Scaling Up Investments

[robertbanking]

Hello you very intelligent and wonderful people that make up this forum. I do hope you are having a nice weekend.

If after alot of research i invest a certain amount of money into a stock and like the way things are going say after 3 months, what is the best way to scale up this investment please? Would you kindly wait for certain dips please, is there anything else to look for to find the best possible entrance on a second buy of a stock please? I am just trying the best to ensure i learn more about purchase timing of stocks, as usually when i buy them they drop, which is not necessarily bad in a quality stock but i wanted to try become better.

Thank you so much for any input you could give me, i would be thankful, grateful and appreciate your kindness. Take care.

 

[Value Collector]

Hello you very intelligent and wonderful people that make up this forum. I do hope you are having a nice weekend.

If after alot of research i invest a certain amount of money into a stock and like the way things are going say after 3 months, what is the best way to scale up this investment please? Would you kindly wait for certain dips please, is there anything else to look for to find the best possible entrance on a second buy of a stock please? I am just trying the best to ensure i learn more about purchase timing of stocks, as usually when i buy them they drop, which is not necessarily bad in a quality stock but i wanted to try become better.

Thank you so much for any input you could give me, i would be thankful, grateful and appreciate your kindness. Take care.

I personally just buy shares in a company when ever I feel that they are good value and that I have the finances to buy them.

When it comes to “scaling up” you can use “leverage” but this comes with it own pros and cons depending on what type of leverage you use, so you would have to research those options.

Although, I do also personally feel that one of the first things an investor needs to establish is a solid savings rate, in the early years most of the growth in scale will come from the accumulation of savings, it’s then just a matter of finding investments that provide a decent return that you can deploy these savings into.

 

[charlsie]

There's nothing like having "skin in the game". You can try dollar cost averaging, or what i do is once i have chosen a stock and either have it in my watch list or have bought a parcel, I watch it more closely and make decisions based on my circumstances. If you know what the end game is, it's much easier to make decisions.
Personally I like to buy in multiples of 10k, 100k of shares as compared to $ amounts, as good news arrives (stocks under 10c) I buy 100k shares at a time (ADN, LRS,ARD)
For more established companies that are being held for dividends, I wait for dips Worley (WOR) is a perfect example. I bought into this after covid hit and every time it went under $10 I bought into it. GUD is another that works well for that plan.
Also, buying in parcels has an effect on capital gains if you decide to sell down a particular stock for any reason. Buying in parcels i believe is a very effective strategy for any investory

 

[divs4ever]

Hello you very intelligent and wonderful people that make up this forum. I do hope you are having a nice weekend.

If after alot of research i invest a certain amount of money into a stock and like the way things are going say after 3 months, what is the best way to scale up this investment please? Would you kindly wait for certain dips please, is there anything else to look for to find the best possible entrance on a second buy of a stock please? I am just trying the best to ensure i learn more about purchase timing of stocks, as usually when i buy them they drop, which is not necessarily bad in a quality stock but i wanted to try become better.

Thank you so much for any input you could give me, i would be thankful, grateful and appreciate your kindness. Take care.

for a second parcel of a stock , i normally calculate a 'target price ' ( a fair price in my opinion ) in my earlier forays in the market , i used to start calculating that price after the stock had slid 20% below my initial purchase price , but of course this strategy has it's dangers and you should be assessing very carefully why the price has slid

now this strategy will not work for a rapidly expanding company ( say EVN or NST when i first started buying .. both had a single producing mine when i bought in at under $1 for each company ) so you will have to decide on a different strategy ( maybe just buy the BIG dips in the upward trend) for companies like that

now there are some cycles that MIGHT be useful , the old adage ' sell in May , and go away , come back St. Ledger day ' while not a guarantee of a sell-down in May/June probably is a hint of some cash reserves ready for a potential bargain or two might be wise .

now you have been in the market for a while you will have your list of attractive stocks .

now another time when a stock MIGHT slide in price is the reporting season , a year or two AFTER a big acquisition , with tax write-downs , and the costs of integration some reports will look less than impressive at a first glance ( and in some cases the acquisition was just a disaster ) so definitely watch around reporting season ( and maybe boost your ability to read financial reports in the 'off-season' )

please be cautious there are still a lot of disruptions possible in the current market ( some of those reactions will be helpful for you , but others won't be )

 

[robertbanking]

Thank you very much for all your responses, this was very helpful. You are all amazing here, i appreciate you all greatly.

charlsie, buying in multiples when good news arrives and buying on dips for dividend stocks is very clever, thank you for sharing your strategy.

divs4ever you are very intelligent, EVN and NST have seen amazing increases in the share price, i appreciate you mentioning these. Can i kindly ask how you found these stocks initially please? Did you use a stock screener and what was you kindly looking at for instance increasing revenue on small cap stocks for instance? Is there anyway you specifically use to look for specific stocks please?

Thanks again for all your support, you are all wonderful. As i keep learning more and more about investing, this forum is a great resource.

 

[divs4ever]

i initially started with companies/brands i recognized ( with mixed results )

i inherited holdings in QAN ( since sold ) , CSR ( added to and the investment cash rescued later ) WOW ( added to , but later massively sold down .. just too many stumbles ) and APE (added to INCLUDING in March 2020 @ $2.63 )

next i used a stock-screener so i could slim down the 2000 plus ASX listed stocks to say 10 to start in-depth research

now because div. income is important to me , i look for stocks that pay a reasonable div regularly ( and franking is looked on favourably as well )

so div. yield and P/E ( price/earnings ratio ) are early things i look for , i also am wary with companies that carry excessive debt


now i normally buy in smaller parcels , so a cheap share price is attractive ( under $1 in my early buys but that was in 2011 and there were several good little companies in that group back then )

BTW i try to look for companies that will likely survive harsh times ( rather than ones that might go up in price ten times over in good times )

now another tactic i use , is focusing on 'sectors ' that i think are being neglected , currently ( i have twisted ideas on say 'defensive' )

AND i try to nibble at the selected sectors EARLY and see if i need to add more cheaper ( rather than chasing a rising stock )

now specifically NST and EVN is was looking for 'safe-havens ' in what i thought might be a credit-squeeze ( around mid 2013 ) , and to me a productive ( and profitable ) gold miner fits in just fine ( if a currency plummets the price of gold is liable to go higher , so the mine SHOULD make higher profits ) ,


ALSO while i have had some winners , i have had my share of duds as well ( so don't be fooled and think i only pick winners

a different stock OZL took years to finally come good ( but part of that was persistent buying small parcels as the price slid lower and lower ) ( and MCR was a similar patience tester )

 

[robertbanking]

i initially started with companies/brands i recognized ( with mixed results )

i inherited holdings in QAN ( since sold ) , CSR ( added to and the investment cash rescued later ) WOW ( added to , but later massively sold down .. just too many stumbles ) and APE (added to INCLUDING in March 2020 @ $2.63 )

next i used a stock-screener so i could slim down the 2000 plus ASX listed stocks to say 10 to start in-depth research

now because div. income is important to me , i look for stocks that pay a reasonable div regularly ( and franking is looked on favourably as well )

so div. yield and P/E ( price/earnings ratio ) are early things i look for , i also am wary with companies that carry excessive debt


now i normally buy in smaller parcels , so a cheap share price is attractive ( under $1 in my early buys but that was in 2011 and there were several good little companies in that group back then )

BTW i try to look for companies that will likely survive harsh times ( rather than ones that might go up in price ten times over in good times )

now another tactic i use , is focusing on 'sectors ' that i think are being neglected , currently ( i have twisted ideas on say 'defensive' )

AND i try to nibble at the selected sectors EARLY and see if i need to add more cheaper ( rather than chasing a rising stock )

now specifically NST and EVN is was looking for 'safe-havens ' in what i thought might be a credit-squeeze ( around mid 2013 ) , and to me a productive ( and profitable ) gold miner fits in just fine ( if a currency plummets the price of gold is liable to go higher , so the mine SHOULD make higher profits ) ,


ALSO while i have had some winners , i have had my share of duds as well ( so don't be fooled and think i only pick winners

a different stock OZL took years to finally come good ( but part of that was persistent buying small parcels as the price slid lower and lower ) ( and MCR was a similar patience tester )

Thank you very much for your amazing response divs4ever. I think that is a very clever strategy you are following. In particular around mid 2013 it what might be a credit-squeeze you went for gold mining sectors, due to currency plummets this sets the price of gold higher.

Can i kindly ask please how you find these sectors early, i am guessing this is something you use on your stock screener? Can i please ask you if you dont mind what criteria you used on your stock screener to get the ASX down to 10? This would really be helpful i very hope you would not mind kindly sharing, i am sorry to ask, but this would be very helpful and i would be forever grateful.

Thank you again for your support you are an amazing and intelligent person. I do hope i can learn some strategies from you and become a better investor. I wish you all the best in your investing and hope you continue to have many successful years. Thanks again for your reply it really does mean the world to me as i continue to learn about various subjects on investing. Thanks so much.

 

[Value Collector]

Thank you very much for your amazing response divs4ever. I think that is a very clever strategy you are following. In particular around mid 2013 it what might be a credit-squeeze you went for gold mining sectors, due to currency plummets this sets the price of gold higher.

Can i kindly ask please how you find these sectors early, i am guessing this is something you use on your stock screener? Can i please ask you if you dont mind what criteria you used on your stock screener to get the ASX down to 10? This would really be helpful i very hope you would not mind kindly sharing, i am sorry to ask, but this would be very helpful and i would be forever grateful.

Thank you again for your support you are an amazing and intelligent person. I do hope i can learn some strategies from you and become a better investor. I wish you all the best in your investing and hope you continue to have many successful years. Thanks again for your reply it really does mean the world to me as i continue to learn about various subjects on investing. Thanks so much.

When I was a beginner I used a book called “Top Stocks”

It comes out every year, eg “Top stocks 2022” is on shelves now.

It lists normally about 80 to 100 companies each year, and has a description of each company and some fundamental based financial information on each one.

Also, at the front of the book it has an explanation of all the financial metrics used to rate each of the companies, this can really help you learn a lot about companies, and what the metrics divs mentioned above mean.

——————

Also, if it’s a fundamental investment style you are going for some of these books in the picture below will help.

Basically as I was eluding to in my original comment the two factors that will have the biggest impact on your wealth creation are

1. Your savings rate - eg How much can you save and out towards your investment portfolio each week or month. These savings are going to be the foundation of your portfolio.

2. Your long term investment return - eg how fast are these savings being grown by compound growth, this will be the result of the quality of your investment decisions.

One final thing I will say is it’s also worth while to think about whether picking individual shares is something that is a worth while approach for you in the first place. Picking individual shares can lead to a better than average return, but it can also lead to a lower than average return if you don’t have the skills for it. It can be a good strategy to just by shares in the whole share market via and index such as the share VAS and VGS.

 

[charlsie]

When I was a beginner I used a book called “Top Stocks”

It comes out every year, eg “Top stocks 2022” is on shelves now.

It lists normally about 80 to 100 companies each year, and has a description of each company and some fundamental based financial information on each one.

I second this. A great book to buy every year. As the author explains, it's not a book about what stocks to buy, what it does is explain in simple terms is why the author would invest in a certain businesses.

 

[divs4ever]

now unlike most members here

i started out differently , i barely took any notice of the stock market up to 2010 ( there were some distractions going on )

but in 2010 ( and early 2011 ) i inherited two estates ( and a handful of shares ) AND i am in my mid fifties ( back then )

so i decided i needed an income stream for my later years ( and to invest that cash rather than spend it )

so i needed to both learn and RUN ( because 10 years is not a long time to set up a retirement fund when you are learning as you go )

lucky for me 2011 was a great time to stumble into the share market ( and March 2020 should have been OK for the newer investors )

now for beginners ( with eyes blurring looking at all the company names ) that are focused on div. income , a quick place to look is the upcoming upcoming divs .. as a STARTING point

Dividend Yield Scan​

Dividend Yield Scan (ASX - Updated Daily)

UPDATED DAILY: Locate the highest Dividend Yield stocks listed on the ASX. Includes share price, gross yield, DRP status and 1-year return.

www.marketindex.com.au

now this isn't as easy as it looks , a high div. yield is SOMETIMES a signal the share price is in a long downhill slide ( and that is where your research comes in ..sort the gems from the duds )

take PTM and MFG on that list , now sure they are having tough times currently ( but can they recover in the coming 5 years , or are they gone , gone , gone )

disclosure , i have a buy order in for PTM , it is a little low and i probably won't get it , but i am ( a little bit ) interested

 

[robertbanking]

Thank you very much for all your responses, you are a wonderful bunch of people here. I appreciate it.

Value Collector i appreciate you mentioning the Top Stocks 2022 book that has 80 to 100 companies each year with descriptions and fundamental financial information on these companies. I think i will definitely buy a copy, so thank you for mentioning this. The books you have enclosed in your image sadly does not open on my PC, sorry to ask are you kindly able to list the book titles please? The Warren Buffett one i can see in your images looks a good one i would be interested in buying.

divs4ever interesting to hear how you stumbled into the stock market in early 2011 by inheriting two estates. I stumbled into the stock market primarily in 2018 after the savings rates were so poor. Then got even more interested in it when the pandemic started in March 2020. Thanks for mentioning about the high dividend yields but i also appreciate you need to do further due diligence on the companies. Can i kindly please ask if you dont mind sharing what some of your filters were on your screener, it might help me to narrow down lists of companies on what might be the most important factors? Hope you do not mind kindly sharing and thanks for all your wonderful advice, i am forever grateful.

Thanks for all your support you are amazing and hope you are all doing well.

 

[divs4ever]

don't forget your questions will help others too shy to post , and aren't sure what questions to ask

so you are helping in your own way

now the original screener i used was on Commsec BUT that screening tool has changed a bit over the last 10 years now whether that is better or worse you will have decide for yourself ( if you use it )

there are other websites that other a similar service ( some of them for free )

also my early screening parameters might need personal tweaking ( by you )

now early on an early screening setup was

div. yield more than 5% ( now inflation is coming that might need to be raised )

share price less than $1 ( you probably need $2 now ) now not many $2 shares pay a regular div. but a few do , still

D/E ( debt to equity ) less than 40% ( very unreliable , 'cos the data is slow to catch up ) use this carefully ( also D/E is useless on REITs which often use a complex leverage and financing which means for REITs i look for at least 8% div. yield )

another one that can be useful is P/E ( price /earnings ) amazingly some listed stocks don't earn any money for years ( and rely on cash raisings and bank loans )

now remember this is only designed to get the list down to 10 ( or less ) stocks so you can do the DEEP research and MAYBE one or two will be worthy of your watch-list after the research

don't be afraid to investigate all those definitions and work out which parameters are good for you ( some look forward like forecast earnings and and some look backwards like div. yield , )

in 2011 i needed shares that had room to grow ( so i went for the smaller banks in preference to the big 4 as an example )

yes this is higher risk , but i felt i needed to HURRY to get a reasonable portfolio built in 10 years

remember this is only to get your feet wet , and build a little experience , ( and let you experiment to find the perfect path for you )

now Warren Buffet has plenty of folksy sayings , and they all have some wisdom ( that you can take on board or reject )

but check them out , and see which make sense to you

AND don't forget the ASF tipping competitions you can test out your research without losing cash ( the ASX has one from time to time , but i have never entered that one )

 

[So_Cynical]

What's the difference between scaling up and over exposure?

 

[divs4ever]

over exposure to me , is say having 5% of the portfolio ( in one stock ) that isn't performing well ( like say WOW during the Master's debacle )

i am only guessing that 'scaling up ' means more stocks or bigger positions in the stocks already held

 

[Value Collector]

What's the difference between scaling up and over exposure?

I am taking it that scaling up just means growing your portfolio, none of us have suggested that he rushed into “leveraging up”

 

[Value Collector]

. The books you have enclosed in your image sadly does not open on my PC, sorry to ask are you kindly able to list the book titles please?

1, The Intelligent Investor, By Ben Graham.
2, Security Analysis, By Ben Graham and David Dodd.
3, Common stocks and Uncommon Profits, By Phil Fisher
4, Interpretation of financial statements, By Ben Graham.
5, Warren Buffetts ground rules, By Jeremy Miller (and Warren Buffett)
6, Buffettology, by Mary Buffett
7, Value able, By Roger Montgomery
8, The Warren Buffett Way, By Robert Hagstrom

 

[charlsie]

What's the difference between scaling up and over exposure?

scaling up means I'm getting confident that I've got it right for once....over exposure is the market telling me i got it wrong lol

 

[divs4ever]

scaling up means I'm getting confident that I've got it right for once....over exposure is the market telling me i got it wrong lol

gee good luck , acquiring that confidence ( most of the time ) , and watch for over-exposure without adequate rewards ( for the risk taken )

 

[robertbanking]

Thank you very much for your responses, you are a top set of people that make up this forum. You have been amazing, thanks again for all your support.

Value Collector thanks so much for taking the time to list the books in the image. I think an interesting an important book is the Interpretation of financial statements, By Ben Graham. I will look at kindly buying some of these books, thanks very much.

divs4ever thanks very much for mentioning what filters you used on your stock screener. I think the D/E debt to equity under 40% is a very interesting filter. I also think you did amazingly well to have the confidence to select 4 smaller banks in 2011 and the strategy you went to build your portfolio in 10 years, you have done amazingly well. Regarding the deep research, i often look at competitors in the industry, i research the business model to see how if i think the business will continue growing in 5 - 10 years. I look at what the management team are doing, their salaries etc. Can you kindly share anything else important you need to look at when doing the deep research please, sorry to ask, but if you had any advice on this area i would be thankful and forever grateful.

Thanks again for all your time and for leaving your very valuable posts. Hope you enjoy your day.

 

[divs4ever]

well i realized i had to GROW the portfolio without super crazy risk , and the big 4 banks didn't seem to have sensible paths to grow ( in 2011 ) ( but declined to buy into Money3 , which was probably a mistake )

remember i was mid 50's at the time , so didn't have time to rebuild a nest-egg , if i stuffed up completely ( not so many good ways to grow a pile of cash with a stuffed body and almost a pensioner )

and luck ( deciding to get active in 2011 ) was a BIG help

now i admire those who invest with conviction ( just one share in each chosen sector ) but that is not me i would rather two ( or more ) shares in the same sector , thinking that MAYBE one will go broke or be taken-over ( and a smaller amount of dollars in each selected share )

well for a start , management counts but for a novice where do you look ( because sometimes you get 'rock-star ' directors dropped into a 20 cent share , that should arouse super-intense research especially in they don't BUY ( as opposed to gifted ) a reasonable block of shares .. makes me wonder if they are there for PR , other directors can come with a track record of 'unfortunate ' companies

and what if a new director is a high-flying finance guy in your 50 cent share , are they planning a buying spree , a merger , or just pretty the company up to be taken-over ( now what is terrible for an investor , could be a nice earner for a trader , so one size does NOT fit all )

fairly reliable income ( business PROFITS ) counts to me ( therefore i NORMALLY avoid new floats , until i can see how they are going )

now another thing that has been helpful for me is a history of lots of low-level jobs ( in different industries ) often as a temp , or sub-contractor , so by working for ( often as a subbie ) or via a large network of acquaintances you can get a 'feel ' for the way a business goes

take MTS as an example , most think of MTS and the wholesaler behind IGA or Home Hardware ( and therefore just a retailer/franchiser ) but have worked inside a distribution centre , and a wholesale warehouse , you get a feel of how the distribution network is run

when investing in a company you are buying a ( tiny ) part of that company ( so become a part-owner ) , that concept is a great help ( but not important to a trader , who most likely won't be holding for long )

when researching a company's financials remember , most of the time the data is old ( so you are going have to guess about the current state and near future ) but that said those historical financials still give hints , are they regularly issuing ( heaps of ) new shares , are they paying down debt or accumulating it , are they hiring more staff or reducing , what about sales ( increasing , stable , or failing or just irregular swings )

if a company is struggling to make profits , it will be hard to pay divs

another thing to watch is the payout ratio ( divs. paid / after tax profits ) a high ratio hints they are sitting on a pile of cash ( OR trying to bribe share-holders ) while a low payout ratio hints they have some expansion plans ( or debt reduction ) planned

( if a new investor you probably want the lower payout ratio hoping the management will grow the company for the future )

it is the little things , worker morale , obvious workplace bottlenecks ( or not ) , MIDDLE management ( i have worked at several places where the top 2 or 3 guys were truly inspirational , but let down by the 'space-fillers ' between top level management and the workers )

( i could spend hours and hours on stories of monumental stuff-ups ) so sometimes the gossip is just as important as all the the secret future plans ( of the business )