinking of buying into a company just because it is "Blue Chip" doesn't make it a good investment. A big company can be a both a good/bad investment.

 

[ENP]

Also,

On your plan, the 65k term deposit I think is a great idea. It means you have more time to think about what you really want from your investments whilst it is in there.

 

[Calliope]

Maybe I am interpreting this wrong, but how do you get $1,500 return a month on $10,000?

Indeed. Even if Jester had $80,000 on deposit it would have to be earning 22.5% to get a return of $1,500 a month. He doesn't need our advice.

 

[Knobby22]

Maybe I am interpreting this wrong, but how do you get $1,500 return a month on $10,000?

I think he means he is saving $1,500 a month.

 

[Jester]

Hi all, apologies for not replying sooner.

Cheers for all the feedback, definitely some hings to ponder! Will look to do plenty of research in the coming months.

Just to confirm, its 1500 a month I am saving from income, not 1500 I am receiving as profit from shares, I haven't actually purchased any as yet.

 

[Sir Osisofliver]

Jester,

There's some good advice already in the thread. Joules has given you a comprehensive response if you wish to be a TRADER. Some of us who either do this for a living or are so proficient it is second nature to us forget the time demands that learning could incur. With that in mind I want you to think carefully about whether you are a trader or investor. Whether you intend on being actively involved or passively involved in the investing process.

If the answer to that question is that you intend to be an active investor... Then you will have a lot to learn in a short period of time and be aware that you will be committing yourself to probably daily interaction with the market. How Do you feel about this?

If its your intention to take more of a passive role with your investment there are perhaps other asset classes you should consider. You have already said that you intend to wait until the market has a pull back before buying blue chips. You've made a fundamental mistake right there. You put emotion into your investing activity. What if the market never retraces and you sit on the sidelines? You seem to be recognizing that the ideal moment to purchase blue chip assets in the share market is at the end of a cycle
There is another asset class which is currently at that point. Similar to when we were purchasing blue chip shares with 7 &8% yields I can now get commercial properties with10 to 12% yields Positively geared from day 1!

It may be very useful for you to examine the different asset classes for when each has their moment in the sun

If you do want to be a trader ignore what I have said. Traders make money regardless of what type of market you are in.

Cheers

Sir O