Newbie needs advice

Jenni,

InvesEd is a valuable tool. I have been a member for a year and only 4 of my 49 threads haven't been answered. I have learned heaps from all sorts of people. In middle of last year, I was a gibbering heap after loss from the GFC. The thing is, I didn't have a guru or a mentor or an investment club. This site gave me access to people who didn't want to sell me a product or take my money

Sure, people don't have 'credentials', but I take everything with a grain of salt. It is my research to evaluate new ideas, that has taken me to places I wouldn't have found by myself. My plans aren't the most popular, but that OK. Finding someone with the same investment strategies as myself is great. Putting the questions out there is so refreshing.

There is no easy answer to financial education except reading and research and courses. I had never heard of DCA or Stop losses before this site. And I keep on learning. InvestEd is my favorite forum.




Johny.

 

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All I see is a thinly veiled advertorial. You've been spruiking this mob for a few years now. Does the advice get any better if you pay the $130?

A couple of points:

(1) An ETF sponsor doesn't make the market. They appoint market makers to create/redeem creation units.
(2) An ETF sponsor doesn't hold the shares, correct. They're held in a trust, much the same as other funds. What's your point?
(3) You say people shouldn't DCA or use DRPs without qualifying your remark. Why not? I wouldn't have had 25% of my CBA holding if I didn't use the DRP. Oh wait - it was a rising market.... (FWIW I pulled out of it in 2006)
(4) Re: Advice. How do you know it's independent? I'm not making any money off this. What about AIA?

I agree everyone needs to educate themselves. We're here to share what we've found and everyone's prefaced their advice with the limitations of their knowledge.

You've come in and bagged other people's advice then let fly with some vague points and lazy rules of thumb - why should anyone listen to you?

 

Hey RB,
Heh heh.. I seem to get the impression that Jenni is warning us to BEWARE OF AIA, that it sounds like a blatant RIPOFF. A website that may be a SCAM that could leave its members POORER for the experience.

I think Jenni is right - BEWARE of UNSOLICITED ADVERTS!

 

re:emerging markets, I've kept it at less than 10% but try to keep it more than 5%. Mostly coz i am not convinced that it makes sense to allocate bits and pieces of 2-3% to a fund. Even at 10% it is tricky to rebalance, unless you either (i) do not rebalance or (ii) have a fairly large portfolio such that 1% is a sizeable sum of money. Plus i like using nice round numbers. Sorry, no good reason, just a preference.

 

Hi RB

The article I had the link to was nothing to do with the AIA - it was an article Marcus Padley (a well known share market commentator) wrote that appeared the previous week in the Age and SMH and seemed appropriate given the initial question was from a beginner. I was not advertising anything! (funny how someone thought I was warning about the same organisation! - it is just one of very few not-for-profit groups of investors who help investors - others being the ASA and ATAA and you don't have to be a member to attend most events by any of them - it is just another way of connecting with other investors - and they don't give anyone any financial advice ever!).

Not all ETFs are structured as you say - some do not hold the shares in trust but only hold derivatives over the shares in trust. You should therefore look carefully at which ones you buy. My main concern with them however is that most of them are very illiquid and the buy/sell spreads can be quite wide. In some cases a managed index fund is a better option.

Regards

Jenni

 

I'd like to apologise to 'someone' that the post wasn't clear. Just pointing out how it was "funny how someone" liked to use CAPLOCKS for EMPHASIS. To be honest, one does reckon that "someone" was providing UNSOLICITED ADVERTS.

One wonder which ETFs are holding mostly derivatives and wonders if these do infact exist, whether or not they are ASX listed and NOT the broad market index ETFs that the OP and RB were referring to. One would like to see some REAL examples instead of VAGUE references

Finally, one would like to caution : "well-known share market comentator" does NOT necessarily equal a good mentor for sensible investing.
For a REAL example, Jim Cramer is well-known share market comentator in the US of A, but his TV program is named "MAD Money"

 

Hi Jenni,

There are some fair points there.

Counterparty risk is a legitimate and recognised problem with swap based ETFs (and mutual funds) in other markets - though none of the ETFs that I've looked at on the ASX have this structure.

IMO the liquidity and buy/sell spreads are bigger concerns for active traders than petty buy-and-holders such as myself. YMMV

And FWIW STW had a spread of 0.07% when I checked 5 minutes ago. Some managed funds have much larger spreads than that. But it is a valid point and one that's always worth checking.

IMO Brokerage is the killer problem in this market. We need the ultra-discount brokers like they have in the US to make it really efficient.

RB

 

Hi

I was just alerting people to the fact that all ETFs are not the same and to be careful.

I've read two articles regarding the use of derivatives - Peter Haggstrom wrote an article in 22 May AFR re this and also look at Exchange-traded funds are not created equal | Money Management.

My apologies in advance if these articles actually refer to any organisation.

Jenni

 

Imagine my surprise when I followed the attached link from the previous post, and found the following statement by iShares director in the article:

 

Flash Crash

The Flash Crash in May of this year affected certain ETFs and somehow got a negative reputation. Like any stock, and a matter of fact anything in life, there are good and bad options, so it is important to understand what you are buying.
Knowledge is power and getting sound free advice is near impossible.
Having sites like InvestED and ETFmate make it possible for retail investors to get access to free information that will allow the user to decide for themselves or at least have some background before they talk to he so called experts. Good on you InvestEd for providing this service

 

Hi eftmate

Could you discribe in laymans terms, what caused the flash crash and its relevance to aussie investors.




Johny.

 

Well basically a automated trading system sparked the crash. The following link give a failry straightforward summary Analysis of the SEC-CFTC Flash Crash Report | Market Melange
In terms of Aussie investors specifically ETF investors, it caused a scare amongst investors and demonstrated how volitile todays market could be, because of computers and electronic exchange!
The good thing to come out of something like this is review and the trial of market wide circuit breakers that can address issues like this before they spook the market into a frenzy.
There is still a strong risk this can happen again so ome timely advise can be found here Growing Concerns about ETFs - Flash Crash May 6 2010 | ETFs Investments

 

I will chip in as well, since I am in exactly the same position as you.

I am going to assume that you are Australian or would want to settle in this country forever, and your parents are not kind enough to have their house inherited by you.

My suggestion would be

1) 50k deposit into house - don't buy into too expensive maybe $350K house - even if there is a housing bubble i don't think the prices will fall too much and if you are planning to stick around in this country over time the prices will go up due to shortage of housing, net migration increase and so on.

2) out of the above 50k deposit - 30k into house (so $320K loan) and 20k into offset account which u can use anytime if needed

3) remaining 50k and whatever super u have - into managed funds/etfs etc...whatever strategy others have suggested from the previous posts.


regards
calvin

 

I have been doing some research on ETFs and followed some links where Peter Haggstrom's name was mentioned and found a couple articles here:

Maths at Bondi Beach - Downloads

Articles 8, 23 and 27 deal with ETFs

Article 27 refers to the Flash Crash and what the SEC in the US said.

My research continues.

Leftfield