Hey guys, I'm a new member, and I'm just posting to get some advice on where/when I start investing! I'm 22 years old, and I'm a fresh graduate student now (luckily) working in industry. Throughout my Uni days working part-time, I've managed to (very difficultly) saved up and stick about $8k into the ASX200 for some passive income, and now that I'm out of Uni, I'm grabbing every opportunity that comes my way. As a result, I'm currently working a full-time job, and attempting to start/run 2 side business ventures, leaving me slightly pressed for time. I've always been very keen on investing, however due to financial restrictions in university, I've always put it off until I've had some 'real capital'. However, now that I'm out and working, I'm still finding myself tempted to put it off until have I save some more or earn a higher salary or have more capital before I start. I was thinking of investments with higher risk/return while I'm youngish and should anything deathly happen, I can work through and recover losses - however nothing requiring a six digit figure for capital (I was told investment loans sound never surpass a % of your yearly salary as a benchmark). I understand that a good portfolio requires a good balance between yield and growth investments, however I'm unsure where to start. Although (arguably) possibly the safest forms of investments, my entry level graduate salary doesn't exactly boost my confidence in taking out a loan for an Investment Property, and I don't like the idea of investing in the Aus property index (growth seems a bit slow while I still have a bit of time ahead of me). I was very interested in shares, day trading and reading charts, however quickly realised I don't have the time or knowledge to dedicate in order to get into that field. The only other alternative I can think of is something like a managed fund or trust all my money with a financial/investment manager. So please help me InvestEd members! Should I be saving more before moving into investments, or am I just procrastinating now? And if I am to start now, where do I start first? Funds? Property? Shares? Buy a nice painting or taxi license plates and wait for their value to grow? Thanks in advance guys!
Hi Heinko Don't put off investing while waiting for a larger wage. Turn it into a game. Every pay packet, you invest X%. Have it automatically removed from your salary. Short of medical expenses, never touch your savings. You said you invested in the ASX200. You could also try the Pacific, BRIC, Europe, Japan, UK, US and Canadian indices. Starting early gives you a great asset. TIME. You can't beg, buy or borrow it. So use it wisely. Johny.
Would you recommend any other alternative then just sticking money in the index? I always thought an active approach to investments would yield a higher return then passive growth. My collaborated knowledge about the indices in general is that the index relies much more on the government monetary and fiscal policies of the country rather then the top 2/3/500 companies themselves. With the recently global economy being so volatile, I'm more inclined to stay away from the indices for now (perhaps aside from Japan?). Having said all this, my knowledge in economics is self-taught and would say I'm comparatively ignorant to other investors, hence why I'm more then open to any advice!
Firstly welcome to the forums! Awesome work! Working hard, being smart, being involved with business, saving what you can and making simple but smart investments is a GREAT way to start. I highly recommend continuing on this path! Well now that you have graduated you have definitely built up some capital - it's just "human capital". Investing in yourself will be the best investments you ever make! Keep investing in that "human" capital, and being around places like InvestEd will help loads with that, along with getting your hands dirty in things like small business. Depends what you want to invest in. Continuing to buy index funds, both here and abroad can be pretty cost effective. I think keeping it simple is the most effective way to build wealth. Though if you were going to go down the day trading path I'd say go hard or go home (as in put all your energies into it - don't treat it like a little on the side thing to make money - I've had too many friend take that attitude and lose thousands). My personal opinion is stick with low cost funds, continue investing in your knowledge, avoid debt for awhile and continue with your business ventures (even if they fail - you'll learn a lot). ... and have a bit of fun inbetween. For most people an "active" approach ends with under performing the index, numerous broker fees and a more complicated tax return. Index Funds vs. Actively-Managed Funds 529 Plans: Index vs. Managed Funds Science and Money Index funds vs active funds Monetary and fiscal policies will definitely have an effect on shares, but most developed economies have similar laws and similar monetary policy agendas - so it's a game of picking the best of a bad bunch. As for Japan... my understanding is some well known value investors are starting to see value in Japan, particularly in Japanese companies that have large market shares outside Japan itself. Japan itself does have some serious debt and demographic issues, in that their government debt is enormous, their population is falling, and a lot of workers are hitting retirement age. So investing in Japan isn't without its perils. An open mind is all you need to learn.
My knowlege of indices comes from books and websites about index investing. Its a bit like religion. You either believe it or you don't. Not generalizing, I will use "I" statements. I am not fully aware of all the current financial transactions in the world. I am not fully aware of all the current financial transactions in Australia. I have a belief that the market will prevail. I know I don't have the experience or luck to trade. So I hold indices with yearly rebalances. It requires Structure and Displine. But it is an alternative. Johny.
Awesome advice on Indices, thanks Johny and Chris. My understanding is; as it's unlikely that the top 200 performing companies of a country will all make mal-investments and fall simultaneously, the primary influential factor is determined by the government and it's policies (of course varying from each country to country). As for the topic of Japan.. my personal research lead me to this when I was looking further into macro economic philosophies and how they effect the global economy. It seemed to be that because the majority of the America's GDP is internal consumer spending, and so little of their GDP comes from their national exports, two things would happen; either they bust, or they recover slowly. Long story short: their government transfers a lot of their own currency to another country (in this case Japan) in order to lower their own exchange rate, resultantly making their currency more appealing, and increasing their exports. The side effect of this is that Japan's economy grows. Thanks for the links on comparison between the indices and managed funds Chris, very interesting reads. So now, should I just stick with Indices and play it nice and safe, or hunt and play with the 'good' managed funds? What would you guys do?
With $8,000 capital I would focus on your job and your business ventures to try and boost you capital base and worry about achieving an optimum return when there is something to gain out of making a marginally better investments. After all it doesn't much matter if your yearly returns are -5%, 5% or 15% over the next three years. The most you would lose or make in those scenarios is a loss of $1,141, a profit of $1,261, and a profit of $4167, respectfully. But over the next three years all those small sums are going to pail in comparison to the income you can earn, not to mention you have far greater control over what your income is than you do over the stock market. So focus on that for the time being. And let's face it, if the experts are still under performing the index, then there is a good chance those that of us that are Sunday paper stock pickers aren't going to out perform the market without a fair bit of experience and luck on our side. I'm not saying don't invest some time in trying to learn more, and I think now is a great time to be learning because things are so volatile and there are so many opinions and variables that are receiving attention that just seemed to be brushed over or discarded when the bullish media fuelled manias are in full swing. So I think it's a great time for us young guys to work hard, put our ears to the ground, accumulate capital, and slowly feel our way into the haphazard world of investing. If there is one thing I have learnt over the last 24 months of craziness, it's - don't be in a rush, the rest of the world doesn't work to your time frame. Sit back relax, reflect, and be smart, this game is a long one, and you're not going to win it tomorrow.
Ok, sounds like a plan! Thanks for the feedback guys, looks like i'm just going to focus on some side projects for now!
Mate, for a longer term/retirement strategy, the sooner you can break into the property market, the better!
