Money/stockmarket For Dummies

[Firefan]

nev; yes diversification across asset classes and currencies is key.

simcity; yes a broker or fund manager churning your account sucks too, which is why one should buy the funds ONESELF and preferably no-load INDEX funds with very little trading needed inside the fund.

9 out of 10 managed funds underperform the indey they are in.

Any load just makes that even worse.

Cheers!

[Butterfly]

Sorry but there is NO proof that any fund with a front-end load (or an entry charge, a bid/offer spread or whatever they decide to call it) perform better than funds that do NOT have that. And since there are TONS of funds without any charge... why pay it? At Ameritrade, Etrade, lowtrades.com Etc. you can pick your fund either at no carge (no transaction fee = NTF) or at say 10-25$ in commission nomatter what the buying amount is.

Front loads STINKS.

Cheers!

Actually there has been evidence that no-load funds tend to outperform front-end or back-end ones

It actually makes sense since you already have a 5% advantage to start with

So why people keep paying for it ?

Most open-ended funds have different share class (different managment fees and broker commissions) which means you are buying the exact SAME fund under different commission schedule. Amazing.

If you want to speculate with funds, there are also closed-end funds. Those are quite fun to play with but a little bit risky. Avoid the Premium over NAV since they will revert to their NAV sooner or later, even when NAV has been going up constantly for a while.

Edited August 14, 2005 by Butterfly

[Firefan]

Butterfly; good comments - fully agree. It often amazes me how some really smart people do not care at all about how the fruit of their labour (savings/investments) are managed.

The closed end funds are some funny animals, and even really smart people have a hard time explaining why they suddenly sell at a premium or a discount. Things like "fashion trends" and similar arguments are being used.

I have been doing as you say; bought at high discount and sold at lower discount or maybe even at premium.

Alternative to funds, is to buy the stocks oneself. That saves management fees (but increases trading commissions) and with 10-20 stocks one would generally be able to copy the average fund (as most are top heavy in holdings).

Cheers!

[Butterfly]

Butterfly; good comments - fully agree. It often amazes me how some really smart people do not care at all about how the fruit of their labour (savings/investments) are managed.

The closed end funds are some funny animals, and even really smart people have a hard time explaining why they suddenly sell at a premium or a discount. Things like "fashion trends" and similar arguments are being used.

I have been doing as you say; bought at high discount and sold at lower discount or maybe even at premium.

Alternative to funds, is to buy the stocks oneself. That saves management fees (but increases trading commissions) and with 10-20 stocks one would generally be able to copy the average fund (as most are top heavy in holdings).

Cheers!

<{POST_SNAPBACK}>

I used to short Premium Closed End Funds. Can you believe that I shorted Thai Equity fund 1 week prior to the Asian Meltdown in 1997 ?

That thing went from 13 or 15 to 6 or 7 in less than 2 months. That was a nice 100% gain there. And on the top of that you would get the dividends

Yes Premium CEF is a "fashion trend" and I used to have a great strategy to "predict" moves in those discount and premium. The "stragegy" has faded though, and I can't predict anything on them now. Market is too efficient, above all when most report NAV daily instead of weekly like it used to be. Also, most have been liquidated now, sued by angry investors. Only a few left. The country funds are the most fun. But like I said very tricky.

Edited August 14, 2005 by Butterfly

[ray23]

Butterfly; good comments - fully agree. It often amazes me how some really smart people do not care at all about how the fruit of their labour (savings/investments) are managed.

The closed end funds are some funny animals, and even really smart people have a hard time explaining why they suddenly sell at a premium or a discount. Things like "fashion trends" and similar arguments are being used.

I have been doing as you say; bought at high discount and sold at lower discount or maybe even at premium.

Alternative to funds, is to buy the stocks oneself. That saves management fees (but increases trading commissions) and with 10-20 stocks one would generally be able to copy the average fund (as most are top heavy in holdings).

Cheers!

<{POST_SNAPBACK}>

Sorry guys the original dummy here nothing to offer just wanted to follow the thread

I used to short Premium Closed End Funds. Can you believe that I shorted Thai Equity fund 1 week prior to the Asian Meltdown in 1997 ?

That thing went from 13 or 15 to 6 or 7 in less than 2 months. That was a nice 100% gain there. And on the top of that you would get the dividends

Yes Premium CEF is a "fashion trend" and I used to have a great strategy to "predict" moves in those discount and premium. The "stragegy" has faded though, and I can't predict anything on them now. Market is too efficient, above all when most report NAV daily instead of weekly like it used to be. Also, most have been liquidated now, sued by angry investors. Only a few left. The country funds are the most fun. But like I said very tricky.

<{POST_SNAPBACK}>

[KhunPadThai]

h90,

The markets are riskier than they look. Beginners are often both too confident of their own abilities and too optimistic about markets. You can identify the less sophisticated advice-givers because they are the ones who boast about high returns, rather than reduced risk. In my opinion the best approach to take is to read widely on the subject and to develop experience and a strategy over time. This is the course I am taking. So far my insights amount to:

1. Avoid management fees as much as possible. Assset managers are not "professionals" from whose competence a minimum level of performance can reasonably be expected. If they are good it is because of talent, not skill, and most aren't. Fees may look small, but over time they compound viciously.

2. All markets are cyclical, but this is not obvious when one first starts paying attention to them. Figuring out where we are in the current cycle and whether now is a good time to enter, is usually crucial to making money. During the 90's in the US, the strong uptrend in the stock market made this less true, but that market is different now.

3. If you can get a positive real rate of return without much risk, even if small, then it makes sense to park your money there for a while until you can determine which risks are worth taking. Haste is never your friend. In the US, Treasury Bills now return a real rate of return of about 1/2% and this is increasing. Since they are short term and backed by the govt they don't have either credit or interest rate risk, although they do have currency risk, it must be said.

Good luck,

Khun Pad Thai

[Firefan]

Very good advise KPT!

Don't rush, read a few books, reduce costs and only gamble with money you can accept to lose.

Butterfly; nice call! (you lucky bastard! ) - only one thing; if you go short you will normally have to PAY the dividends - not receive them.

Cheers!

h90,

The markets are riskier than they look.  Beginners are often both too confident of their own abilities and too optimistic about markets.  You can identify the less sophisticated advice-givers because they are the ones who boast about high returns, rather than reduced risk.  In my opinion the best approach to take is to read widely on the subject and to develop experience and a strategy over time.  This is the course I am taking.  So far my insights amount to:

1.  Avoid management fees as much as possible.  Assset managers are not "professionals" from whose competence a minimum level of performance can reasonably be expected.  If they are good it is because of talent, not skill, and most aren't.  Fees may look small, but over time they compound viciously.

2.  All markets are cyclical, but this is not obvious when one first starts paying attention to them.  Figuring out where we are in the current cycle and whether now is a good time to enter, is usually crucial to making money.  During the 90's in the US, the strong uptrend in the stock market made this less true, but that market is different now. 

3.  If you can get a positive real rate of return without much risk, even if small, then it makes sense to park your money there for a while until you can determine which risks are worth taking.  Haste is never your friend.  In the US, Treasury Bills now return a real rate of return of about 1/2% and this is increasing.  Since they are short term and backed by the govt they don't have either credit or interest rate risk, although they do have currency risk, it must be said. 

Good luck,

Khun Pad Thai

[Butterfly]

Butterfly; nice call!    (you lucky bastard!  ) - only one thing; if you go short you will normally have to PAY the dividends - not receive them.

Cheers!

Only when they go ex during your holding period, which was not the case here

so I got both (because I went long when it reached $6)

However I had to pay some fees for "borrowing" the securities and I think the dividend was "trimmed" a little bit but not that much. I am not sure what was the logic behind the dividend reduction because I clearly remember that the rules was only when it gets ex you have to pay the dividend. Maybe my broker got a cut or maybe it was withholding tax. The dividend was a nice 10% btw

Edit: It was withholding tax after I got long on the thing

Shorting CEF is no longer possible. Right after that, NASDAQ ruled we couldn't short some of these CEF or anything below $5 or some other silly rules. Can't remember really.

Edited August 15, 2005 by Butterfly

[The Skipper]

I have a 20-30 K US$ which I can invest long term. Actually I don't want to trade every day and I don't want much of a risk and I have no idea about such things.

I think of let the money stay 5 or 10 years and than happily finding out that it is more than before.....

I read about bonds, if I can wait and they have a nice rating than there shouldn't be much of a risk, or?

I read that there are also funds (is that right in english?) which contain a basket of stocks and some even guarantee that you get 100 % or 80 % of your money back. But there is a hugh amount of offers, I guess I need to read 30 years and still don't know anything about it.

Has anyone a clue on how to start that?

h90

<{POST_SNAPBACK}>

Depends on how old you are, what other investments you have and risk tolerance.

If you are 20 years old, $30k earning 10% annually will be about a million when you are 55 years old.

Be sure to max out any tax deffered retirement accounts like an IRA. This money can be put into Stocks, Funds, Bonds , Money Markets etc.

Keeping it in the Bank CDs or Money Market will not do well if inflation keeps up to historical averages. (3-6 months pay should be in the bank for emergency.)

Learning, avoiding mistakes and low expenses are key.

Good investing is boring, not exciting.

If you feel like trading, take 5% and have some fun.

I don't recommend individual stocks or managed mutual funds.

Some stocks and funds will perform better than the market sometimes. How can you pick these ?

You can't. Nobody can with any regularity.

During the last stock market boom, 80% of the funds managed by professionals failed to meet the average gain of the S&P500.

If you have more than 5 years, here is what I would do.

Open an investment account at Charles Schwab or an online broker.

Divide your lump sum into 12 equal amounts and put a portion into the below fund every month.

Buy the S&P 500 INDEX FUND thru Vanguard (very low expenses).

You will own a basket of 500 diversified stocks.

Get a little exotic and put 20% in their International Index.

Stock brokers will discourage you from this approach, they are the enemy.

[Taggart]

>>>Buy the S&P 500 INDEX FUND thru Vanguard (very low expenses).<<<

H90 is not an American citizen nor does he live in the U.S.A, so he won't be able to buy a fund through Vanguard. He could buy index ETFs (exchange traded funds) on one of the U.S. stock exchanges, but that would be his only option in America. One problem with that is he would have to pay commissions, and he doesn't exactly have a huge lump sum to invest.

>>>Buy the S&P 500 INDEX FUND thru Vanguard (very low expenses).

You will own a basket of 500 diversified stocks.

Get a little exotic and put 20% in their International Index.<<<

H90 is from Europe, so I can't see this person, putting only 20% in international. Most investors are home biased when it comes to investing. If H90 can find no-load, low cost index mutual funds somewhere in Europe, that would let him buy and sell in small amounts without penalty, then that's the route I would take. This way the portfolio could be rebalanced, say on a yearly basis, without penalty.

[zaz]

Bluuuurrrgghhh....oh excuse me all this talk about investing is making me throw up!! It brings back some painful memories of not too long ago when I decided to jump on the dot com revolution of buying IT stocks/shares...oh dear..oh dear. Well the thing is I like rollercoasters, especially when you're right at the very top just before you come speeding down down down....and before you know it it's shaken your flippin wits out!! Well that's what happened with my stocks, I ended up buying them right at the top and just sat there watching them go down down down thinking "they can't go any further surely..." but they did!!!

I lost...a lot of money. I even started to buy/sell shares on short term trades and at it's peak I was buying and selling £30k per month - it was getting too addictive and although I still lost money I was fortunate enough to stop myself, unlike some people I know who carried on greedily and lost absolutley everything.

The trick with trading is to know when to cut your losses or when to take your profits - be desciplined, draw a line and don't cross it, set yourself a profit level or a loss level and stick to it.

Me? I said screw this I can think of better ways of throwing away money so since then I've been driving BMWs and fast motorbikes!!! Money? Investments? Naaaah bllx to it, it's made for spending and enjoying!!! If I have nothing to show for it tomorrow then at least I smiled yesterday!!

[Taggart]

>>>I decided to jump on the dot com revolution of buying IT stocks/shares...<<<

Buying into the hot sector of the moment isn't going to make any investor rich. In fact it will more than likely do the opposite. The trick is to diversify, diversify, and the cheapest, easiest way to diversify is by using a selection of index funds. Just don't expect instant results, but over time a balanced portfolio, will do better than most pros, let alone the amateurs.

As The Skipper said in his post earlier:

"During the last stock market boom, 80% of the funds managed by professionals failed to meet the average gain of the S&P500."

[Firefan]

I am also not a US national but I have a US online broker account which any foreigner can open and with $5 or 10 per trade ETFs will not get expensive in commissions for a buy and hold person.

I can even buy US funds Incl. Vanguard through the broker ($18/trade). Not all US brokers will allow foreigners to do that though - but ETFs would be fine.

I hold about 40% US market (Incl. microcaps/value Etc. as getting stuck on SP500 only is silly) and the rest international.

I also lost money in 2000-2002 - and learned some (expensive ) lessons there leading me to a globally and asset class wise well diversified low cost portfolio. I STILL have my trading money to ensure I do not do stupid things with the main portfolio.

Cheers!

>>>Buy the S&P 500 INDEX FUND thru Vanguard (very low expenses).<<<

H90 is not an American citizen nor does he live in the U.S.A, so he won't be able to buy a fund through Vanguard.  He could buy index ETFs (exchange traded funds) on one of the U.S. stock exchanges, but that would be his only option in America.  One problem with that is he would have to pay commissions, and he doesn't exactly have a huge lump sum to invest.

>>>Buy the S&P 500 INDEX FUND thru Vanguard (very low expenses).

You will own a basket of 500 diversified stocks.

Get a little exotic and put 20% in their International Index.<<<

H90 is from Europe, so I can't see this person, putting only 20% in international.  Most investors are home biased when it comes to investing.  If H90 can find  no-load, low cost index mutual funds somewhere in Europe, that would let him buy and sell in small amounts without penalty, then that's the route I would take.  This way the portfolio could be rebalanced, say on a yearly basis, without penalty.

[Taggart]

>>>I hold about 40% US market (Incl. microcaps/value Etc. as getting stuck on SP500 only is silly)<<<

Firefan:

Another alternative, H90 could buy a Total Market fund like the Wilshire 5000 index which includes just about every stock in the U.S., large, small, growth, value. The long term performance of the Wilshire 5000 isn't much different than that from the S&P 500. The rest of his equity portion should be either in an EAFE (Europe, Australia, and Far East) fund, or split between a Europe and a Pacific stock index fund. If he can buy Vanguard like you say, then he could buy a Vanguard Total International fund to make it easy.

H90 doesn't want a lot of risk, so should consider a 40% to 50% bond allocation, probably in a low MER (management expense ratio) bond fund since there's not a lot of money to buy an assortment of individual bonds for this allocation. If H90 can also find a low MER bond fund containing inflation-indexed bonds I would also suggest he add that to the mix.

[CMguy]

HP

Have you considered real estate. Depending on which market you are buying in you can find many properties, that with a 20-30k down payment will cash flow as well as give tax benifits down the road. And of course you will reap the benefits of increased equity as someone else covers the mortgage .

Landlords, like all other men, love to reap where they never sowed.

- Karl Marx

[thaistick]

It definitely depends on which market and area in regards to real estate.A $100,000 property should get $1000/month in rent normally,but in too many frothy areas of the US,it's a $400,000 property that gets $1000/month.After taxes,

maintenance,etc.,one would get a negative cash flow.With all the speculation and auction-style bidding frenzies for properties not even built yet plus the interest only and adjustable rate debt piling up the bubbles will pop big time.Stay in the vulture position with cash in hand to swoop in and buy at bargain basement prices after the millions of foreclosures and bankruptcies.Hopefully every US bank won't go under with all the real estate debt they are carrying so you could still get a mortgage.

[expatcindy]

I have a 20-30 K US$ which I can invest long term. Actually I don't want to trade every day and I don't want much of a risk and I have no idea about such things.

I think of let the money stay 5 or 10 years and than happily finding out that it is more than before.....

I read about bonds, if I can wait and they have a nice rating than there shouldn't be much of a risk, or?

I read that there are also funds (is that right in english?) which contain a basket of stocks and some even guarantee that you get 100 % or 80 % of your money back. But there is a hugh amount of offers, I guess I need to read 30 years and still don't know anything about it.

Has anyone a clue on how to start that?

h90

<{POST_SNAPBACK}>

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[ThaiPauly]

I am very interested in this thread, but as feel the book "Investment For Dummies" also applies to me, what are CD's .I have never heard of them before reading a few threads in the last few days. Obviously I know what a CD is but it obviously is not that kind of CD!

Cheers

TP

[Spaniel]

The CD's that the posters are refering to in this thread are Certificates of Deposit, usually issued by a bank for a set period of time from 3 months up to 10 years. You give the bank your money and select the time period and upon completion you get your initial deposit back plus the accrued interst. The catch is if you want to get your fmoney back before the term is up you have to pay substancial penalty.

At least this is how they work in the USA. If you want to check out current rates in the USA then go to: www.money-rates.com

[Pascal]

We are a registered company here in Thailand operating fully following the rules but the share amount owned by Thai nationals is very low, therefore it is very difficult to get approval for a credit or a leasing to expand investments on machinery...

On the other side we are a European company but we operate here in Thailand so the banks are very reluctant there to help us invest here...

We finally found leasings available but well over 10% what we find to high.

We would be interested to meet possible investors for loans on 3 to 5 years at rates of 4 to 6 % annualy.

The investment could be done as well in one European ( or Switzerland ) country in Euros ( or Swiss Francs ) or here in Thailand in Thai Baht.

The use of the funds will be disclosed to the possible investor, we may organise visits to our production facility, etc .

Minimum amount 2'000'000.00 thb as we are not a bank but a manufacturing business.

In order to keep it confidential, first step of connection would be by reply to this posting and website.

[Firefan]

Pascal; I think your post belong in the classified or commercial ads forum.

Also; why would anybody be interested in this considering the higher risk/same return as bank CDs or even money market or saving(offshore) accounts with reputable banks and institutions? Or a short bond fund.

Actually the 10% you have been offered by banks here sounds a bit more realistic (Ok, make it 9%! ) in order to attract SOMEBODY..maybe....

Cheers!

We are a registered company here in Thailand operating fully following the rules but the share amount owned by Thai nationals is very low, therefore it is very difficult to get approval for a credit or a leasing to expand investments on machinery...

On the other side we are a European company but we operate here in Thailand so the banks are very reluctant there to help us invest here...

We finally found leasings available but well over 10% what we find to high.

We would be interested to meet possible investors for loans on 3 to 5 years at rates of 4 to 6 % annualy.

The investment could be done as well in one European ( or Switzerland ) country  in Euros ( or Swiss Francs ) or here in Thailand in Thai Baht.

The use of the funds will be disclosed to the possible investor, we may organise visits to our production facility, etc .

Minimum amount  2'000'000.00 thb as we are not a bank but a manufacturing business.

In order to keep it confidential, first step of connection would be by reply to this posting and website.

[Butterfly]

Yeah 9% sounds about right

And how is it secured ? what are the collaterals ? shares in the company ? how an individual could find interests in such an illiquid investment ?

The bank did you a good favor for even 10%, I would take it.