Young, retired, and wanting some advice!

[YougNomad]

Hey everyone

Brand new to the forum, so thought I would share my story, and see what conversation transpires.

I'm 32 years old, and recently sold a business I started 7 years ago (in the property arena).

Sale price of the business was $3.2m, with zero borrowings.

Over the course of the business life, I purchased 9 IP's, 2 of which have been sold due to cash flow issues, leaving us with 7, which have effectively been paid down to generate our passive income goals.

I'm in the process of starting my next business venture, but also am really, really interested in shares. I'm one of those people who hates waiting, so want to jump straight in (I love risk); but completely understand that this would be the wrong move.

I've read some topics on here suggesting the Diploma of Financial Services to get a basic understanding; currently I have a financial planner who has sorted out our SMSF + financial plan etc, and I see huge value for money in the work he provides.

However, it is my own money, and am I placing too much trust in someone else?

I'm hoping there are other people on here in the same position as me, and can shed some insight into how they operate.

Looking forward to getting involved, and hopefully getting to know some of you!

 

[KurwaJegoMac]

Hello and welcome to the forum. While I am by no means a millionaire like yourself, I have been trading for the last 5 years with good success.

If you have any specific questions post them here and you'll find most on the forum will happily provide advice. My biggest advice to you right now is this:

Start off small.

By your own admission you say you love risk and you have a large amount of capital. This is very dangerous in learning to trade as you will make plenty of mistakes as you learn and stand to lose a large chunk of money compared to most people (owing to having more money to risk). It's easy to get sucked into throwing good money after bad so don't go rushing ahead.

For someone in your position, I would start with a capital base of $50,000 risking no more than 2% on any trade (I wouldn't trade with a capital base less than $20,000). Trade live and trade only once you've chosen/designed a system and backtested it and were able to produce positive expectancy with a good risk/reward ratio. You'll have a natural temperament as a person so try and find a system that matches it.

You will see a lot of bull on here so be careful where you take your advice from but there are a few posters here who really know what they're talking about.

Oh and be aware that just as in business, 9/10 traders fail and it all comes down to practice, practice, practice and working, working, working.

On a side note, I'd love to hear some advice on starting your own business - perhaps some of the key lessons you've learned along the way and any advice for those starting out.

 

[Serpentis]

I was in the same position as you a couple years ago when I was 23. Thanks to entrepreneurial/business success I had tons of money. Not quite as much as you, but still enough to stop working, retire and live comfortably off the bank interest. Not that I would ever stop working mind you, I love working!

I got into the stock market when I started poking around to see what I could do with all my capital, and it appealed to me immediately. The risk, the numbers, the rapid pace that everything can change, the liquidity, the fact that I can do everything over my computer, it's great.

I said I would start slow, maybe $40,000 here or there and that would be it. But I kept finding value and cheap stocks, so I soon found myself with the majority of my capital invested! Fortunately this was just at the start of a bull run, so I came out of it pretty well, but you'll hear plenty of stories of people who did a similar thing at the wrong time and came out much poorer, though wiser for the experience.

People with low capital, high income (most salaried people in the workplace) can rebound fast, but high capital, low income (relatively speaking) people can get hammered and be put behind for decades. It depends on your goals and how you want to trade, but for me capital preservation is a key part (as much as it can be in the most volatile of investment classes). Keeping my portfolio diverse, buying quality companies and never paying too much for them. And keeping plenty of cash on the sidelines, in case there is a big market drop.


I'm still fairly inexperienced, but coming from a similar position as you the one bit of hindsight advice I would give is be prepared for how rapidly your capital will get sucked into the stock market. If you can't stem the tide, then get smart and do as much research and reading as you can to invest your capital in the best way.

 

[Iggy_Pop]

From my experience, I would suggest getting someone to assist with learning. Two I would suggest are Nick Radge - Offers a few different services or you can buy his software packages to use with Ambi-pro to do your own trading

The other one is Colin Nicolson who shows you how he selects shares for his own portfolio and how to manage risk.

Both do teach good habits with managing risk which is the key point with trading. Nick's site has a variety of costs for his service several hundred per year to about $1000 for all information and Colin;s is relatively cheap at $100 then $40 year

Both sites do teach you as well, not just say what to buy and sell but why.
I found both useful for learning

And the forum has been excellent in sharing information

 

[Zedd]

Jump in! In my experience no better way to learn then to have money invested. I put my lifesavings in at the age of 12 (Mum wouldn't let me spend it on toys). Fairly small investment but kept me interested. Nothing will make you pay more attention to the economic situation locally/nationally/globally then if you've money on the line.

Obviously your lifesavings are a little more significant so I wouldn't recommend quite the same approach but I think everyone would agree that you won't really learn until you have some money in.

Know why you're buying. Know before buying when you'd consider selling. Understand that a large portion of profits will be made not through your own knowledge/skill/ability but instead as a reflection of the risk you take with your capital.

 

[ROE]

With that sort of capital, you can invest in some rock solid business on the ASX and has 6 figures income stream coming in for a long long time.

Stock market is not like properties, you get quoted each minute on how much your portfolio worth.
you got to learn to ignore most of the noises and daily quoting of your stock price and focus on the prize (the business cash flow and earning).

Start small jump in and see how you go but keep majority of the cash until you know how to invest in
great business.

Once you invest in great business there little you need to do but getting reliable dividend stream and
capital appreciation will comes when the business throw out increasing cash flow and earning...

 

[howmanyru]

Hello and welcome to the forum. While I am by no means a millionaire like yourself, I have been trading for the last 5 years with good success.

If you have any specific questions post them here and you'll find most on the forum will happily provide advice. My biggest advice to you right now is this:

Start off small.

By your own admission you say you love risk and you have a large amount of capital. This is very dangerous in learning to trade as you will make plenty of mistakes as you learn and stand to lose a large chunk of money compared to most people (owing to having more money to risk). It's easy to get sucked into throwing good money after bad so don't go rushing ahead.

For someone in your position, I would start with a capital base of $50,000 risking no more than 2% on any trade (I wouldn't trade with a capital base less than $20,000). Trade live and trade only once you've chosen/designed a system and backtested it and were able to produce positive expectancy with a good risk/reward ratio. You'll have a natural temperament as a person so try and find a system that matches it.

You will see a lot of bull on here so be careful where you take your advice from but there are a few posters here who really know what they're talking about.

Oh and be aware that just as in business, 9/10 traders fail and it all comes down to practice, practice, practice and working, working, working.

On a side note, I'd love to hear some advice on starting your own business - perhaps some of the key lessons you've learned along the way and any advice for those starting out.

Good advice here. I have traded for 7 years and have not been successful - only manage to break even (so why don't i stop?). But i have majority of assets in real estate and cash, low risk stuff, thankfully. The only place you can lose money faster than the stock market is the casino. So don't get too excited, you have to go through an apprenticeship for many years, unless you are lucky or gifted. Otherwise the market will take it from you; that's what it does and it's very good at it. I can't overcome my psychology, most can't so they lose or break even like me, even if they are technically good.

 

[Kalaika]

Hi there,

Agree with prev posts, with some additions:

• "Risking 2%" doesn't necessarily mean placing a $1000 trade out of your hypothetical $50k starting equity. Search ASF forums (or google!) for "position sizing". its not that complex but extremely important as part of your risk managment strategy. The 2% ($1000) is the max you want to lose on any trade, but you don't want to lose the whole trade amount!
• I wouldn't support Dip Fin. Svcs. as means of understanding markets and trading; better to pick up a couple of great books for starters (Van Tharp, Jack Schwager, John J Murphy), then build on it through dialogue on forums such as ASF.

Good luck on the journey.

 

[Kalaika]

Oh, and might be worth figuring out whether you are looking to be a trader (shorter term, more actively managed, higher overhead for you personally) or investor (longer term, buy&hold) - if the later then the info in my previous post isn't as relevant, and maybe DipFinSvc is something to consider! But then again, if you are more of an investor you've got a Financial Planner to outsource to

 

[Julia]

Young Nomad, congratulations on being so successful. That's an enviable and great result.
Best wishes for your career in the share market.

 

[chops_a_must]

Read and ask. Ask and read. Rinse and repeat. Always repeat.

 

[McLovin]

Forget about a diploma in financial whatever. It's a waste of money. Waaayyy back when I was 14 I did the Dip of Financial Markets at the old Securities Institute (now called Finsia), while it was interesting for a 14 year old who was literally just starting out and with an internet that was nothing like it is today, it was extremely basic.Those diplomas are industry targeted, ie if you want to go into back/middle office work and need to know some basics then they're great.

Take your time to learn, there is no rush, don't expect to have all your capital deployed in the first three months or even the first year. Be patient.

A lot of investing is temperament, not so much having super-dooper powers. You need to be stubborn enough to know you're right but humble enough to know you're wrong.

 

[CanOz]

Protect your risk capital like its your last...

3.2 m might seem like allot but a nasty little drawdown in a bear market could wipe half of it out.

CanOz

 

[Stockman2678]

Hey everyone

Brand new to the forum, so thought I would share my story, and see what conversation transpires.

I'm 32 years old, and recently sold a business I started 7 years ago (in the property arena).

Sale price of the business was $3.2m, with zero borrowings.

Over the course of the business life, I purchased 9 IP's, 2 of which have been sold due to cash flow issues, leaving us with 7, which have effectively been paid down to generate our passive income goals.

I'm in the process of starting my next business venture, but also am really, really interested in shares. I'm one of those people who hates waiting, so want to jump straight in (I love risk); but completely understand that this would be the wrong move.

I've read some topics on here suggesting the Diploma of Financial Services to get a basic understanding; currently I have a financial planner who has sorted out our SMSF + financial plan etc, and I see huge value for money in the work he provides.

However, it is my own money, and am I placing too much trust in someone else?

I'm hoping there are other people on here in the same position as me, and can shed some insight into how they operate.

Looking forward to getting involved, and hopefully getting to know some of you!

I'd love to here more about the business you started 7 years ago...

 

[KurwaJegoMac]

Hi there,

Agree with prev posts, with some additions:

• "Risking 2%" doesn't necessarily mean placing a $1000 trade out of your hypothetical $50k starting equity. Search ASF forums (or google!) for "position sizing". its not that complex but extremely important as part of your risk managment strategy. The 2% ($1000) is the max you want to lose on any trade, but you don't want to lose the whole trade amount!
• I wouldn't support Dip Fin. Svcs. as means of understanding markets and trading; better to pick up a couple of great books for starters (Van Tharp, Jack Schwager, John J Murphy), then build on it through dialogue on forums such as ASF.

Good luck on the journey.

Very good point clarifying the 2% risk. It's what I meant when i wrote my post but because position sizing is so ingrained i forgot to spell it out.

Anyway i'd also second not getting the diploma. You can can find all you need on the net for basics in terms of what instruments and markets exist. Use books and posts on here to get ideas to build a system that works for you.

Some further advice:

1. There is no holy grail
2. You do not need to be right all the time to be profitable (nor will you ever be always right anyway)
3. Be the best loser (i.e. learn to cut your losses short - hard to learn for most)
4. You can make money using fundamental analysis, technical analysis, short, medium and long term trading, investing, day trading, etc etc. find what suits your style, temperament and beliefs about the market
5. Risk management is vital but usually overlooked as it's not as glamorous as other aspects of trading
6. You must know your exit conditions BEFORE you enter a trade
7. The market will prey on your weaknesses
8. It's ok to take breaks from trading. Don't trade if you're going through major stressful life events
9. You cannot, ever predict where the market will be. Dont listen to idiots who tell you the market will hit 5,000 in July. You can however, predict the likely direction, but not the magnitude, of a move - but you will be wrong, often. Hence the importance of position sizing and risk management
10. Keep it simple

 

[waimate01]

My advice is to buy a book called "How Much is Enough" by Arun Abey and Andrew Ford. It's the nearest thing I've found to be a manual on what to do *after* you're wealthy. Most books tell you how to trade stocks or leverage property to make yourself wealthy. Few address how best to arrange your affairs after you've made it.

 

[YougNomad]

Wow - thanks to everyone for their replies!

As a few has asked, I'll post a bit about my previous business.

It was a real estate agency based in Canberra - started it from the garage of our modest 3 bedroom home back in 2006, offering sales at a flat fee.

After 12 months of raising capital from the sales, we hired a small office and opened up our property management arm of the business, again offering services at a reduced fee to our competitors (all were charging 10%+, we offered 5%).

Things blew up, and we were able to gradually increase our fees from 5 - 6, and then to 8%; offering massive innovation and added benefits, which helped us retain almost all of our client base through the fee increases (which was a huge surprise, but a great lesson to have learnt, as I thought we would lose 10 - 20% of our clients, where we only lost a handful).

Last year we were managing over 600 properties, and had a fairly large sales team. We were approached by a nation wide company, and brokered the sale.

We were very fortunate that we grew the business through cashflow - no loans, no overdrafts, and we invested quite alot of the profit of the business into our own residential property portfolio.

It was certainly a busy few years, but it's put us in a great position - 32 years old, with fairly rock solid investments.

I certainly don't want to put all the money into the share market, I think that would be a bit crazy - I'd love to have a kitty of 20-30k which I can trade and *fingers crossed* run a decent profit off, and then sink that surplus profit into longer term portfolios.

For me, it's about keeping my cash flow safe for now, so we can enjoy our life, but also build on the base so in 20 years time we're in a *better* position than we are now, without having to don the working hat again.

Also for me, it's all about founding and running businesses which are autonomous - I've got one in the pipeline which completely automates the property management business model; it's all systemised and online, with all the documents, procedures, articles, Q&A's, bespoke online system to manage the properties etc. $20 per month as a subscription, instead of the normal 5-10% management fees (so about a $100 per month saving on fees). Once it's set up, it will effectively run itself; no need for staff etc.

^^^ This is where I see the future. Having a handful of businesses like this up and running, all generating a few thousand a month, which is my relatively easy passive income from business, which can then be diverted to slightly higher risk trading or medium risk portfolios.

Exciting times, but I definitely need to learn, learn, learn! I know everything about residential investments, but nothing about shares :/

 

[prawn_86]

Firstly welcome to ASF and congratulations on getting to where you are in life.

When I started investing my old man told me 2 things (for a beginner):
1. Don't invest what you cant afford to lose the total of
2. The market will always be there

20 - 30k sounds as though, absolute worst case scenario, it wouldn't affect you if you lost it all. Obviously this is unlikely to happen, but as a beginner you need to be aware of the possibility.

Get your feet wet sure, but as others have said, don't dive in fully until you are consistently making profits. This could take anywhere from 1 - 100 years (if ever).

 

[Kalaika]

Some further advice:

1. There is no holy grail
2. You do not need to be right all the time to be profitable (nor will you ever be always right anyway)
3. Be the best loser (i.e. learn to cut your losses short - hard to learn for most)
4. You can make money using fundamental analysis, technical analysis, short, medium and long term trading, investing, day trading, etc etc. find what suits your style, temperament and beliefs about the market
5. Risk management is vital but usually overlooked as it's not as glamorous as other aspects of trading
6. You must know your exit conditions BEFORE you enter a trade
7. The market will prey on your weaknesses
8. It's ok to take breaks from trading. Don't trade if you're going through major stressful life events
9. You cannot, ever predict where the market will be. Dont listen to idiots who tell you the market will hit 5,000 in July. You can however, predict the likely direction, but not the magnitude, of a move - but you will be wrong, often. Hence the importance of position sizing and risk management
10. Keep it simple

YougNomad (please tell me you didnt pump out a typo in your username )

The above quote is as perfect a summary of the best 10 books youll find on trading as there is!

KurwaJegoMac - you could have posted this two months ago, it would have saved me $300 from Amazon and about 500 hours of reading! (but it was still worth it)

 

[KurwaJegoMac]

YougNomad (please tell me you didnt pump out a typo in your username )

The above quote is as perfect a summary of the best 10 books youll find on trading as there is!

KurwaJegoMac - you could have posted this two months ago, it would have saved me $300 from Amazon and about 500 hours of reading! (but it was still worth it)

I'm glad you liked it - the problem with that list is that without having read lots of books and traded live, you wouldn't necessarily realise the value of the statements.

I know when I first started trading 5 years ago, I used to get told the same things. I never dismissed the concepts but I never took them to heart either. I'm glad you've come to the realisation after reading those books - now comes the challenging part which is to put it into practice and maintain your discipline.