Monday, February 26, 2007

 

Constructing His Own Financial Future


I think the stockmarket should be an essential component of everyone's investment and retirement strategy. But there's probably two main things that put people off:
  1. they think it's too complicated, too hard to learn
  2. they think it's too volatile - one minute the market's going up, the next it's going down. What happens if there's a crash and I lose everything?
Ironically, it's actually the volatility of the market that's the key to making money from it consistently! (But more about that later.)

There are simple asset protection strategies that can be put in place to protect your investment against a market downturn.

As for being too complicated to learn, I don't buy that either. I'm reminded of this recent story in the Australian - Former construction worker takes flight through trading

Full-time trader Grant Booth's first investment was a cash management trust, writes Anna Fenech

What happened?

I used the funds to invest in managed funds and started using margin lending against those. Then the market began to turn down - so I thought I could do this better myself. I pulled all the money we had out of managed funds and started a self-managed superannuation fund. I did quite well and recouped a lot of what I had lost.

Then about 18 months ago, I started share trading full-time. Before that, it had been a sideline. In my former life I had been working in the construction industry. Then I hurt my back and had to get out.

What are your investment goals?

I wanted to be a millionaire, but trading is a hard apprenticeship. Now my goal is just to be comfortable. I want to be able to pursue my aerobatics interests and the plane I am building. For work, I started as a mechanic, then began working on construction sites doing rigging, crane driving and maintenance. So building a plane is easy. In terms of being comfortable, I want my wife to be able to shop where she likes and to see my child grow up.

When I was contracting, working 12-hour days was common. Being a trader means I can work the hours I want to, usually from 9am to 4pm.

What's the best investment decision you've made?

To take control of my investing and to do it myself. If someone is going to send me broke it had better be me. Up to 12 months ago, I was doing better than 20 per cent a year just by trading. At that point I was still doing contracting too so I was getting other income. Then I moved and my infrastructure did not allow me to trade as I could not get ADSL.

By the time I got back to trading again, the environment had changed. The market peaked around May. For the novice trader it has been hard this year.

What about the worst?

The managed funds I invested in and then borrowed against during the market downturn of a few years ago. I paid for this lack of education.

What's the best piece of investment advice you've received and who was it from?

Education is everything in trading. That advice came from a good friend of mine who was much older than me, another pilot who is also a trader.

A lot of it is experience too. I am a technical trader so I don't care much about what the market is doing. I care about what the share I am focusing on has done in the past and levels etc.

Learning how to get the right information and what to do with it is like doing an apprenticeship.

Probably the best education was doing Brisbane-based trader Alan Oliver's course. He is also the author of Trading with the gods.

What advice would you give to an investor who is just starting out?

First of all be very patient. You can't do it overnight. You must be very patient and don't stop.

You must be prepared to commit yourself and be prepared to hurt at certain points along the way.

If you don't give up, the rewards will come.

Also be prepared to pay for good software. I use Market Analyst, which helps with the decisions I make.

How do you react when markets get rocky?

As a technical trader, I don't care which direction it goes as long as it goes somewhere. Lately, the market has been going sideways. The more it moves, the more volatile it is, then the better it is.

What's the biggest investment risk you've taken and did it pay off?

Walking out of an industry that I grew up in and knew and putting my family's future on the line for something I was not educated in. It is a slow road but it is starting to pay off.

What would you never do with your money?

I don't gamble. If my trading research shows the numbers don't add up, then they don't add up.

Where do you source most of your investment research?

Because it is data-based, the software has all the information. The education process involves knowing what to do with the software.

What are the most important attributes of a good financial planner?

Someone who gives you credible information. There are millions of claimed experts, but in the end you must back it up with your own research.

This is really important as it could mean the difference between retiring comfortably or working till the day you die.

What are your views on socially responsible or ethical investment?

Trading is not about that. It is about share price history and trends. You don't care about the management, what the company does or what the media says.

Would you feel comfortable running a portfolio of individual direct shares?

Yes I would and I do. I am looking at 15 to 30 out of the Top 200 at a time and might hold five at any one time.

How do you feel about investing overseas?

No, I am comfortable with the market here.

Now this bloke's got the right idea - rather than be afraid of the market, understand it and learn to work with it.

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