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Old 2012-02-08, 18:58   Link #1
DonQuigleone
Knight Errant
 
 
Join Date: Dec 2007
Location: Dublin, Ireland
Age: 26
Investment Advice

So I've been working a bit, and I've managed to save a bit of money, so I think it might be a neat idea to do some investing with it. Me and a few friends are thinking of pooling resources to do so economically. I'm completely new to this , but I remember that some of you guys were experienced at this sort of thing, so I might as well ask you guys at least about the basics.

I don't absolutely need the cash (due to my youth), so I'm willing to take on a fair amount of risk, but I'd prefer to get into buying and holding stock for long term growth rather then day trading. Any tips, suggestions? Any good sources of investment info (not buying tips, so much as technique). Anything I should know?

I have a few basic questions:

1. What's the best online broker to use?
2. Is there any particular exchange that's the best/easiest to use? Is it best to stick to using a single stock exchange?
3. What do the various stock stats mean?
4. What should I look out for when assessing stock for buying/selling?
5. Are there any websites that in your experience post the best information, and any that should be avoided?
6. What's the best way to keep on top of the health of the companies in my portfolio?
7. Anything Legal/Tax related I should be aware of when investing?

If you guys think there are better ways to invest savings, I'm open to it, though as a general rule I don't want to be investing in stuff that's particularly abstract and complex (I can't help but think they're a bit dangerous...).
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Old 2012-02-08, 19:11   Link #2
Dhomochevsky
temporary safeguard
 
 
Join Date: May 2004
Location: Germany
Age: 33
A few things from personal experience:
- be very careful if a bank offers you consultation. They will offer you things that they make the most money from. Don't believe a word they tell you, because the people you will be talking to are salespersons first and bankers a far second.
- don't use long time investments at your age. If you can not cancel it and get your money back in a relative short timeframe and without a loss, then don't use it (you can cancel/sell off most investment scemes at any time, but it often comes with a hefty fee).
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Old 2012-02-08, 19:54   Link #3
Kokukirin
Shadow of Effilisi
 
 
Join Date: Oct 2011
I don't really have answers for your questions. Just decided to share an interesting article on risk and return I read a few days ago. It goes against the conventional belief that high risk brings high reward by showing that low-risk stocks consistently outperform high-risk stocks in a 40-year span in US stock market.

Link to the paper
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Old 2012-02-08, 21:14   Link #4
DonQuigleone
Knight Errant
 
 
Join Date: Dec 2007
Location: Dublin, Ireland
Age: 26
Quote:
- be very careful if a bank offers you consultation. They will offer you things that they make the most money from. Don't believe a word they tell you, because the people you will be talking to are salespersons first and bankers a far second.
Have to agree, I see no reason why I need to depend on a banks services or advice. With the internet, all the resources are there online for me to handle my investments personally. None of the math involved is all that hard after all.

Quote:
Originally Posted by Dhomochevsky View Post
- don't use long time investments at your age. If you can not cancel it and get your money back in a relative short timeframe and without a loss, then don't use it (you can cancel/sell off most investment scemes at any time, but it often comes with a hefty fee).
I wouldn't actually want to literally lock up the assets, more acquire an asset (that can easily be sold off) with a view to holding it long term rather then sell it for a quick buck. Basically, buy something that I'd likely never want to sell.

In this case, the only fee would be the conventional buy/sell fee a broker levies, which is pretty low if you limit your transactions.

@kokurin: interesting.
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Old 2012-02-09, 03:18   Link #5
SaintessHeart
NYAAAAHAAANNNNN~
 
 
Join Date: Nov 2007
Age: 26
Investing or trading? Those are two VERY different concepts of handling your money.

If you have absolutely no idea what is

1. Dow Jones
2. S&P
3. Russell
4. Capitalisation
5. Where do commodity prices quoted in news come from

Buy an Endowment policy with a Single Premium payment. Xellos can help you out with that.

How much capital do you have? And how much can you afford to lose?
__________________

When three puppygirls named after pastries are on top of each other, it is called Eclair a'la menthe et Biscotti aux fraises avec beaucoup de Ricotta sur le dessus.
Most of all, you have to be disciplined and you have to save, even if you hate our current financial system. Because if you don't save, then you're guaranteed to end up with nothing.
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Old 2012-02-09, 05:01   Link #6
TinyRedLeaf
. . .
 
 
Join Date: Apr 2006
Location: Singapore
Age: 40
Quote:
Originally Posted by DonQuigleone View Post
I have a few basic questions:

1. What's the best online broker to use?
2. Is there any particular exchange that's the best/easiest to use? Is it best to stick to using a single stock exchange?
5. Are there any websites that in your experience post the best information, and any that should be avoided?
6. What's the best way to keep on top of the health of the companies in my portfolio?
7. Anything Legal/Tax related I should be aware of when investing?
Those are good questions, but they are far from "basic" questions, in that the answers would depend very much on your circumstances, which we aren't likely to be familiar with. It'll be best to talk to a broker or financial adviser in your area.

Quote:
Originally Posted by DonQuigleone View Post
3. What do the various stock stats mean?
4. What should I look out for when assessing stock for buying/selling?
With regard to the stock stats, I've found Investopedia to be a good place to get a first-glance, basic understanding of the various terms.

The thing to remember about stocks: You're essentially buying a share of a company's future income stream. So, the first thing to look at would be the company's financial statements. Is the company profitable or not? (Bear in mind, though, that past performance is not a reliable prediction of future success.)

Next, take a look at the company's current price and its price-earning ratio (the ratio of its share price per share vs its profit per share). That gives you an indication of how "valuable" the market thinks its profit stream is. On its own, the PE ratio is meaningless. You need to compare it against that of similar companies in the same sector. That gives you an understanding of how well this company is performing compared to its close rivals, that is, whether it is underperforming or overvalued vis-a-vis its competitors.

Beyond that, it starts to get a bit fuzzy, as a lot will depend on your own judgment. For example, there may be companies whose business cycles are highly volatile, in which case, the PE ratio may not give an accurate assessment of its business value. In such cases, investors may want to look at the company's book value instead. There are also investors (typically those who are very familiar with the company's industry) who place a lot of emphasis on the company's key managers, on the belief that any business is only as good as the people who run it.

Your general knowledge will help a lot. Say you decide to focus on technology stocks. It's highly preferable that you understand the technology the companies build, whether such technologies are considered worthwhile, whether they have a lucrative market to look forward to, and so on. In other words, it's important to keep up with the daily news. The more you know, the more you can be sure about whether a company is a good "buy".

Quote:
Originally Posted by DonQuigleone View Post
If you guys think there are better ways to invest savings, I'm open to it, though as a general rule I don't want to be investing in stuff that's particularly abstract and complex (I can't help but think they're a bit dangerous...).
Like SaintessHeart suggests, you need to be aware of your risk appetite: How much are you prepared to lose? Unfortunately, this question can be answered only through experience. It's only when you've started to lose money that you'll be aware of much pain you can take.

Conversely, you must set hard targets for your projected gains. That is, be aware of how much you wish to make out of an investment, and then have the discipline to exit once you've hit that target. A common mistake for many newbie investors is to hang on when things look rosy, believing that they'd make more if they hang on for just that little bit longer.

With both those points in mind, be aware that stocks are not the only things you can invest in. There are also bonds and other instruments that are tailored to different risk profiles. So, don't be overly fixated with stocks but, at the same, don't be overly bothered by others who buy a whole lot of exotic stuff. They have their own portfolios to suit their profiles, which may not be the same as yours. Just be comfortable at learning and profiting at your own pace.
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Old 2012-02-09, 07:08   Link #7
SaintessHeart
NYAAAAHAAANNNNN~
 
 
Join Date: Nov 2007
Age: 26
TRL has pretty much pointed out alot of things, but there are still plenty of stuff to take note of :

1. Beta : It measures how will the company do in volatile market conditions; a negative beta would mean that it moves opposite in the market condition, and a positive would mean it follows the market. A near zero beta means it is entirely independent of the market mood.

2. Company history : How has the company been performing in the past decade or so? One thing to note is that companies can capitulate even after a century of service, like Bear Stearns, Barings, or the most glaring, Worldcom. High capitalisation doesn't mean the company is rich - sometimes it may have a crapload of accounts payable to their creditors over a term. And you also have to look at the type of corporate bonds they issue; are they long term or short term, and what are the interest rates on the bonds, issued which year, how close is it to maturity, etc.

3. Company structure : Who is their CEO? What is their CEO history? It is a good idea to take a look at the top three histories before buying a company share (CEO, CFO, COO). Usually the biggest assholes in the history of finance tend to make companies do well after its downturn because they are asinine enough to do the dirty stuff to get the company back up, but that is just my opinion.

4. Current situation of the world economy and the company's place in it : this is probably the most important, difficult and confusing subject to learn. I spent close to 4-5 years, even during my NS days, reading up and studying it, but I am still a newbie. You need to have a crapload of knowledge on history, geography, militarisation, production level, corruption level, transparency, media trend and language, trade ties, political enemies, internal stability, main export industry, main domestic industry, domestic consumption rate. It is insane - there is way too much to learn.

You might want to pick a company you like, do research about it, and if you don't know any terms, consult wikipedia, investopedia, Marketwatch, AP, Reuters and TRL. But ultimately :

1. How much is your capital?
2. How much can you lose?
3. What is your preferred range of RoR?
4. How long do you plan to hold?
5. What will you do if the company runs into some shit and loses 25% of its value?
6. What is your investment/trading plan to you?

One more thing is that, do you add to that lump sum? If so, you might want to create a cash flow statement of your income, expenses, savings and investment fund each month. Doing this may take up to 3 months, and you need to build a new one everytime you change a job.

Making an investment is an extremely seriously business, as much as your family's future is to you. If you are not willing to put anything more than your life and utmost effort on it, my suggestion is that you buy an ILP or Endowment plan, or just park that money in a mutual fund, close your eyes, and pray that it doesn't collapse.
__________________

When three puppygirls named after pastries are on top of each other, it is called Eclair a'la menthe et Biscotti aux fraises avec beaucoup de Ricotta sur le dessus.
Most of all, you have to be disciplined and you have to save, even if you hate our current financial system. Because if you don't save, then you're guaranteed to end up with nothing.
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Old 2012-02-09, 07:13   Link #8
jdennis007
Senior Member
 
 
Join Date: Jun 2009
Location: New York
I was always taught the first rule of investing in stocks was never invest more money than you are willing to lose.
You can get annual reports from companies either online or by requesting them from the company, these contain a lot of information including breakdowns by different divisions of the company.
Have you looked into D.R.I.P. funds yet (which I hear are good for first time investors) whereas you agree to reinvest money from quarterly dividends back into the company for more shares of the stock, but each company has different rules, minimums etc.
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Old 2012-02-09, 07:45   Link #9
SaintessHeart
NYAAAAHAAANNNNN~
 
 
Join Date: Nov 2007
Age: 26
Quote:
Originally Posted by jdennis007 View Post
I was always taught the first rule of investing in stocks was never invest more money than you are willing to lose.
You can get annual reports from companies either online or by requesting them from the company, these contain a lot of information including breakdowns by different divisions of the company.
Have you looked into D.R.I.P. funds yet (which I hear are good for first time investors) whereas you agree to reinvest money from quarterly dividends back into the company for more shares of the stock, but each company has different rules, minimums etc.
Actually the first rule is where does the money in your investment fund come from - it is an acknowledgement that you are risking that wad of spare cash to do something that might not even return it.

Regarding investments, I am not personally for DRIP funds because :

1. It is an option at the time of reinvestment, not a future or stock - you have no obligations in a company, so the company has no obligations to pay you once it runs aground. And options are made to lose money.

2. Capital gains tax : when you exercise the reinvestment option, you are purchasing stock - it is still taxable if tax laws apply. So in the end, keeping a group of them means that you are managing a whole lot of paperwork every quarter if dividends are paid out; not a good idea, drains your energy and confuses you.

3. M&A seasons : if the company you have a DRIP in gets acquired or merges, there will be an adjustment to cost-basis (original cost of the asset before M&A), which brings us back to number 2 : enjoy being taxed the crap out of your investment income for every share you own. Even worse is something called stock-split : by the time you finish calculating your capital gains, the ORCs (Office of Revenue & Commissions)are at your front door and your face would probably be as green as theirs.

However, the good thing is that DRIPs are low-cost investment plans, meaning you can own alot with little or nothing. The risk factor comes in because you are only investing in a single company instead of a managed fund that spreads your risk out; unless you have plenty of time to watch the basket, don't put any egg in there.

One more thing : investment isn't only about equities. You can also invest in Bonds, Money Markets (Forex, which isn't going anywhere thanks to Dr Breen and PIIGS), Geographically Specialised funds, Commodity Funds, Managed Funds, or maybe Cap Guaranteed funds.
__________________

When three puppygirls named after pastries are on top of each other, it is called Eclair a'la menthe et Biscotti aux fraises avec beaucoup de Ricotta sur le dessus.
Most of all, you have to be disciplined and you have to save, even if you hate our current financial system. Because if you don't save, then you're guaranteed to end up with nothing.
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Old 2012-02-09, 08:23   Link #10
DonQuigleone
Knight Errant
 
 
Join Date: Dec 2007
Location: Dublin, Ireland
Age: 26
Quote:
Originally Posted by SaintessHeart View Post
Investing or trading? Those are two VERY different concepts of handling your money.
Investment, trading seems more difficult, and frankly, I hear of people losing a lot more money on trading, then on investing.

Quote:
If you have absolutely no idea what is

(snip)

Buy an Endowment policy with a Single Premium payment. Xellos can help you out with that.
I'm familiar with all those terms. I'd like to go full tilt in, I'm willing to devote a lot of my time to understanding my investments.

Quote:
How much capital do you have? And how much can you afford to lose?
Right now we're pretty low. My friends and I could probably pull together a few thousand. We're in a position where we'd be able to take losing all of it (We're not dealing with life savings here). However we're looking to go at this in the long term, and if decently succesful plow more money into it.

Quote:
Originally Posted by TinyRedLeaf View Post
Those are good questions, but they are far from "basic" questions, in that the answers would depend very much on your circumstances, which we aren't likely to be familiar with. It'll be best to talk to a broker or financial adviser in your area.
Is it possible to do this cheaply? We don't really have the money for substantial fees.

Quote:
Next, take a look at the company's current price and its price-earning ratio (the ratio of its share price per share vs its profit per share). That gives you an indication of how "valuable" the market thinks its profit stream is. On its own, the PE ratio is meaningless. You need to compare it against that of similar companies in the same sector. That gives you an understanding of how well this company is performing compared to its close rivals, that is, whether it is underperforming or overvalued vis-a-vis its competitors.
Is there anywhere central where most of this data is collected and graphed, including historical data stretching back 10 years?

Quote:
Your general knowledge will help a lot. Say you decide to focus on technology stocks. It's highly preferable that you understand the technology the companies build, whether such technologies are considered worthwhile, whether they have a lucrative market to look forward to, and so on. In other words, it's important to keep up with the daily news. The more you know, the more you can be sure about whether a company is a good "buy".
I think this is one aspect we're fairly good on. We're all fairly worldly, and my friend works in a company that organises financial statistics, and reads the FT daily, among other things.

Quote:
Conversely, you must set hard targets for your projected gains. That is, be aware of how much you wish to make out of an investment, and then have the discipline to exit once you've hit that target. A common mistake for many newbie investors is to hang on when things look rosy, believing that they'd make more if they hang on for just that little bit longer.
My own thinking is to buy into companies that could, realistically, continue to grow and operate for the foreseeable future. Once I bought into said companies, I'd watch it, and if I feel I don't like it's current direction, I get out.

If nothing wrong seems to be happening at said company, I'd see nothing wrong with holding the stock indefinitely.

Quote:
With both those points in mind, be aware that stocks are not the only things you can invest in. There are also bonds and other instruments that are tailored to different risk profiles. So, don't be overly fixated with stocks but, at the same, don't be overly bothered by others who buy a whole lot of exotic stuff. They have their own portfolios to suit their profiles, which may not be the same as yours. Just be comfortable at learning and profiting at your own pace.
I want to keep things fairly simple, so I'd mostly be looking to invest in the most simple direct type of securities (namely stock, preferred stock, bonds...). I'm going to be satisfied if we're getting portfolio growth that beats bank interest.

Quote:
Originally Posted by SaintessHeart View Post
You might want to pick a company you like, do research about it, and if you don't know any terms, consult wikipedia, investopedia, Marketwatch, AP, Reuters and TRL. But ultimately :

1. How much is your capital?
2. How much can you lose?
3. What is your preferred range of RoR?
4. How long do you plan to hold?
5. What will you do if the company runs into some shit and loses 25% of its value?
6. What is your investment/trading plan to you?
1. A thousand at most, with more forthcoming once we gai some experience.
2. All of it.
3. If we can manage 10% a year, I'd be very happy. Not looking to get rich quick.
4. Indefinitely, if the company is performing well and stable.
5. Well, hopefully we'll be diversified enough that won't be an issue. We're thinking of buying stocks in, and tracking, around 6-10 companies, with no single entity taking up too much of the portfolio.
6. A possible savings plan for the future. If the capital reaches ~1 million or so, I can probably retire and live off the returns.

Quote:
One more thing is that, do you add to that lump sum? If so, you might want to create a cash flow statement of your income, expenses, savings and investment fund each month. Doing this may take up to 3 months, and you need to build a new one everytime you change a job.
Well, right now we're working informally, but certainly, if things go right, we'll be continually putting money into this (though perhaps restrict it to every quarter to simplify accounting).

Quote:
Making an investment is an extremely seriously business, as much as your family's future is to you. If you are not willing to put anything more than your life and utmost effort on it, my suggestion is that you buy an ILP or Endowment plan, or just park that money in a mutual fund, close your eyes, and pray that it doesn't collapse.
Of course, but I think I'm smart enough to track a few companies without devoting my whole life to it.


You guys are being super helpful, but to get down to practicals, I'd like to get my feet wet and buy a stock or two, and get familiar with the process. Is there any advice you'd give regarding choosing a stock broker?

Some info: We're all based in Ireland, and all our money is in Euro, and none of us really know any language besides English.

Now the most immediate stock exchange is the ISE, based nearby in Dublin. But the Irish market is generally moribund, and I feel wary of investing listed there.

Then we have the London Stock Exchange, which while big, would (I'd guess), require all transactions to be in , I'd prefer not to have to deal with currency conversions.

The other option would be a European stock Exchange, like Paris, or Berlin, who of course operate in Euros, but I have a feeling that we wouldn't be as easily able to access information for companies listed on those exchanges, due to the language barrier, and the fact that we're not as familiar with the continental economy.

There's also the option of New York, but then you still have the currency problem(as with London), and it's located in a very different timezone, which may make life difficult, but we're all fairly familiar with the US.

And of course, I need to find the best way to buy said stocks online, as I don't see myself visiting any of these exchanges in person (besides the ISE, I suppose).

Just going off google there's ameritrade, tradeking, optionshouse and Scottrade, but these are just names I have no idea how to assess. And further more, they're all US websites charging in dollars.

Would most of these online brokers work at one single exchange? And do they allow traders based outside their country? Should I use a full service broker, or just a basic one? And should I stick to using only 1 broker?
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Old 2012-02-09, 10:40   Link #11
SaintessHeart
NYAAAAHAAANNNNN~
 
 
Join Date: Nov 2007
Age: 26
From your answers, I am worried that you don't know what you are getting into.

1. Investment is a personal thing. Never pool unless you guys feel like buying a trust fund like UT or REIT.

2. To do it cheaply, I suggest that you use ThinkorSwim under TDAmeritrade. You can open from overseas, but you are at the mercy of the Fed.

3. If you want financial data, go MSN Money Central.

4.
Quote:
Of course, but I think I'm smart enough to track a few companies without devoting my whole life to it.
You will never be smart enough to track "a few companies". You have to track all the major companies in the industry you invest in because competition can kill your investment, especially when it comes to M&A. It is a bloody investment nightmare, sometimes when the company you invest might reject a takeover, but the big guy plays dirty by shooting their way through the backdoor with silenced weapons, and will never know about it until the news announce that the stock is delisted. PotashCorp is a potential incident, read about it and scare yourself.

What I have heard from a few old men is that to invest, you have to pool at least US$10k within a span of 3 years, with your base capital in the first year up to US$5k.

If you are worried about timezones, investing is no issue because you only have to check the thing once per week, and keep yourself updated on the news of your company every day. I am training more as a trader than an investor, so psychology side, ask TRL.

Start out with one industry. Ask yourself, which industry do you have the clearest knowledge of? And how much do you know about the industry with regards to stock price, purchases, acquisitions, relativity to global economic health? It can fool many people; I thought my best was in technology, then I realise that I know more about defence - which is one hell of a useless industry when there is no war or sabre-rattling.
__________________

When three puppygirls named after pastries are on top of each other, it is called Eclair a'la menthe et Biscotti aux fraises avec beaucoup de Ricotta sur le dessus.
Most of all, you have to be disciplined and you have to save, even if you hate our current financial system. Because if you don't save, then you're guaranteed to end up with nothing.
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Old 2012-02-09, 12:06   Link #12
TinyRedLeaf
. . .
 
 
Join Date: Apr 2006
Location: Singapore
Age: 40
Quote:
Originally Posted by SaintessHeart View Post
If you are worried about timezones, investing is no issue because you only have to check the thing once per week, and keep yourself updated on the news of your company every day. I am training more as a trader than an investor, so psychology side, ask TRL.
Err... understanding human psychology is more important for traders than investors, I would think. And the last thing I'd want to do is to hype my investment acumen. I've returned to the stock market about only two years ago, and I definitely do not spend a whole lot of time monitoring the market. For me, it's more about wealth management than making money. As long as my portfolio beats inflation, I'm happy. Of course, fat gains are always welcome, but I'm not counting on it.

Quote:
Originally Posted by DonQuigleone View Post
Is it possible to do this cheaply? We don't really have the money for substantial fees.
Why would it require fees? If you're still in university, just drop by the business department and consult a professor or two. Surely you'd have friends or relatives who invest as well?

Regarding trading platforms, there ought to be a number available. The really sophisticated ones would even provide dummy accounts to let you test the water with simulated trades, or at least that's what my trader friends tell me. I'm not particularly bothered, as I went back to the dormant online account I set up with a local broker over 10 years ago. The most important things to take note of, I feel, are the trading fees, which will differ (in Singapore, not by very much, as online trading has become highly competitive).

Quote:
Originally Posted by DonQuigleone View Post
Investment, trading seems more difficult, and frankly, I hear of people losing a lot more money on trading, then on investing.
My advice would be to get over your hang-up with the investment/trading dichotomy. Yes, it's true that it describes different approaches to building a portfolio but, frankly, neither approach is better or worse than the other. In fact, as I understand it, many people use a mix of both approaches, as do I.

It's natural to be overwhelmed by all the charts and numbers used by technical traders. I am too, so I avoid them. I do refer to price and index charts, however, to get a feel of how the market is moving in the very short term. I do this because I've set aside a part of my portfolio for short-term gambles. And to benefit from this, I find that you don't really need to pore over tons of data. It's just a matter of spotting when people are being irrationally fearful, dumping stocks that you understand to be fundamentally sound. Of course, SaintessHeart would disagree but, then, it's different for traders, especially if they are playing with margin accounts.

Quote:
Originally Posted by DonQuigleone View Post
Right now we're pretty low. My friends and I could probably pull together a few thousand. We're in a position where we'd be able to take losing all of it (We're not dealing with life savings here). However we're looking to go at this in the long term, and if decently succesful plow more money into it.
I strongly agree with SaintessHeart here. Pooling money for stock investment sounds like a really bad idea. I would suggest an entirely different kind of investment if you guys are really keen on pooling resources: Start a business! Simply because the legal procedures for doing so would offer so much more clarity as to how you guys should share your profits and losses.

As you said, you're ready to lose all your money. So why not? Running your own business would offer a whole different kind of intellectual satisfaction besides. So, even if it fails, you'd still gain in terms of experience.
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Old 2012-02-09, 13:02   Link #13
DonQuigleone
Knight Errant
 
 
Join Date: Dec 2007
Location: Dublin, Ireland
Age: 26
Quote:
Originally Posted by SaintessHeart View Post
From your answers, I am worried that you don't know what you are getting into.

1. Investment is a personal thing. Never pool unless you guys feel like buying a trust fund like UT or REIT.
I've known this guy for years, we're pretty much of the same mind when it comes to what companies we want to go into. Anyway, it's mostly out of convenience, both of us are interested in going into this, we might as well learn together and pool our resources.

Quote:
2. To do it cheaply, I suggest that you use ThinkorSwim under TDAmeritrade. You can open from overseas, but you are at the mercy of the Fed.

3. If you want financial data, go MSN Money Central.
Quote:
You will never be smart enough to track "a few companies". You have to track all the major companies in the industry you invest in because competition can kill your investment, especially when it comes to M&A. It is a bloody investment nightmare, sometimes when the company you invest might reject a takeover, but the big guy plays dirty by shooting their way through the backdoor with silenced weapons, and will never know about it until the news announce that the stock is delisted. PotashCorp is a potential incident, read about it and scare yourself.
Certainly something to bear in mind, but, while you'd need to know the company in which you have stocks inside and out, you would not need to know the same level of detail for it's competitors (other then a general awareness of their existence).

Quote:
What I have heard from a few old men is that to invest, you have to pool at least US$10k within a span of 3 years, with your base capital in the first year up to US$5k.
That feels like a number we can manage. While I have very limited money right now, my friend has saved a lot. I'd say within 3 years we could manage to have a 20k investment pool.

Quote:
Originally Posted by TinyRedLeaf View Post
Why would it require fees? If you're still in university, just drop by the business department and consult a professor or two. Surely you'd have friends or relatives who invest as well?
I'm more thinking transaction fees. IE every single time you buy or sell a stock you always have to pay a fee. From my reading, that can kill your margins if you're not careful.

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My advice would be to get over your hang-up with the investment/trading dichotomy. Yes, it's true that it describes different approaches to building a portfolio but, frankly, neither approach is better or worse than the other. In fact, as I understand it, many people use a mix of both approaches, as do I.
My main point is that I wouldn't buy with short term trades in mind. But, for every share I have, I'll probably keep a price in mind, and have an order to sell it if the share price goes high (IE I think it's overpriced), and be watching to buy it at a low price. Calculating that price is a whole other ballgame though...

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It's natural to be overwhelmed by all the charts and numbers used by technical traders. I am too, so I avoid them. I do refer to price and index charts, however, to get a feel of how the market is moving in the very short term. I do this because I've set aside a part of my portfolio for short-term gambles. And to benefit from this, I find that you don't really need to pore over tons of data. It's just a matter of spotting when people are being irrationally fearful, dumping stocks that you understand to be fundamentally sound. Of course, SaintessHeart would disagree but, then, it's different for traders, especially if they are playing with margin accounts.
Yeah, my own view is to invest in stuff which seem to have sound balance sheet, and hope to catch the market when it's undervaluing it. I'm not entirely against a bit of short term dealing, but I don't want to get into margin trading.

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I strongly agree with SaintessHeart here. Pooling money for stock investment sounds like a really bad idea. I would suggest an entirely different kind of investment if you guys are really keen on pooling resources: Start a business! Simply because the legal procedures for doing so would offer so much more clarity as to how you guys should share your profits and losses.

As you said, you're ready to lose all your money. So why not? Running your own business would offer a whole different kind of intellectual satisfaction besides. So, even if it fails, you'd still gain in terms of experience.
Here's the thing:
1. Starting a business requires a whole other level of time commitment, and risk.
2. We don't have the kind of capital you need to start a business.
3. We're working decent full time jobs, but earning an excess that we have nothing to put into (the banks are offering non-existent interest rates).
4. We've got no ideas for starting any kind of business.
5. Ireland is not the place to start a new business, demand is poor, and the market for pretty much everything is saturated.

Investment is attractive because me and my partner are long time friends, who pretty much think the same, are interested in the exact same type of investment, and both are fairly knowledgeable about these things. Given that you need to put in a fair amount of effort to learn about what to invest in, it seems like a good idea.

If the people involved know each other well enough, and share a similiar mindset, I don't see the issue. And the potential benefit of information sharing and asset pooling is pretty compelling.

As for the legal side of things, when we're operating at such a small scale, I doubt we'll have any disputes. Once we're more experienced, and if we choose to continue the arrangement, we'd set up some kind of simple legal contract.
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Old 2012-02-09, 13:32   Link #14
SaintessHeart
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Quote:
Originally Posted by TinyRedLeaf View Post
Of course, SaintessHeart would disagree but, then, it's different for traders, especially if they are playing with margin accounts.
It depends on how much leverage and gearing a trader has. Since we have high turnovers on our accounts, most of us set stop losses to avoid being assigned or margin called. Those two are a trader's worst nightmares, especially assignment in futures.....fancy having a whole van of frozen pork bellies outside your house? I think not.

But I am still paper trading. US$5k means I have to be a total hikkikomori after work everyday, but TOSSG is being a bitch by locking me out of my trading account.

Quote:
I strongly agree with SaintessHeart here. Pooling money for stock investment sounds like a really bad idea. I would suggest an entirely different kind of investment if you guys are really keen on pooling resources: Start a business! Simply because the legal procedures for doing so would offer so much more clarity as to how you guys should share your profits and losses.
It doesn't sound like a bad idea, it is a bad idea. Everyone has a different purview and opinion, so how are they going to decide on the stock to buy, and most importantly, when to sell it?

Quote:
As you said, you're ready to lose all your money. So why not? Running your own business would offer a whole different kind of intellectual satisfaction besides. So, even if it fails, you'd still gain in terms of experience.
IMO, setting up a business is much more difficult than trading. You have to know the people in your area well.

Of course, the simple lemonade cart/stand would work on a hot sunny day, switching to a warm Irish coffee stand on winter. Flavours and differentiation, customer satisfaction....it is enough to make you puke (pun unintended).

That could work in a small neighbourhood or town, but that is tough work to wheel a cart around.
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Most of all, you have to be disciplined and you have to save, even if you hate our current financial system. Because if you don't save, then you're guaranteed to end up with nothing.

Last edited by SaintessHeart; 2012-02-09 at 13:47.
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Old 2012-02-09, 16:58   Link #15
qwertyuiopz
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The riskier the investment the better rewards. Investing in big companies like Apple is worthless but you probably already know this. I don't know how it is in Ireland but here in Canada the business cycle is starting to slope up again. Watching dragon's den or shark tank is good too lawl
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Old 2012-02-09, 17:48   Link #16
DonQuigleone
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Quote:
Originally Posted by SaintessHeart View Post
It doesn't sound like a bad idea, it is a bad idea. Everyone has a different purview and opinion, so how are they going to decide on the stock to buy, and most importantly, when to sell it?
Mathematics? The "group" would agree on a set way to value companies, then it becomes a matter of comparing the market price to your own estimation. You agree on a particular value at which to buy the stock, and a value at which to sell it, then place the order.

Now for faster paced day trading, this approach wouldn't work (it requires too much deliberation), but I could see it working very well if your not doing transactions more then once every few weeks.

Likewise, you'd only do it in a small group. As long as everyone in the group agrees to follow the same general approach (EG value investing vs growth investing etc.) then things should work well. The group has a regular meeting, at which the portfolio's performance is assessed. Likewise, every member of the group would come to the meeting with a set of proposed stocks to buy. During the meeting, the group examines the stocks, and the companies behind them, and then they all take a vote at the end on what to invest in. For a small group, you could easily use a principle of unanimity.

There's actually a word and legal category for this kind of investment fund: an investment club. (here's what the SEC says) I think it's a pretty neat way to do things, particularly if the members treat the club as an educational exercise.

It also drastically cuts down on work. I can make a much more complete portfolio, because me and my friend can check out different companies seperately, and then come together and analyse them.
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Old 2012-02-09, 19:36   Link #17
Xellos-_^
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Originally Posted by SaintessHeart View Post
Buy an Endowment policy with a Single Premium payment. Xellos can help you out with that.
different country not much help here.

i will just say this, if you and your friends don't know much about picking stocks. Don't bother because it would be just a waste of money.

buy mutual funds instead. in the states we have different types of IRA (the investment type) you can purchase with different tax implications. if you are not sure what is available in Ireland, go to your local bank and ask for some investment brouchers.
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Old 2012-02-10, 01:57   Link #18
SaintessHeart
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Originally Posted by DonQuigleone View Post
Mathematics? The "group" would agree on a set way to value companies, then it becomes a matter of comparing the market price to your own estimation. You agree on a particular value at which to buy the stock, and a value at which to sell it, then place the order.
Problem is, you will never agree. And when the stock loses money, the blame game starts.

Trust me, I hopped on the STI back then with a group of friends, and got one of our fathers to drop the money in. It hit subprime somewhere in June and the blame game starts - until we got reprimanded by the old man that we shouldn't be doing that because our opinions are different.

There is no compromise in trading or investments. It is a personal thing and personal idea, and winning or losing means you have nobody to blame but yourself. Builds character to more successful trades and investments.
__________________

When three puppygirls named after pastries are on top of each other, it is called Eclair a'la menthe et Biscotti aux fraises avec beaucoup de Ricotta sur le dessus.
Most of all, you have to be disciplined and you have to save, even if you hate our current financial system. Because if you don't save, then you're guaranteed to end up with nothing.
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Old 2012-02-10, 07:15   Link #19
DonQuigleone
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Originally Posted by SaintessHeart View Post
Problem is, you will never agree. And when the stock loses money, the blame game starts.
If all the parties involved agreed to it, then how can their really be a blame game? Now if I was investing my friends money as a manager, then there might be a blame game, but because all parties are taking the decision together, there can't reallly be that cycle.

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There is no compromise in trading or investments. It is a personal thing and personal idea, and winning or losing means you have nobody to blame but yourself. Builds character to more successful trades and investments.
I disagree. The success of a company, and hence it's stocks, is first and foremost a question of mathematics. That's not to say there's no qualitative aspects (for instance, you need to bear in mind management etc.), however, those qualitative aspects are all fairly based on reason.

So long as the club bears that in mind, and doesn't make any investments on a whim, and argues out everything based on reason, then superior investments can be made.

Further to that, if all the parties involved, before hand, have an agreed set of criteria that they agree constitute a "desirable" company, I don't see how it would be impossible to agree.

Let's say that before hand all parties have agreed to take a "value investing" approach. All parties have agreed on the algorithm via which they'll mathematically value a company, their margin of safety, and so when assessing stock they can all agree on what price it's worth, and what price they will buy, and also, at what price it will be worth selling.

In addition to that, they will have agreed beforehand what qualitative aspects (EG management) they find attractive.

So, when they meet up, each person brings a set of companies they wish to invest in, and each person presents them to the rest of the group. After this, the merits can be debated in a reasonable fashion, with the pros and cons of each being determined.

Once this is done, each member can take an informed decision, and that decision will have been stronger for going through the rigorous debating process. Furthermore, each member will have learned more about selecting quality stock by hearing each others views, and learning from them, and, because everyone is looking for stocks, it's possible for the group to have much wider diversification then a single person would.

It's also a question of maturity, if everyone is mature, they'll understand that investing is an inherently risky, and they'll know that sometimes there investments will flop, and because it was a mutual decision, it was as much their own failure as anyone elses. If a person can't approach investing with a cool head, they probably shouldn't be doing it, or at least, not in a group setting.

It's like any team endeavour. Teams often fail, they'll lose the big game, or whatever. In a bad team, a cycle of recrimination and blame will start (you didn't pass the ball correctly, you kept missing your goal opportunities etc.). In a good team, they'll talk about how they can improve for the next game. (I should have marked X player more, we should have done more passing etc.). So it goes for sport, so it goes for investing.

And besides, there's thousands of actual real life investment clubs out there. This is just in my own county (dublin). If it didn't work, it wouldn't be so common.

Also, isn't it very similiar to how a lot of mutual funds operate? A lot of mutual funds don't operate on just one investment manager calling all the shots, a lot of them have boards, which all investment decisions have to pass through.

So long as the members of the group are all mature, sound and intelligent, I think group investing has the potential for superior decisions and investments to be made.
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Old 2012-02-10, 08:20   Link #20
MeoTwister5
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Join Date: Jul 2004
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@Don

Dude I think you're GROSSLY underestimating the transformational effects of human greed. I do believe that's what people thought in the past, and look what the global economy's become.

Thank god I'm in Medicine.
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