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Discussion in 'Investing Strategies' started by powerpoint, 13th Jun, 2008.

  1. powerpoint

    powerpoint New Member

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    Location:
    wollongong, nsw
    hi i am a yr 12 student and i am new to this site. to be straight up, i dont know much about investments, i dont really have much money due to the wages for people my age and short amount of time in the workforce, although the money i have i want to invest.

    i do not care how high the risk of investment is(infact would proably prefer higher risk if it meant greater return) as it really would not be a great loss for me to lose my money as i am young and my money is idle at the present time.

    how should i invest?
     
  2. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    If risk is no option, then lotto is probably your best bet - sharing $54m between four people like happend recently is a great way to make money. The problem is that your chances of actually winning are extremely remote (practically zero by most statistical measures!)

    Seriously though - I think you should start by learning about money. Learn how it works, learn how finance and lending works, learn about budgeting and saving money.

    If you can't master the basics, then you certainly won't last long if you do win $54m in lotto or make a lot of money from your investments.

    Start by saving money and watch the magic of compounding. It really is the most amazing thing.

    Read a lot - anything you can get your hands on.

    I suggest you start with a short book called "The Richest Man in Babylon" by George S Clason - it won't take long to read, and is one of the best books about the fundamentals of money.

    So in summary, my advice to you is to invest in two things:

    1. education (specifically books and other cheap/free sources of information)
    2. a bank account. Save your money - you need capital to get started, and compounding interest will teach you a lot

    One question: what do you intend to do when you finish school?
     
  3. powerpoint

    powerpoint New Member

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    i appreciate the feedback, and i will go and find that book and read it. im impressed that the comment was not judged too harshly for its ignorance and lack of knowledge. i agree i need to obtain further understanding.

    in response to your question about what i want to do after high school. im a believer in keeping my options open and not being set on doing one thing. so i am not certain of what career path i will take, i am also uncertain of what i want to study. although i know one thing for sure, that is; i dont just want to financially rely on a career without investment. i find this idea of investment interesting and i genuinely want to learn about it. it is probably because my parents have many investments of their own in property and shares, and they have emphasised the importance of investment to earn money.

    i want a head start, and i am not sure how to go about it. its funny you mention lotto,because i was contemplating sports betting for investment (didnt follow through with that idea) as it seems there can be no real gains from investment without sufficient capital. i mean maybe the answer really is "just wait til you are older" - i guess i just do not want to accept that answer. so i wanted to find out for myself. thats why i am on this site.
     
  4. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    You are taking the first step by trying to educate yourself - that's 100% further than most people get - especially at your age !!

    There are pros and cons for getting a job first.

    Firstly it is very possible to make money and become wealthy with very little capital behind you. I know a woman who started in her late teens with virtually nothing and worked really hard to get enough cash to buy a run down old property, which she then did up and sold at a profit (the magic was in being able to buy cheaply, add value for relatively little cost, and sell for a good price). She then used those profits to buy more property and did the same over and over again. She went on to become extremely wealthy, and owns many properties all over Australia, and also owns a few businesses too.

    But you do need to understand that capital is what makes it all possible - so even if the first thing you do is to somehow make money by creating something of value, or by adding value, or by good old "sweat equity" (doing the hard work), all you are actually doing is generating capital to be able to reinvest and compound the returns over and over again. It is compounding that does all the magic in investing, and it is leverage (other people's money) that allows you to do it far more quickly than would otherwise be possible.

    The trick with leverage is that the cheapest loans are available to those people who have good incomes and stable jobs, and the banks are more comfortable with the level of risk they are taking. When I worked for IBM earning a nice 6 figure salary, the banks virtually threw money at me - more than I could ever hope to repay on my own.

    That doesn't mean it is impossible to get loans if you don't have a good income (although in today's credit squeeze, things are much harder than they were previously) - it just means that you will pay a bit more and have to work harder to get over the hurdles. At the end of the day though - everyone hits the same hurdles eventually - even those on good incomes ... they will eventually hit a servicability limit for their loans and the banks will stop giving them the easy money. Then they have to play the same game as everyone else.

    However, there is still merit in getting a job to spend time working on things that interest you and motivate you - your passions. By gaining experience and expertise, all sorts of new doors open up to you. You don't have to get a job to achieve this - but it is one path that is not unreasonable if it helps you get to where you want to be.

    I know at your age that knowing what your passions are is often very difficult. I knew what I enjoyed doing and I had an idea about the types of things I wanted to do (computers - IT), but in reality I had no concept about what that really meant. It wasn't until I was in my mid-20s that I really found my passions and a bit more focus.

    There are all sorts of business opportunities I can now leverage my skills and expertise in (that I couldn't do if I hadn't done what I did over the past 15 years) ... and I am now expecting to make far more money from business than I ever did as a well paid employee.

    You could also just start off in business - learning how to run a business is a career path in itself (people pay lots of money to get fancy bits of paper that say they are supposedly an expert in running a business) ... and provided you are prepared to learn quickly and work extremely hard - you can achieve just as much ore more than anyone who got a degree and then a job.

    The difficult part is in getting started - setting goals is a very important part of the process ... but to do that, you need to know who are are, who you want to be, and how you want to get there. That's not easy to do for someone at your age - but you have to start somewhere!
     
  5. crc_error

    crc_error The Rule of 72

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    My best advise is to choose a managed fund which invests in shares and invest say 20% of everything you earn into it. Do it on a weekly basis and in 5 years time, it will grow into a nice nest egg.

    If you want something with spice, choose the colonial first state geared australian share fund, its got a proven track record, and it will teach you how important its to invest on a regular basis.

    Investing isn't complex, but some people make it more complex than necessary.

    Tricks to successful investing are:

    Invest on a weekly basis - ie set aside a % of your income each week which will allow you to Dollar cost average your entry points

    Gearing - using other peoples money to buy shares.. borrowing to buy a property is one example, can also be done to buy shares.. this way you magnify your returns

    have long term view - you should view your investment for 7-10 years, and not watch daily price fluctuations

    power of compounding.. interest upon interest.

    I also believe you should buy 1 IP as soon as you can, this will give you negative gearing benefits, and you can then redraw new equity to buy geared shares. Owning a IP along side shares, you have 4 people working for you. Tax man, tenant, you and the stock market.
     
  6. crc_error

    crc_error The Rule of 72

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  7. powerpoint

    powerpoint New Member

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    Location:
    wollongong, nsw
    Sim those were true words of wisdom and i do agree with goal setting(and everything else!). one of my personal goals is to get a basketball scholarship at a college in the US, and at the present time i have been accepted into an american college scouting company. so i guess this is just one pathway. i was thinking about the possibility of studying something involved with money or business. though like you said, for someone at my age it is difficult to find out who i am, where i want to be and how i will get there. hopefully it will work out for me when im in my 20s like it did for you.

    after reading your response, i discussed the issues of leverage with my parents and heard their own first hand experiences with bank loans and money, even with a great deal of equity the banks still required greater income for a larger loan. it was interesting.

    the trick really is getting started. although i took the advice from crc_error and i have just ordered an information pack about the colonial first state geared australian share fund. i might give this a go, well atleast look into it.

    i noticed due to the recent share market slump their interest rates seemed to have been affected slightly more than the average equity fund. one of their investing companies was Fosters Group limited - unlucky to them! i figured that must have been a major contributing factor to their fall in rates, with fosters major losses in their wine division.



    once again, thanks for the feedback, much appreciated.
     
  8. DaveA

    DaveA Well-Known Member

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    dont forget to discount that back... @4% inflation... $400k in 10 years time is only worth $265k in todays $$$s...

    and 14% is aiming a bit high... but i agree with your mind set about teaching to invest...