Join our investing community

21 y.o with 25k wanting to start investing...any good tips/suggestions?

Discussion in 'Investing Strategies' started by investing101, 26th Dec, 2015.

  1. investing101

    investing101 New Member

    Joined:
    26th Dec, 2015
    Posts:
    3
    Location:
    Melbourne, VIC
    I'm new to this forum so I don't know if this is the right place to ask the question, so please let me know if it's not.

    As the title indicates, I'm a 21 year old uni student in Australia and I'm interested in investing in some stocks, securities etc, but am not sure how to start. I have 25k sitting in a savings account and only earn interest from that. I don't have any major debts or student loans and my living expenses are minimal. I also have about 2.5k in a Super fund.

    I'm making this post because although I'm interested in investing, I have no idea where to begin. I study commerce/business at uni and have somewhat of an understanding of the financial market, but in terms of applying that knowledge to make an investment, I'm completely clueless. I feel like this is highly relevant to my future career and so I'd like to learn more about it.

    I'm not expecting people to tell me to "invest in x and y stock", but rather, I'm looking for some guidance or resources on investing 101 that I can use to educate myself in order to make investment decisions.

    Given my inexperience and current finances, I'd appreciate it if someone could offer some tips/suggestions on where/how to start, how much I should invest (or whether investing is even a good idea) etc.

    Cheers
     
    twisted strategies likes this.
  2. Johny_come_lately

    Johny_come_lately Well-Known Member

    Joined:
    1st Jul, 2009
    Posts:
    703
    Location:
    SE Queensland
    Hi,

    The first thing you need to set up is a online trading account. There are many, but the easiest is the Mywealth platform. It is free, and the best thing about it is being linked to Comsec. If you grow out of Mywealth you can move across to Comsec. A trade on Mywealth (buy or sell) is $19.95 on a minimum of $600. If you are a Commonwealth Bank of Australia customer, you can join online, else go to a branch in person. WWW.mywealth.commbank.com.au

    I am a firm believer in two things before a thing is bought. Asset Allocation and a Plan. The AA is what you are going to buy and the plan is how you are going to buy.

    I am a lover of index funds/ETFs. Not that popular in Australia, but big in the US. A five fund portfolio of $25,000 could buy 5000 of the world's companies. You will never make more than the index, but Will beat 70% of managed funds.

    There are over 100 ETFs on the ASX. Plenty to make up a seamless portfolio of Stocks, Bonds and Reits in large,mid and small caps. They even have oil, gold and grain ETFs. Go to Home - Australian Securities Exchange - ASX for a list of ETP's.

    If you have any questions, I'll be glad to help out.


    Johny. :)
     
    twisted strategies likes this.
  3. investing101

    investing101 New Member

    Joined:
    26th Dec, 2015
    Posts:
    3
    Location:
    Melbourne, VIC
    Great, I'll have a look at everything and get back to you if I have any questions :)
     
    twisted strategies likes this.
  4. Johny_come_lately

    Johny_come_lately Well-Known Member

    Joined:
    1st Jul, 2009
    Posts:
    703
    Location:
    SE Queensland
    One of the many things I like about Exchange Traded Funds (ETFs) is, that an entity known as a Market Maker is present. When you trade a share of one company on the market, the ASX links buyers to sellers. You have no liquidity when you have no buyers for sellers or no sellers for buyers.

    You do not have illiquidity with ETFs. If there are no buyers or no sellers, the Market Maker will buy/sell you shares for a small spread( profit). Many years ago, I was the only buyer of 40 ETF shares in the whole day. The Market Maker sold me some. I would be unable to buy if I was after one company.

    For big trades ,of $100,000 or more, the Market Maker can create or dissolve ETF units when the need arises.


    Johny. :D
     
    twisted strategies likes this.
  5. Peacemaker007

    Peacemaker007 Peacemaker

    Joined:
    30th Apr, 2016
    Posts:
    7
    Location:
    Orange nsw
    while I agree with most of the advice of yours I have read, avoid the Combank MyWealth advice. The dumbest advice about the stock markets is if you like a company buy it! if you want to follow that advice you'd be better to run out to the toilet and flush your money down it. Knowledge! Knowledge! Knowledge! doesn't matter if you hate the company knowledge will inform you when to get in and out not how popular it is to you. Stupid advice from the com bank 100% guaranteed to lose you money.
     
    twisted strategies likes this.
  6. Peacemaker007

    Peacemaker007 Peacemaker

    Joined:
    30th Apr, 2016
    Posts:
    7
    Location:
    Orange nsw
    Market makers are to be avoided at all costs those that are human are A holes in the extreme. Market makers today are primarily computer algorithm's that buy and sell hundreds of thousands of stocks every second autonomously and like their dwindling human counterparts are merciless in how they steal your money. When a stock is bouncing all over the place in price with little reason they are the ones making it that way (hence they are called market makers). even when you can follow which stocks they are buying they will faint they tell the SEC in the US or what ever country they are in which stocks they will buy this month and at what price, they wait till people have bought up big then cancel the buy and the stock plummets which is what they want because they were betting on a fall in price so they make it fall and you loose your shirt.
     
    twisted strategies likes this.
  7. Fathertime

    Fathertime New Member

    Joined:
    16th Jul, 2016
    Posts:
    1
    Location:
    Bundaberg
    Have you considered Managed Funds

    I have invested in numerous blue chip companies, and some small caps over more than 10 years, but found that some went up in value but at the same time others would drop in value. As a result I have been changing to all Managed Funds in recent years as the researchers at these funds have a much better understanding of when to buy in and out than I would have. If you buy 5 star funds which invest in various areas of the Australian and global market you can spread your risk. The better funds will usually outperform the market.
     
    twisted strategies likes this.
  8. Redwing

    Redwing Well-Known Member

    Joined:
    9th Jun, 2006
    Posts:
    476
    Location:
    PERTH..WA
    Hi Fathertime

    Research points out that over time Managed Funds usually under perform the market/index, some even disappear or are re-birthed
     
    twisted strategies and Bran like this.
  9. Simon Hampel

    Simon Hampel Co-founder Staff Member

    Joined:
    9th Jun, 2005
    Posts:
    4,619
    Location:
    Sydney, Australia
    Hi @Redwing - for the record, I'm not a fan of generic or blanket statements such as "managed funds usually under perform the market/index" ... there are some funds which consistently manage to outperform, just as there are many which do consistently under-perform.

    If you just rely on a generic advisor to pick a basket of generic funds, you'll more than likely underperform the market. However, if you do your research, choose carefully and monitor your investment, I have found that you can outperform the market.

    If you're just after a simple buy-and-hold-and-ignore strategy, you're probably better off with low cost index funds or ETFs, but an active strategy can work well with carefully selected managed funds.
     
    twisted strategies likes this.
  10. Hodor

    Hodor Well-Known Member

    Joined:
    17th Sep, 2016
    Posts:
    79
    Location:
    hodor
    I like it as it points the fact that you need to be careful, maybe 'usually' should be underlined. Like you have added there are funds that have outperformed long term and identifying these is the trick.
     
    twisted strategies likes this.
  11. Simon Hampel

    Simon Hampel Co-founder Staff Member

    Joined:
    9th Jun, 2005
    Posts:
    4,619
    Location:
    Sydney, Australia
    I would prefer the statement to be something like "many managed funds consistently under perform the market/index" ... which I think is true, while I don't think the statement that "managed funds usually under perform the market/index" to necessarily be true.

    The thing with managed funds (or any actively managed investment for that matter), is that you're not only choosing the type of asset or investment style, you're also choosing a fund manager - two largely identical funds can have two very different results over the long term due to management style and decisions.

    Changes in the people making the decisions can have an impact on the performance of the fund - just like changes in the management of a company can have on listed shares.

    That's why I strongly believe that managed funds are not an entirely passive investment - you need to be paying attention. Otherwise, you are much better off with a simple low cost index fund or ETF - which is what I think Redwing was trying to say in the first place.

    I like managed funds ... or to be more specific, there are certain funds by certain fund managers that I like, but certainly not all. And if you're not prepared to put in the effort to pay attention to what your fund managers are doing - I do think you'll be much better off with the low cost algorithmically traded index funds.
     
    twisted strategies and Hodor like this.
  12. trinity168

    trinity168 Active Member

    Joined:
    16th Sep, 2016
    Posts:
    32
    Location:
    NSW
    twisted strategies likes this.
  13. austing

    austing Well-Known Member

    Joined:
    5th Jun, 2006
    Posts:
    386
    Location:
    north maleny
    But to give you an idea of how small the number of managed funds that do underperform the index is check out the bi-annual SPIVA Report:

    https://us.spindices.com/documents/spiva/spiva-australia-year-end-2015.pdf?force_download=true

    Summary of the previous report (June 2015):
    Small caps is the winner in terms of active management.

    A great fund mgr one year might be terrible the next or in a few years time. So as @Simon Hampel says you need to choose carefully and monitor these.

    Or alternatively buy index ETFs and know that you will outperform the "majority" of managed funds most of the time except perhaps for small cap funds.

    Personally I like LICs (company structure), never been a fan of the "unlisted" trust fund structure especially from a tax perspective and given they're open ended. But that's an entire topic in itself.
     
    Last edited: 18th Sep, 2016
    twisted strategies likes this.
  14. Redwing

    Redwing Well-Known Member

    Joined:
    9th Jun, 2006
    Posts:
    476
    Location:
    PERTH..WA
    Thanks Sim

    The below

    Was a response to..

    I should have given timeframes also (i.e. over the Long Term of 30 years +) I also didn't mention fees, as per my previous post, in my short time I've seen many funds disappear or re-birthed

    Which funds have outperformed over the long term Sim (genuinely interested)

    SPIVA seems to back up the US data, though i wonder if superannuation funds are included, or LICs?
     
    twisted strategies likes this.
  15. twisted strategies

    twisted strategies Well-Known Member

    Joined:
    3rd Nov, 2013
    Posts:
    228
    Location:
    QLD
    please , please , please .. understand the bench-mark being used for the comparison , sometimes a benchmark is selected that allows one products to fall over the bench-mark every-time ( to the disadvantage of others ) , unfair comparisons are rife in many fields , investing is a doozy

    i didn't go with managed funds , but prefered listed companies that mange such funds , i also hold LICs , REITs and ETFs .

    ( some REITs can have a managed fund component )