Newbie Lessons - All your questions answered

Onceblue · 31 December 2009

Does anyone know of a calculator that allows you to calculate capital withdrawals and add on interest over a 6 year time frame?

I have a substantial expense $x which will be payable over 6 years in three intallments per year. I have $y saved which is less than $x and I would like to calculate (given an interest rate of $z) how much I need to add to the capital each month to ensure the expense is covered. I've looked at my bank's website but their budgeting tools are very basic.

Also an unrelated query, can a person have more than one CHESS sponsor? and where can I find out more about bonds? It seems to me from Newbie lesson by Sir O in Aug 08 that bonds have more potential than term deposits because they can possibly increase in value, worst case being they just run their term.

akkopower · 31 December 2009

use excel.

good link to hybrids and the assorted here

http://www.macquarie.com.au/macsecmc/codi/CodiServlet?nav=start&documenttosend=income_security_doc

if u search the thraed "hybrid scurities here there is a lond discussion

Sir Osisofliver · 2 January 2010

Onceblue said:
Does anyone know of a calculator that allows you to calculate capital withdrawals and add on interest over a 6 year time frame?

Yes I do - and it took me ages to build so you cannot have it. Make you own - use excel, don't forget anything important.

I have a substantial expense $x which will be payable over 6 years in three intallments per year. I have $y saved which is less than $x and I would like to calculate (given an interest rate of $z) how much I need to add to the capital each month to ensure the expense is covered. I've looked at my bank's website but their budgeting tools are very basic.

Also an unrelated query, can a person have more than one CHESS sponsor?

Of course - one for each broker that you deal with.

and where can I find out more about bonds? It seems to me from Newbie lesson by Sir O in Aug 08 that bonds have more potential than term deposits because they can possibly increase in value, worst case being they just run their term.

There is plenty on these boards about bonds - but I would caution you to remember that anything that can possibly increase in value, can also decrease in value if the circumstances are reversed.

So do you know what conditions need to exist for Bonds to increase in value? The answer to this question is a falling interest rate environment. Would you consider that we are in such an environment at this time? We have just come up off a 49 year low in RBA cash rates, and the most probable direction for interest rates is upwards.

Cheers

Sir O

imdrunk · 9 January 2010

Re: Newbie Lessons - Chapter Two - How to manage your Bank Manager (secrets from the

Hay Sir O, Im a beginner who began to read your effective lessons a few days ago and as i was reading this lesson above there were certain points which i didn't understand..

If you decide to pay fortnightly (AND YOU SHOULD), when you get your mortgage documents, if you are paying attention and haven't gone glassy-eyed from reading all the legalese, you will see that they will amortise your fortnightly payments across the year so that you pay exactly the same as someone paying monthly. You pay exactly the same over the course of a year.

Lets say example i pay $2500 interest with about $1000 off the principle a month together it equals 3500, If i was to go and enquire about paying fortnightly payment does that mean i get charged higher interest rates?

Next question is How does a bank have more interest(they like to deal with) in someone who pays interest on credit card debts than a person who borrows $100k on thier $1m House which then allows a bank to lend out as you said about $800k and interest on that? thats exluding the interest being payed on the $100k by the owner of the $1m liabilty, so is liabilty better then debt and if i repay my mortgage fortnightly does that mean i save money and how much?

sorry for the question and if it wasnt understandable then please let me know so i can clarify them thank you and i appreciate your answer

Sir Osisofliver · 11 January 2010

Re: Newbie Lessons - Chapter Two - How to manage your Bank Manager (secrets from the

imdrunk said:
Hay Sir O, Im a beginner who began to read your effective lessons a few days ago and as i was reading this lesson above there were certain points which i didn't understand..

If you decide to pay fortnightly (AND YOU SHOULD), when you get your mortgage documents, if you are paying attention and haven't gone glassy-eyed from reading all the legalese, you will see that they will amortise your fortnightly payments across the year so that you pay exactly the same as someone paying monthly. You pay exactly the same over the course of a year.

Lets say example i pay $2500 interest with about $1000 off the principle a month together it equals 3500, If i was to go and enquire about paying fortnightly payment does that mean i get charged higher interest rates?

No - your interest rate is subject to a contract (even if the contract states variable), neither party can change the contract without the other's permisson. If you have an existing loan agreement where you pay your mortgage monthly, simply change this to a fortnightly payment structure. Instruct your bank to set up a periodic transfer from whateer account you usually pay your mortgage from on a fortnightly basis. DO NOT change your mortgage contract unless you can get a better interest rate in doing so.

Next question is How does a bank have more interest(they like to deal with) in someone who pays interest on credit card debts than a person who borrows $100k on thier $1m House which then allows a bank to lend out as you said about $800k and interest on that? thats exluding the interest being payed on the $100k by the owner of the $1m liabilty, so is liabilty better then debt and if i repay my mortgage fortnightly does that mean i save money and how much?

imdrunk - I think you need to read that section again. If you have a $100k mortgage on a $1m property, then the bank has your million dollar asset as security and has your unused security. It can then use this to lend out to other bank customers, be they other mortgages, credit cards (at much higher interest rates) overdraft facilities etc.

By paying your mortgage fortnightly instead of monthly, over the course of year you will make two extra payments. So it is more expensive in the short term to do so. These payments result in significantly fewer payments in the longer term. How much you will save is entirely dependent upon the size of your mortgage.

I hope I answered that correctly and it makes sense.

Cheers

Sir O

Onceblue · 3 February 2010

Hi, I'd like to ask a couple of unrelated questions:

1. I'm watching a stock because I hold it and it's dropped in value by 80% (missed the boat to unload it). Anyway I look at the company announcements and they all relate to company share buy backs. I've assumed that this implies the company has faith in its own stock. However there seems to be a price limit on what the company can pay and according to these notices its still got heaps more buying to do. Is this buy back both propping up the sp and holding it back?

2. I've come accross the term "crystallizing a loss" i.e. selling a share you've lost on and then buying it back at exactly the same price. Is this still a valid method i.e. acceptable to ATO?

3. Another query I've got is why when you put in a buy order at limit the buy is always executed exactly at that price. Why isn't the order interpreted as "I'd like to buy XYZ and the maximum I'll pay for it is $abc but if you can get it any cheaper that'd be great"? Same with selling at limit.

4. Today I thought it would be good to sell some BHP and I took a look at the market depth to try an get a feel for a realistic asking price. On the buy side of the table was a price of $50 (way more than going rate) and on the sell side was a price of $35 (much lower than going rate). I'd like to know where these prices come from? Was the $50 buyer trying to influence sentiment? Would the transaction have gone through and at what price? I tried to put through a sell order at limit $50 but the system wouldn't accept the order

5. Also when I've looked at course of sales sometimes there are sales of single shares. Who would buy or sell just one share? Is it just the system topping up orders? it just dosen't seem worth the brokerage otherwise.

Trembling Hand · 3 February 2010

Onceblue said:
1. I'm watching a stock because I hold it and it's dropped in value by 80% (missed the boat to unload it). Anyway I look at the company announcements and they all relate to company share buy backs. I've assumed that this implies the company has faith in its own stock. However there seems to be a price limit on what the company can pay and according to these notices its still got heaps more buying to do. Is this buy back both propping up the sp and holding it back?

No idea sounds like a dud.

Onceblue said:
2. I've come accross the term "crystallizing a loss" i.e. selling a share you've lost on and then buying it back at exactly the same price. Is this still a valid method i.e. acceptable to ATO?

No. Its called a washed sale and mostly its not allowed.

Onceblue said:
3. Another query I've got is why when you put in a buy order at limit the buy is always executed exactly at that price. Why isn't the order interpreted as "I'd like to buy XYZ and the maximum I'll pay for it is $abc but if you can get it any cheaper that'd be great"? Same with selling at limit.

It is. If there are already offers in the market at a lower price than your limit order and of sufficient volume you get them.

Onceblue said:
4. Today I thought it would be good to sell some BHP and I took a look at the market depth to try an get a feel for a realistic asking price. On the buy side of the table was a price of $50 (way more than going rate) and on the sell side was a price of $35 (much lower than going rate). I'd like to know where these prices come from? Was the $50 buyer trying to influence sentiment? Would the transaction have gone through and at what price? I tried to put through a sell order at limit $50 but the system wouldn't accept the order
.

You must of looked outside of trading hours or during the opening and closing acution. See here. Nothing about trying to "influence sentiment".

Onceblue said:
5. Also when I've looked at course of sales sometimes there are sales of single shares. Who would buy or sell just one share? Is it just the system topping up orders? it just dosen't seem worth the brokerage otherwise.

Only retail traders pay min brokerage per trade. Instos and brokers pay per volume so it doesn't matter if they do 100 trades of 1 share or 1 trade of100 shares. they could do this for any number of reasons, internal cross so they need a market price, could be leftovers from a uncompleted order, could just be a bored trader.

Sir Osisofliver · 4 February 2010

Trembling Hand said:
No idea sounds like a dud.

+1 What's the company?

No. Its called a washed sale and mostly its not allowed.

+1 It's still a fairly grey area as far as the tax department is concerned however. if it's obvious that it is a wash sale (IE same volume, same day) then the ATO are on firm ground. If it is not obvious (Different volume, fortnight apart, material news items), then you can say that you had a legitimate reason for re-investment and ATO does not have much of a leg to stand on. BUT - this is no something you want to get wrong. No one likes a tax audit.

It is. If there are already offers in the market at a lower price than your limit order and of sufficient volume you get them.

+1 Go read the sticky in the beginners section on opening conditions of the market.

You must of looked outside of trading hours or during the opening and closing auction. See here. Nothing about trying to "influence sentiment".

+1

Only retail traders pay min brokerage per trade. Instos and brokers pay per volume so it doesn't matter if they do 100 trades of 1 share or 1 trade of100 shares. they could do this for any number of reasons, internal cross so they need a market price, could be leftovers from a uncompleted order, could just be a bored trader.

+1

Thanks for that TH - that's almost exactly the answers I would have given.

Cheers

Sir O

Onceblue · 4 February 2010

Thanks TH and Sir O, I appreciate your input.

Stock I was referring to is SDG. Not one I'd attempt to "wash".

Trembling Hand said:
You must of looked outside of trading hours or during the opening and closing acution.

Yes, I was looking outside trading hours, I try not to get caught browsing charts at work.

Trembling Hand · 4 February 2010

Onceblue said:
Yes, I was looking outside trading hours, I try not to get caught browsing charts at work.

I believe there is worst thing you can get caught browsing at work.

Izabarack · 8 March 2010

Re: Newbie Lessons - Non-commercial packages

Maybe that's not the correct term; the search function did not return any hits. I'm tidying up the portfolio in anticipation of a bit more time to devote to learning more and more activity in share investment. I have discovered I hold a share package currently worth less than $50 on the market. My understanding is that this package is classed as "non-commercial" at that value and cannot be disposed of on the open market. The shares are an old spec buy in mining and I just want to clear the holding from my books.

Can anyone offer any advice on what to do?

Iza

Trembling Hand · 8 March 2010

Re: Newbie Lessons - Non-commercial packages

Izabarack said:
Maybe that's not the correct term; the search function did not return any hits. I'm tidying up the portfolio in anticipation of a bit more time to devote to learning more and more activity in share investment. I have discovered I hold a share package currently worth less than $50 on the market. My understanding is that this package is classed as "non-commercial" at that value and cannot be disposed of on the open market. The shares are an old spec buy in mining and I just want to clear the holding from my books.

Can anyone offer any advice on what to do?

Iza

If its a company share & the shares are still listed and trading you should be able to sell it. Maybe call your broker if you are having trouble selling it when the market opens.

Sir Osisofliver · 8 March 2010

Re: Newbie Lessons - Non-commercial packages

Izabarack said:
Maybe that's not the correct term; the search function did not return any hits. I'm tidying up the portfolio in anticipation of a bit more time to devote to learning more and more activity in share investment. I have discovered I hold a share package currently worth less than $50 on the market. My understanding is that this package is classed as "non-commercial" at that value and cannot be disposed of on the open market. The shares are an old spec buy in mining and I just want to clear the holding from my books.

Can anyone offer any advice on what to do?

Iza

If it's listed you can transact in the share. Be aware that brokerage may cost you more than the value of the holding so all you will be doing is clearing it out (and probably crystallizing a loss).

Infrequently, listed companies will act to clear out their registries of non-marketable parcels as a brokerage free transaction.

You might wait for this but if it is a very small company they may not do it for some time.

Cheers

Sir O

Izabarack · 8 March 2010

Re: Newbie Lessons - Non-commercial packages

Sir Osisofliver said:
If it's listed you can transact in the share. Be aware that brokerage may cost you more than the value of the holding so all you will be doing is clearing it out (and probably crystallizing a loss).

Infrequently, listed companies will act to clear out their registries of non-marketable parcels as a brokerage free transaction.

Sir O

Thanks guys. I'll contact the company first on the chance that, they too, want to do some housekeeping. Failing that, it will go on the list for the Broker to deal with and I'll just wear the cost.

Iza

Sir Osisofliver · 9 March 2010

Re: Newbie Lessons - Non-commercial packages

Izabarack said:
Thanks guys. I'll contact the company first on the chance that, they too, want to do some housekeeping. Failing that, it will go on the list for the Broker to deal with and I'll just wear the cost.

Iza

I'd be surprised if they tell you... that information would be considered material and subject to continuous disclosure legislation.

Cheers

Sir O

adobee · 9 March 2010

Thought I would post this here rather than a new thread. .. If I have just opened a comsec account with my super and I want to sell some of my current holdings and buy them in the super is it possible to have the broker at cba do this directly ie a cross trade rather than trying to do it on market ?

skyQuake · 9 March 2010

adobee said:
Thought I would post this here rather than a new thread. .. If I have just opened a comsec account with my super and I want to sell some of my current holdings and buy them in the super is it possible to have the broker at cba do this directly ie a cross trade rather than trying to do it on market ?

Why not just get them to do an off mkt transfer?

Izabarack · 9 March 2010

Re: Newbie Lessons - Non-commercial packages

Sir Osisofliver said:
Infrequently, listed companies will act to clear out their registries of non-marketable parcels as a brokerage free transaction.

You might wait for this but if it is a very small company they may not do it for some time.

Cheers

Sir O

I emailed the company concerned and received a prompt and helpful reply. The reply tells me that companies can clear out their registries of non-marketable parcels as through a compulsory acquisition process. After announcing intent and giving notice, the company can dispose of non-marketable parcels by selling them on the market unless shareholders who do no wish to sell, advise in writing in response to the notice. I did not ask about brokerage and there was no info in the reply on that aspect of the process.

The reply further tells me that no process is in force at the moment (at that company) but triggered by my query, it will be an agenda item at the next board meeting.

Just going to wait for the moment and see what happens next.

Iza

Cobweb · 29 March 2010

Hi, i was aware of the advantage of fortnightly payments but had no idea i still had to ask the bank manager not to amortise my payments aswell. Am i understanding correctly, is this the case?

Sir Osisofliver · 29 March 2010

Cobweb said:
Hi, i was aware of the advantage of fortnightly payments but had no idea i still had to ask the bank manager not to amortise my payments aswell. Am i understanding correctly, is this the case?

I don't know cobweb. When you set up trhe mortgage did you do so under a defined monthly or fortnightly payment structure?

If it was monthly and you are paying fortnightly...no problems

If it was fortnightly.....you will need to check and see if the figure they quoted you was an amortised figure. It's standard bank policy to amortise the payments...unless you specify otherwise.

Cheers

Sir O

Newbie Lessons - All your questions answered

Onceblue

akkopower

Sir Osisofliver

imdrunk

Sir Osisofliver

Onceblue

Trembling Hand

Can be found on the bid

Sir Osisofliver

Onceblue

Trembling Hand

Can be found on the bid

Izabarack

Trembling Hand

Can be found on the bid

Sir Osisofliver

Izabarack

Sir Osisofliver

adobee

skyQuake

Izabarack

Cobweb

Sir Osisofliver

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