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Best place to start for beginner investors?

Discussion in 'General Investing Discussion' started by MoneyNotorious, 12th Mar, 2018.

  1. MoneyNotorious

    MoneyNotorious Member

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    Hi InvestChat members,

    I'm 23 and have been seriously considering investing for years now. From curiosity I've always been interested in finance, investing and the stock market since I was old enough to earn money but I never took that 'first step' as my casual jobs were unstable and I never had enough cash to invest properly whilst living a semi-decent lifestyle that a 18-21 year old Uni student could - sometimes only earning $200 a fortnight.

    Fast-forward a bit I've graduated from my course and got a full-time job in Construction straight away, for which I'm grateful for. But as the months have gone on, I've been earning a reasonable $900 after tax a week and it was something I wasn't used to after surviving on peanuts for most of my teens (from my first job at Woolies for $8/hr to my last casual job at Mitre 10). I found my spending habits were atrocious. I looked at what I had earned all year on my pay slip, then compared it to what was available in my account and the results were depressing - I had been on a shopping spree and all my money was gone. This went on for months.

    Finally, I decided to change and I took some measures and now I inject $500 of my paycheck every fortnight (1k per month) into a savings account to watch it stockpile but I want to be smart with my money. I know that the present seems great to buy things I don't need with money I need to harvest but the future will come, and quite quickly, so I need to be prepared.

    I've been researching options with how to be smart with my money and the best places to invest in but I don't know where or what to begin with. Stocks? Bonds? Banks? Property? Overseas? Maybe changing Super options...I don't know where to start! Should I go to my Bank and ask them where to go (like a mutual fund or something). Given my age I am pretty set to take the leap with a more aggressive approach - but still strategic with defensive options - and I don't have any major overheads, my monthly expense is about $500. So I have time, and I have some capital but it will be foolish to think I can do this without research. I've also stockpiled about 10% more of my leftover fund as 'pay myself first' in another account simply for investing. Quite a turnaround from someone who was spending ~$600 a month on shopping.

    Unlike some people I know who think this is all a 'get rich real quick' scheme, I understand what is at risk here. This is a serious matter and it's all overwhelming for a beginner who doesn't indeed know much about finance or investing. But this still excites me, and God knows I am willing to learn and grow and ride out the highs and lows so one day, in the distant future I can retire without ever worrying about money.

    I haven't consulted a financial planner or anything like that as I'm still trying to find my bearings in this new universe of finance. But guys, where is generally the best way to start?
     
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  2. monk

    monk Member

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    Congratulations on realising early that you want to invest & not just spend on 'stuff'.A simple,easy & reasonably safe way to start investing imho is with old school LIC's like Argo,Afic Milton,Bki,low fees,been around a long time.There are some good Australian blogs where some have retired early by disciplined saving/investing etc.These have very low fees,less than 1%.Not sure if I'd break any rules on this site by recommending a blog or two so I won't until I'm sure it's okay.Another easy investment is through etf's like ioz,stw,vas these are asx codes.For LIC's & etf's you'd need to open up an online trading account through placers like comesec,belldirect or cmc markets.Easy enough done,good luck
     
  3. twisted strategies

    twisted strategies Well-Known Member

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    MoneyNotorious ,

    congratulations on making an early start ( i did the opposite , while not ideal , it did have some unexpected bonuses )

    first LEARN
    ( and think ) about where you want to go

    second find a working pocket calculator ( do the maths your own way , some get really tricky when presenting figures )

    there is a plan that is right for you ( however many will tell about a perfect plan for everyone , take that plan with some skepticism )

    ALL INVESTING incurs risk ( even leaving it in the bank ) be very cautious of anyone telling you different .

    since you are now working in construction , learn that business , from the investing angle at the same time ( not just tips from work-mates and bosses )

    currently the stock markets are near 10 year highs ( in Australia ) DON'T RUSH if you see a good bargain ( value ) fine , but you might keep some cash in the bank in case a good buy appears ..

    ALWAYS DO YOUR OWN RESEARCH ( before parting with your cash ) even when following a recommendation from somebody else .

    it is your money , you will get 100% of the losses ( but someone else will get the commissions ).

    browse this web-site there have been some excellent ( if a little out-dated ) posts here on many sectors
     
  4. MoneyNotorious

    MoneyNotorious Member

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    Thanks for your advice, both of you. What do you reckon of Bank financial planners? I’m with CBA and I was advised to consult a financial planner/consultant that are based in the branches.

    Do they offer sound advice and strategies on how to invest and grow my wealth or is it best to consult a proper financial firm?
     
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  5. monk

    monk Member

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    I personally would stay away from 'in house' financial planners.
     
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  6. MoneyNotorious

    MoneyNotorious Member

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    Well that’s very reassuring....

    Why’s that? Where should a beginner go
     
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  7. monk

    monk Member

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    Previously a lot of bank planners were stearing people into bank products which were not always the the best around,there was a big stink about this leading to many banks are selling their financial businesses.Always remember that when you go to a planner you will be charged a fee.Quite large in some cases so always best to check their fees before accepting their advice.
    So where to go? Good question,self education is the best as TS stated there is some advice/direction if you browse the posts here,there is a post comparing IOZ,STW &VAS I think,this is a good place to start to educate yourself about these etf's or exchange traded funds.
     
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  8. monk

    monk Member

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    Oh and you will find that under 'recent posts'.
     
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  9. twisted strategies

    twisted strategies Well-Known Member

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    MoneyNotorious ,

    i did go to a financial advisor ( in-house at a major bank ) the Royal Commission is looking at such advice currently ( including THAT bank )

    i did listen AND DID SOME THINKING and chose to go it alone ( in 2010 )

    yes an un-conflicted financial advisor might have created a better plan but might have also made a more complex plan ..

    i chose simplicity ( where i could ) mainly because i was planning to retire in just 10 years from then ( the logic was being more flexible to take up passing opportunities ).

    where to go ????

    that depends on your future plans , if you think you will start a family ( in a few years time ) you might choose a trust set-up or a formal SMSF .

    are you likely to migrate ( for a long time or forever )

    possibly just an investment portfolio for a start say 10 years ( with the option of extending that time-frame later )

    currently the government(s) are shifting the goalposts quite often ( your plans might need to adjust frequently )

    being young has different problems and choices to being older ( and facing retirement , soon )

    cheers

    ( it isn't easy .. so don't panic just think carefully .. and read the fine print everywhere )
     
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  10. MoneyNotorious

    MoneyNotorious Member

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    You're not wrong, this is not easy. The past week I've been reading article after article, journal after journal and forum after forum of investing and turning it into a career but damn it's hard to
    panic. I know there is a logical path though.

    So just on banking again, prior to today I was about to look into starting with CommSec. Is this also a potential 'stay clear'? I only thought about it because I'm with CBA.
     
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  11. twisted strategies

    twisted strategies Well-Known Member

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    re Commsec ... i have an account with Commsec ( and one with Bell Direct )

    yes they sometimes have problems .. but if you stay calm Commsec support will most times help you through it ( if the ASX itself has dramas .. .. well support does try to work through things )

    with Commsec ( and Bell Direct ) both are budget ( no extra fees ) accounts

    the 'logical ' path is the one you are comfortable with ( not a good career move arriving at work after sleepless nights )

    at your age , i was struggling to buy a block of ( vacant ) land when the mortgage was @ 17.5% ( young equaled 'sub-prime ' in those days )

    please note i am NOT a fan of CBA , but the trading account was a fair deal ( compared to the other options investigated in 2010 )

    remember the stock-market are near 9 year highs , ( more chance of a 20% drop than a 20% rise within the next 2 years ,in my opinion )
     
  12. MoneyNotorious

    MoneyNotorious Member

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    Legend thanks TS. Now another thing that's plaguing my mind, I understand the concept of Compound Interest, but do the banks offer a specific option to compound? - forgive my stupidity but that's how you learn.

    I know that Term Deposits are fixed interest. So is compounding earned on savings accounts such as NetBank Savings (for CBA users) and other accounts? I have another account in which transfer savings as I please but does that get compounded?
     
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  13. twisted strategies

    twisted strategies Well-Known Member

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    compound interest simply means interest is calculated on the current balance ( or debt ) reassessed say monthly ( 3 monthly , or 6 monthly )

    this is a beginner ( but important) concept

    offer that option yes they do , often that is called automatic roll-over ' ( when talking term deposits ) HOWEVER that automatic roll-over MIGHT be at reduced interest rates ( if a term deposit )

    the usual game is a 'sweet-heart ' rate to get you interested , but after the initial term is up .. the interest rate is lower ( hoping you will be too busy to negotiate a new term deposit deal when the time comes )

    Netbank ( and Commsec-linked CDIA ) accounts pay very little interest

    for savings ( and some ACTUAL interest ) i use a Heritage account ( may not be available in SA ) but have also used a BOQ 'holdings account ' when i need the cash available at short notice

    the Heritage account uses minimum monthly balance but the online saver account gives a small bonus interest if you add money during the month
    -------------------------------------------------------------------------------------------------------------
    * To be eligible, you must trade online, be CHESS Participant Sponsored with CommSec and settle your trades through either a Commonwealth Direct Investment Account (CDIA) or a CommSec Margin Loan.

    ^ Applies to CDIA's opened on or after 1 November 2012. For payment frequency on CDIA's opened on or prior to 31st October 2012, interest is calculated daily and paid quarterly.


    albeit at tiny interest yields
     
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  14. Hodor

    Hodor Well-Known Member

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    The interest generally lands in the account that earned it and then interest will be earned on the new balance. IE compounding.

    If you are really interested in the nuts and bolts of things get "a random walk down wall street". After reading that you will have an appreciation of many important concepts.

    Monk offered some great advice for starting points. Don't get distracted by bright lights and fancy investments. You're young and have time and therefore compounding on your side, take advantage of that.
     
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  15. MoneyNotorious

    MoneyNotorious Member

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    I aim to take advantage of compounding for sure! As TS said, the Netbank saver that I opened generates 2.5% interest for the first 3 months then reverts to 0.8% so I imagine this really isn't benefiting too much from compounding?

    I do have another account that was started when I was born and wasn't until a few years ago I set up regular deposits of $500 per fortnight ($1k per month) into that account and also cop that extra bonus interest (albeit tiny as hell). I've never touched that account and don't plan to as the monthly deposits go in and it's not a fixed term or rate so all earnings are essentially re-invested into that account - am I compounding right?
     
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  16. twisted strategies

    twisted strategies Well-Known Member

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    MoneyNotorious ,

    compounding in theory .. yes

    but .. but then you have the hidden costs .. tax on that interest and the dreaded enemy inflation ( inflation currently seems trivial , but currently so is your interest payments , especially after the tax liability )

    find a grizzly old pensioner and ask about the gory details , half these folks never graduated Grade 10 maths but many have become experts at banks and surviving on pennies

    it is no accident many a pensioner has been forced into shares to earn a supplementary income

    for me compounding works better on a share like CMW ( actually a REIT ) it pays 3 monthly div. ( but NO franking but more importantly can be DRPed )

    i have two holdings of CMW .. one lot 100% DRPed and one lot partially DRPed ( a later buy as i was closer to retirement and perceived a trickle of regular cash MIGHT be a good idea )

    Dividend Reinvestment Plan - DRIP

    this is US web-site but this is close to how it works in Australia as well

    ( you can change your DRP preferences , if they have a plan , by contacting the share registry )

    ALL SHARES ( REITs LICs etc ,) carry risk

    ( DYOR )
     
  17. twisted strategies

    twisted strategies Well-Known Member

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    The Value of Reading and Thinking

    The Value of Reading and Thinking


    however the trick is to think about what is best for you ( i have completely different needs and ideas )
     
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  18. MoneyNotorious

    MoneyNotorious Member

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    I think I’m ready! I have been eying down Managed funds/ETFs for a while and would like to make my first ever investment in one. I love the fact that it gives me good diversification (a key objective for me) and that I can get my money to start working opposed to having to be fully invested in researching how one single company is performing (I wish to do this later but not whilst I’m learning the basics after one week). It’s good knowing that they are professionally managed so I can be passive in terms of researching and monitoring its performance.

    So I think I’m ready. How do I get started? Who or where do I go to purchase shares in ETFs/managed funds?

    Everyone’s investment vehicle works differently for themselves and what works for one may not work for the other. But there’s only one way to find out!!!
     
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  19. twisted strategies

    twisted strategies Well-Known Member

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    MoneyNotorious,

    good luck !

    it is always hard to decide when to be patient and when to try a different tactic
     
  20. Hosko

    Hosko Well-Known Member

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    MoneyNotorius,
    I won't tell you what to do but I can tell you what I wish I did when I was your age about 20 years ago.
    That sum of money that you have - keep in mind I was similar. I wish I had put that first lot into a single share, ETF, LIC (take your pick) and had a DRP activated and then forgot about it until 10-20 years later. With hindsight I would have survived quite well without the money, in fact I did because eventually it ran out - Hello GFC, holidays, lifestyle.
    I was trying to get creative chasing penny stocks, trying to trade blue chip shares (call it $100k parcels with margin) to make my millions, but-write positions for cashflow. Tried a few different things.
    Fast forward to now, I wish that when I was 20 I had just put the initial lump sum away for later on (a better house, holiday, give away the day job).
    Don't get me wrong I have still accumulated property, having some fun playing the market, buying any beers that I feel like, etc.

    Why do I say this? Well the hardest part financially for me now is finding a lump sum of cash. The cashflow for day to day is fine but to make the next move I need to have a lump sum $100-200k type thing and currently we are hamstrung and can put away $500/fortnight but we are now 15 years away from having a lump sum.

    A couple of years ago I put a small lump sum away for the kids with a DRP arrangement. Wouldn't have a clue what it is currently worth but will look in 10 years time and they should have a reasonable start.

    Hopefully this rambling makes sense to you.
     
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