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that is probably not the way to start unless you are trading stocks like MTS , QBE , BPT , ILU , big but volatile companies and get jammed at a fairly high entry ( compared to the current price )
How many people get above average returns over the long term?
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We might suffer from survivor bias with anyone below average / losing money having given up.
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since you already trade look for long-cycle trading stocks , say QBE , SUN , maybe even BHP ( if you can get them with a '3' handle or better )
Dona Ferentes
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not claiming any secret, but starting has to occur somewhere. And then, if market returns are, on average, 9 per cent a year, and add the secret sauce of compounding, you can get to a good place without too much effort;
A SMSF with some initial rollovers plus a few transfers in, at beginning mainly, then make contributions and just enjoy the ride .
...and achieved
- without ever holding an ETF,
- everything listed, a mix of LICs and directly held stocks,
- a high growth allocation of assets,
- some buying and selling but not much,
- bonds are IAB / ILB
- no property.
and now a minimum pension of 90k. Plus shares in my own name.
.
.
my two sestercii worth
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now depending on which shares you select participating in the DRP ( if they have one ) can be a boost as well as the company pays you in extra shares without charging any brokerage
www.investopedia.com
www.investopedia.com
( Australia just calls it DRP )
both articles are written for US investors but easy enough to apply the theories to Australian shares
please note DRP is NOT always the best choice , but often it is especially if franking credits help you ( more shares = more franking credits )
Compounding Interest: Formulas and Examples
Compounding Interest: Formulas and Examples
Compounding is the process in which an asset’s earnings, from either capital gains or interest, are reinvested to generate additional earnings.
What Is a DRIP Investment, How It Works, Benefits
What Is a DRIP Investment, How It Works, Benefits
DRIP is an acronym for "dividend reinvestment plan", but the word also describes the way the plan works as investments grow a little bit at a time.
( Australia just calls it DRP )
both articles are written for US investors but easy enough to apply the theories to Australian shares
please note DRP is NOT always the best choice , but often it is especially if franking credits help you ( more shares = more franking credits )
Dona Ferentes
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not claiming any secret ... trick would have to be finding a stock that has growth...
.
For example, $10,000 to $20,000 over six years is only a $10,000 gain. But 18 years later the same doubling in value will generate an $80,000 gain and six years after that a $160,000 gain – all from the same initial investment of $10,000.
Using the mathematical shortcut “rule of 72”, by dividing 72 by an annual growth rate, anybody can work out how long it takes to double an investment.
For example, 72 divided by 12 equals six years. Whereas if you only generate 4 per cent a year, it takes 18 years to double your money.
To double their money every six years, an investor would need to earn 12 per cent every year.
.
So, get started
.
Rule of 72
The benefit of compounding investment returns to create wealth by holding long-term winners is best understood in the sense that if an investment doubles every six years, an investor’s gains become exponentially greater.For example, $10,000 to $20,000 over six years is only a $10,000 gain. But 18 years later the same doubling in value will generate an $80,000 gain and six years after that a $160,000 gain – all from the same initial investment of $10,000.
Using the mathematical shortcut “rule of 72”, by dividing 72 by an annual growth rate, anybody can work out how long it takes to double an investment.
For example, 72 divided by 12 equals six years. Whereas if you only generate 4 per cent a year, it takes 18 years to double your money.
To double their money every six years, an investor would need to earn 12 per cent every year.
.
So, get started
Nice summation @Dona Ferentes.
Of course, as implied in your post, the compounding isn't linear. Nevertheless, compounding still works even with small initial amounts. It's a matter of time as, under a DRP, the amounts received will not be large nor will the number of additional shares allocated. However, give it a couple of decades and young person starting ats say 20 years of age, will notice those initial allocation of shares maybe in single figures but now would be in three figures or more if they had did the occasional buy as well.
I know many are against DRP's as the view is it's complicated yet, in my view, it's no more complicated than having two or three buys during the year.
I think the biggest issue many new investors face is looking at the bloody prices. Blissful ignorance and not looking has an advantage in that regard. One of my children, who is in the Generation Y demographic, probably has an income close to or above the married rate age pension from their investments if I understand our discussions clearly (I don't enquire too closely as I don't believe in hovering over my children's lives.)
Of course, as implied in your post, the compounding isn't linear. Nevertheless, compounding still works even with small initial amounts. It's a matter of time as, under a DRP, the amounts received will not be large nor will the number of additional shares allocated. However, give it a couple of decades and young person starting ats say 20 years of age, will notice those initial allocation of shares maybe in single figures but now would be in three figures or more if they had did the occasional buy as well.
I know many are against DRP's as the view is it's complicated yet, in my view, it's no more complicated than having two or three buys during the year.
I think the biggest issue many new investors face is looking at the bloody prices. Blissful ignorance and not looking has an advantage in that regard. One of my children, who is in the Generation Y demographic, probably has an income close to or above the married rate age pension from their investments if I understand our discussions clearly (I don't enquire too closely as I don't believe in hovering over my children's lives.)
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not as easy now ( given the probable acceleration of take-overs and company failures coming ) as it was in 2011
not only does your selection have to grow but also SURVIVE ( some of my better choices have been snapped up by a predator )
but still possible , but you will need luck ( not to be taken out ) on your side for your 'acorn' to grow into that tree
one alternative ( still no guarantee of success ) is to look for businesses considering demergers like WOW did divesting EDV and what is now RGN ,ILU shedding DRR and SRX is another example
That's a good solution/investment....I think I've missed the boats. Have you anything now that you think will be of benefit for late comers like myself, Dona? Will appreciate that.
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MAYBE
the bears think an economy-shattering KA-BOOM ( or worse ) is possible
take 2020 as a blue-print to compare with 2011 , SOME worthwhile shares went below 2011 levels ( and some didn't )
however newcomers should go back to previous crashes even back to the 1920's to see how markets and governments reacted ( they MIGHT apply the same techniques next time ) and it will give you some strategies to keep on the shelf until useful
for example BHP went down to $14.80 in 2016 and the S32 and WDS demergers were still in the future at the time
benefit for late-comers ... how about understanding your targeted companies from different angles take for example APE , most see it as a retailer selling cars but the major shareholder claims he is a frustrated property developer ( many of those car-lots are free-hold property), while some see it as a financial services company packing loans , insurance and after market maintenance contracts
the ongoing discussion on what WES plans for Office-Works has potential , i am thinking a demerger ( like the COL one ) OR an independent REIT ( like they did with BWP ) something to think on if the WES share price halves during a panic
i suggest having a plan just in case a new boat comes by ( and i have no idea when that will be , i have been waiting for the bl**dy crash since 2013 )
Dona Ferentes
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well, @eskys , you're going to get that compounding one of two ways
1. Buy growth stocks, that show share price appreciation
2. Buy value sticks that pay dividends, which reinvested deliver share number appreciation
3. The sweet spot, a combination of 1 and 2. i.e. ten baggers that pay regular and increasing dividends .
Are there any truisms that can apply? If it's all about risk and reward, then consider the dynamics in:
a) diversification
b) Outsourcing/ using a manager. It can enhance returns but may not. An ETF will return its index. Each has a cost, with the more passive likely to be lower than active management
c) smaller companies have better prospects to get #3, with attendant failure/ slippage to irrelevance
d) newer companies have better prospects to get #3, with attendant failure/ slippage to irrelevance.
Note that, in Australia, most "return" metrics are optimised, by including franking. Any taxation will erode those numbers.
Here's one of my holdings, a LIC; according to the Annual Report, I'm now in the top 241 of holders
1. Buy growth stocks, that show share price appreciation
2. Buy value sticks that pay dividends, which reinvested deliver share number appreciation
3. The sweet spot, a combination of 1 and 2. i.e. ten baggers that pay regular and increasing dividends .
Are there any truisms that can apply? If it's all about risk and reward, then consider the dynamics in:
a) diversification
b) Outsourcing/ using a manager. It can enhance returns but may not. An ETF will return its index. Each has a cost, with the more passive likely to be lower than active management
c) smaller companies have better prospects to get #3, with attendant failure/ slippage to irrelevance
d) newer companies have better prospects to get #3, with attendant failure/ slippage to irrelevance.
Note that, in Australia, most "return" metrics are optimised, by including franking. Any taxation will erode those numbers.
Here's one of my holdings, a LIC; according to the Annual Report, I'm now in the top 241 of holders
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i prefer methods 2 and 3 , but do not completely avoid method 1 ( but am very careful when i do )
I like all 3, thanks for sharing your thoughts and strategy, Dona. All these years, I've been chasing real estate. Another email now saying we need to fix the heating and air conditioning...noisy, the trades person said. How would we know if we don't send our our trusted plumber 2 hours away? Problems on all front....not just the stock market....I'm grey prematurely!
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my hair chose suicide before the grey really got started
but owning property directly is getting more complicated ( as an investment ) that's why i sold and moved to Hicksville , some future income but more self-sufficiency
getting GOOD tradies is becoming very difficult
but owning property directly is getting more complicated ( as an investment ) that's why i sold and moved to Hicksville , some future income but more self-sufficiency
getting GOOD tradies is becoming very difficult
And if you're miles away, tradies know you're not local and that's where the rip offs come in....cost $20,000 to have that unit replaced on the roof with a crane, now saying it's gonna cost $1,859. Renovations should be over by the 2nd Oct...sunset date.
Think I should put it into some quality stocks with real business paying divs when the time is right. Market not doing badly this morning....good luck everyone...back later.
Think I should put it into some quality stocks with real business paying divs when the time is right. Market not doing badly this morning....good luck everyone...back later.
tech/a
No Ordinary Duck
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I also do a great deal of Investment in Property.
The compounding and leverage available in Property with very low risk is unmatched in my view
when compared to other investments. Particularly if like myself you started in 1995.
Your plumber's bill is a mere drop of a cent or so in one of your stock holdings. Which is in most
cases nullified by your capital appreciation on your property.
The big benefit of Investing in Stock is the ability to liquidate any asset in minutes!
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NOW you are scaring me ( roof repairs ) it started with 'a roof leak' , was fixed to create a vent-pipe leak ( for the dunny )that resulted in a fault in the solar-panels , replacing the solar-panels triggered an inverter failure ...
so after replacing the solar-panels ( incompatible to the new inverter ) we await the next heavy rain to test out the roof repairs heck it is a tile roof what can go wrong ??
some days i actually feel sorry for the insurer ( but not often considering they provide the contractors )
Couldn't have written that better, myself.
I take it you're younger, tech. We started in our mid 20s, young and green but with plenty of energy and enthusiasm....for my part, never thought the sky would fall down, and luckily, it didn't.
Second paragraph, spot on. Manager rang, said they are having this one over us...was serviced last year by a different mob, nothing said. And, she said, why are they suddenly talking about the air conditioner when the unit has nothing to do with the renovation....it's a case of mates looking after mates, it's done everywhere. Just look at the threads yesterday and today....happens all the time........so I leave it to our manager's discretion....she's young, but learning fast (in a different profession prior to this)
Divs, if it's insurance, you needn't panic....just tell the insurer you aren't happy if they don't do it right.
We had a leaking roof once....whoever installed the roof had the pins or screws on the valley of the corrugated roof...have to wonder where some tradies come from.
Don't you like this market? Going nowhere.....so long as it holds a pattern, and we follow it...low in the mornings, work it's way up, can't be bad, can it?
