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Playing the game with limited funds

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darkone

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1 July 2008
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hi guys

I am still young just 22, and just starting out, have not even made my 1st reall trade yet, i have recently made the decision to use the funds that i saved up to start trading to pay of all my debt, credit cards fines phone bills etc etc. which brings my back to 0 maybe a few grand after i get my tax return. my plan is to put between $300(10% of my wage) and 1000 a month towards investing. basicaly what i was paying on bills every month. my plan was to start buying companys that are price between 0c and 2$ so far im looking at SDl, AHS,PEM,CER and CNP, I am currently looking at young company or companys that got slamed over the last 12 months due to the credit crunch. that i think will bounce back if they can make it through the next 12 months. i was orignaly plaining on geting a few of the big banks but due to lack of funds i have changed my mind,

I would like to get you guys thoughts on my current statergie. or if you think that im better of saving for another year be for i start
 
Hi Darkone,

I'm in a similar position to you - it seems like there are a lot of cheap stocks out there that are probably underpriced so it must be a great time for small time players like us to make some $$. I jumped in to a stock called ARR because of its cheap price, long downward trend and listening to a speech from the board of directors at an AGM. I thought i'd done a fair amount of research and that it was only a matter of time before it bounced back. Now i'm getting absolutely stung. I didn't put in much so it OK but my point is - there's a reason why stocks on a long downward trend are in that trend. Something is probably wrong. Not only that - some stocks don't bounce straight back up, they go sideways for years.

There are some really experienced guys on this forum that describe strategies that go completely over my head and others that use broad macro trends to justify positions. My advice would be to read as many threads and do as much research as possible. Don't put all your eggs in one basket and don't put in what you're not prepared to lose. There's an intersting thread on "bottom pickers and knife catchers" that you might like but as i say you must do your own research and don't be impatient. Take your time.
 
Forget about it. Just save until you are in a position to purchase amounts that are not affected by transaction cost. (especially with cash @7%)

Use this time to LEARN what to do. The markets will still be there with just as much opportunity in two years as today. Stepping in with no money and no skills will most likely mean that you will not. Trying to catch a falling knife just shows how much you have to learn.

Rushing in when young and unprepared reminds me about the young bull and old bull story,
 

The best investment you can make with any certainty is to pay off any credit card debt first and continue to pay all credit card bills in full on or before the due date.

The next step is to work out how much you can afford to lose and only then should you consider penny stocks. Penny stocks are speculative. Ask yourself why a stock is worth, on the market, only a fraction of it's issue price. Ask where the rest of the money went. Maybe it went on prospecting for oil, gas, gold, uranium, copper etc and maybe they will strike it rich. Some will but most will not.

If you invest in haste you may repent at leisure.

Having said that I still suggest investing as a good way to build a bank.
 
Im in a similar situation. Im 21 (nearly) but have been investing for over 2 years.

Firstly i would suggest you learn what a market capitilisation is. It doesnt matter that price the stock is, it depends on the market cap.

IE - 1000 shares @ $1 = $1000 MC
or 10000 shares @ 10c = $1000 MC.

Price itself is only one half the relationship to the overall value of the company you need to look at the number of shares on issue.

Secondly, is with cash accounts at 8% they might be something to consider while you keep learning.

thirdly, start with bigger companies, dont go gambing n specs straight away.

Fourth, try and do the ASX share game, its a great way to learn without risking anything
 
Don't rush into the stock market unprepared.Just because stocks are down at the moment believe me they could go down even further yet.
No one can predict accurately which way the market is going to go or when the next bull market will arrive.

Sure you might get lucky and get a stock that makes you a bundle but it would be luck picking the right one if you are a beginner.

The art to making money in the stock market is to "Minimise Risk"and you have to learn to do that.

If you feel the urge to get into the market I would go for solid "Blue Chip" which are down at the moment even then there are no guarantees as to when they will rebound.

Above all Learn all you can. There are some excellent websites around
where you can find basic information to start you on your way.

And being biased of course you can start with mine.
 
darkone said:
so far im looking at SDl, AHS,PEM,CER and CNP
Click to expand...

I wouldn't be surprized to see 2-3 of these go bankrupt.
PEM need to merge with CBH or much higher zinc prices.

CER and CNP I don't know them that well but geez they smell. Their share prices are down so much because people expect they will fail.
 
Some good advice given so far.

As a new investor with limited funds, I would also tend to steer away from those companies that have copped a hiding lately or in strong downtrends atm.

Stocks in downtrends are normally in one for a reason, just remember people alot smarter and with alot more money then us are not buying those stocks (hence the downtrends) so why would we want to buy them? Because they are cheaper then 12 months ago isn't a good reason to buy a stock.

If you have a longer term view you would be better off buying some good blue chip companies paying good dividends and then continue to learn about the markets and save as much as you can for when you've got a better understanding of the markets and what you want to achieve in the market. But this is purely my opinion only.

Good luck
 
Personally,Id be looking at trading one stock maybe 2.

Getting on one which is moving in your direction--wether long or short and building in and out of positions with correct money management and a very low fee broker.
Minimising loss and maximising profit when the opportunity presents itself.
Patience,and trading in the direction of favorable market conditions (relative to your chosen positions---long or short.

I think you could do it with as small a capital base as $5K.
Your really against it with any less and much more likely to succeed with larger capital bases.

Its not impossible but very difficult.
 
darkone said:
hi guys

I am still young just 22, and just starting out,

I would like to get you guys thoughts on my current statergie. or if you think that im better of saving for another year be for i start
Click to expand...
If I was you, my 'statergie' would be to save money in the bank and go backpacking for a year before I was 25.

Or, you may have different motivations to me.

Plenty of time to make money later on.

Have fun!

Unless you are an Alex Keaton type.
 
i have been trading bhp mainly for around a year now and although ive made a few decisions that have lost me a little bit of money (not selling at highs) im happy with my decisions

my little philosophy (being so young) is that i should learn and become accustomed to as many blue chippers as possible as they will/should make the basis of my portfolio in the near/long-term future

mate my advice is pick a big blue chipper and invest and follow for a while...just hop on and enjoy the ride really
 

I love this idea. To me it works for many reasons. Mostly you realize that limited $$ and experience puts you in the learning phase. If you accept you are here to learn then that removes the pressure of tuning $5000 into $100,000. Which by the way greatly increases you chances of doing just that.
 

good, now if you are involved in any kind of firm...

give me a job please...:
 
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