Newbie share trading.

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Kol12

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Master Geek
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Topic # 215541 1-Jul-2017 16:43

I've been looking for a local share trading forum and the only one I can see is Sharetrader.co.nz which requires an ISP email address to sign up, how many people still use ISP email addresses?

Maybe there are some savvy share traders here?

I am completely new to share trading and want to buy some stock on the NZX50, I've just recently completed and have an ANZ Securities account. I've been researching a bit but there is a lot to grasp. I've decided investing in an ETF would be appropriate for a longer term investment and am thinking probably the FNZ Top 50 Fund... Any ETF traders here? What was your approach?

Of course people recommend to diversify your investment profile where is where I'm a little stuck. I'm interested in short term trading and trading for income via dividends also but aren't really sure where to go with that. Can anyone offer any advice? Would be much appreciated.

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74 posts

Master Geek
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Reply # 1810184 1-Jul-2017 17:39

Can’t help you with short term ‘trading’. But for long term investment learning
Google bogleheads , vanguard etf
Have a read of Stocks for the long run by Siegel which gives a good understanding of stocks
When you buy a share (stock) you are buying a part of a company so want to buy something with an increasing earnings. Ebos , port of Tauranga and fph being good nz examples.
I’d suggest trading with virtual portfolios first to see if you have that X factor. You may find that after a few months you are glad it’s just virtual money. Nzx has a virtual plaything.
Of course finding a company that others don’t already know more than you is not easy.

gkbrn95

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Reply # 1810189 1-Jul-2017 17:44

One person supports this post

Depends what markets you'll be looking at and what you plan to do. I'm mostly ASX & NZX using ASB Securities, and still have no idea what I'm doing :)

Guessing most people on here have their own custom domain email address or forwarder to get around sharetrader's interesting "not a free e-mail address like hotmail, yahoo, gmail" requirements.

Forums I use that have abit more activity than sharetrader.co.nz:
- aussiestockforums.com
- www.hotcopper.com.au

Do some paper trading first before you throw real money away.

Kol12

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Master Geek
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Reply # 1810244 1-Jul-2017 19:50

Thanks guys. I can't believe the amount of reading ahead there will be, this stuff is like another language!

Plan to do? Um... I figured an ETF should be a pretty safe bet as it's something you just want to lock and leave, reinvest dividends and can add regular funds too... Is an ETF still risky enough to want to paper trade first or mainly the more short term gain risky stuff?

I've put some funds into my ANZ Securities account and I'm thinking maybe the sooner I get an ETF running the better... Thing is I don't even understand how to place an order! For example, on the Buy Order page I've chosen FNZ which is the TOP 50 Fund ETF. Then I have to choose a quantity and a price limit, what? What is the quantity and price limit? Here is the blurb from ANZ on price limit:

"Price Limit
When placing an order, this is the price you are not willing to pay more than if buying or receive less than if selling.
ANZ Securities will accept the best price available if it is within or equal to your specified Price Limit."

Still don't get that... How do I work the quantity out? The Quote is 228 cents. Expiration I assume I choose until cancelled as I plan to just leave this...

Thanks, I realise this isn't a trading forum, there just doesn't seem to be much of a community of it NZ. I will check out the other pages/forums mentioned.

Sam91

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Reply # 1810245 1-Jul-2017 20:10

You might find Harmoney an easier alternative. Discussion here and here (sharetrader forum).

NZX virtual trading is a good place to start for shares, as mentioned above.

Kol12

161 posts

Master Geek
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Reply # 1810259 1-Jul-2017 20:28

Sam91:

You might find Harmoney an easier alternative. Discussion here and here (sharetrader forum).

NZX virtual trading is a good place to start for shares, as mentioned above.

Thanks. Another form of investing, interesting.

Ouranos

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Reply # 1810347 2-Jul-2017 09:23

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Kol12:

I am completely new to share trading and want to buy some stock on the NZX50, I've just recently completed and have an ANZ Securities account.

I also have an ANZ account, so I can help with the mechanics.

You expressed an interest in FNZ. Here is a screenshot of the "Detailed" page for FNZ:

It is helpful to understand what the numbers mean:

- Total issue: Number of shares in the market. In this case 100.7 million shares.

- Market Capitalisation: Share market value of the company. The current share price is 228 cents per share. At that price, 100.7 million shares are worth $229.5m.

- Earnings/Share: Earnings last year divided by the number of shares. This implies that earnings last year were $0.1667/share * 100.7m shares = $16.8m. ie. Earnings/Share = $16.8m / 100.7 m shares = $0.1667/share = 16.67 cents/share.

- Price/Earnings Ratio: A measure of how high the share price is relative to earnings, expressed in cents per share, ie. 228/16.67 = 13.68. A rule of thumb that many people use is that a ratio in the teens is OK, less than 10 is cheap, and more than 20 is expensive. Of course, there may be reasons why the ratio is high or low, so it is just a guide.

- NTA/Share: NTA = Net Tangible Assets. Essential the value of all the company's stuff if you sold it today. For an exchange traded fund like FNZ, the share price is usually close to the NTA per share because its assets are other shares that are easily valued and sold. For other types of companies, the share price is usually higher than the NTA/Share.

- Dividend/share: The rate at which the company has paid dividends (over the last year, I think).

- Dividend Yield: The "interest rate" that the dividends represent relative to the share price = 9.9/228 = 4.34%. If you're looking for dividend income, then this number is important. Note that this calculation looks at past dividend payments. There is no guarantee that future dividends will be paid at the same rate (or at all).

Kol12:

Still don't get that... How do I work the quantity out? The Quote is 228 cents. Expiration I assume I choose until cancelled as I plan to just leave this...

Let's say you have $5,000 in your trading account. The last trade of FNZ was at 228 cents/share, but the current sell price is 229 cents/share ($2.29/share). You will also have to pay the trading fee, which is $29.90 up to $15,000 trade (more for larger trades). Therefore, you can buy up to (5,000-29.90)/2.29 = 2,170.3 shares. You can only buy whole shares, so if you offer to buy 2,170 shares at 229 cents per share, it will cost you 2,170*2.29 + 29.90 = $4,999.20. That will leave you $0.80 in your account. If you offer to buy 2,000 shares, it will cost you 2,000*2.29 + 29.90 = $4,609.90.

You can offer to buy at a lower price, though you'll join the queue of buyers so you might not be successful. You can leave your offer to buy in the market until it is accepted, until it is cancelled by you, until the end of the trading day, or until a specified date. An offer to buy at the current sell price is generally accepted within a few minutes of you completing the order.

Weather or not the FNZ price of 229 cents per share is a "good" price is for you to determine.

ObidiahSlope

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Master Geek
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Reply # 1810366 2-Jul-2017 10:39

If you are a newbie I suggest you start by investing in a sector that you know personally.

Do you work as a shelf stacker at the Warehouse? If you do you probably know more about retailing than share analysts who wear $1,000 suits and work from swanky offices.

Who is giving your employer grief, Briscoes Katmandu Smith City or is your employer slaying the competition Use this knowledge to guide your investment decisions.(1)

My other advice is do not fall in love with a share. If your judgment about a share purchase turns out to be wrong admit to yourself you made a mistake sell up and move on.

(1) If you work in a policy or price setting role at your employer there are restrictions on you trading on your inside knowledge.

logo

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Ultimate Geek
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Reply # 1810377 2-Jul-2017 11:06

Sam91:

You might find Harmoney an easier alternative. Discussion here and here (sharetrader forum).

NZX virtual trading is a good place to start for shares, as mentioned above.

Harmoney is a long term investment - you have to wait until principal is repaid back which you can then withdrawal but it can take years to get your money out.

At least they've put in an autoinvest option now but it would also be good to have an autowithdrawal to get your money out without having to log in periodically to check your balance.

TinyTim

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Reply # 1810383 2-Jul-2017 11:26

I have taken a similar strategy - buying Smartshare ETFs through the ASB. By doing this you are already diversifying your risk; if you are worried about paying too much then buy smaller parcels over a period of time, which further reduces your risk. And you should be in it for the long term - not short term capital gain. That means you don't have to spend your time worrying about if you should sell or not - you shouldn't. (If you want to worry about when to sell then buy individual shares, not ETFs.)

When I buy I tend to put in an offer below the current price, and wait. Usually the price fluctuates enough day to day to meet my price after a few days or a week. It probably doesn't make much difference in the long term, but it makes me feel like I'm getting a better deal!

Buying ETFs means if you're smart you can probably do a pretty good job without getting personal advice from an advisor. Just make sure you are up to date with what's going on - read the financial advice columns in the papers, read the big investment blogs. Go to Sorted and find out what sort of investment split you should have - NZ/Overseas, shares/bonds/cash etc. You can also buy bond ETFs. You will never become an overnight millionaire but you will get a good reliable return. In the long term. The *long term* should be your mantra.

Kol12

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Reply # 1810504 2-Jul-2017 17:00

@Ouranos

Thanks for that little write up it's helped me better understand some of those simple things a lot! May I ask where that detailed page for FNZ came from?

With the FNZ 50 are you buying shares from those 50 companies or shares from the "fund"?

So the quantity is the amount of shares you want to buy, funds divided by current share price or sell price? Do I need to add the trading fee into the equation myself?

If you don't put an offer in do you have to buy at the current sell price?

"whether or not the FNZ price of 229 cents per share is a "good" price is for you to determine."

Right so I could check out the price history to make my decision on that?

antoniosk

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Reply # 1810522 2-Jul-2017 17:30

Kol12:

@Ouranos

Thanks for that little write up it's helped me better understand some of those simple things a lot! May I ask where that detailed page for FNZ came from?

With the FNZ 50 are you buying shares from those 50 companies or shares from the "fund"?

So the quantity is the amount of shares you want to buy, funds divided by current share price or sell price? Do I need to add the trading fee into the equation myself?

If you don't put an offer in do you have to buy at the current sell price?

"whether or not the FNZ price of 229 cents per share is a "good" price is for you to determine."

Right so I could check out the price history to make my decision on that?

These types of things are called unit trusts, and they have a composition made up of x% of the, in this case, NZ50. So 4.8% of Airnz, 4.6% of Sky and so on. The share prices of each and volume helps derive an overall unit price, which is a COMPOSITE of all the many investments. This way you spread the risk but also compromise the gain (If AirNZ doubles in value, the FNZ50 might go up a tiny amount as it's a small proportion of the overall). These things are not really for regular trading, more built for you to start investing in right at the start of their life, hold for 5-15 years, make regular monthly purchases, and so on. They are less roller-coaster than holding shares direct and smoother, but also take a lot longer to build up real value.

Dividends from shares are normally used to buy more units for you, although some products will allow you to trade them out and derive some income.

If a stock falls out of the top 50, or whatever the conditions of participation are, the fund manager will make a decision on whether to hold (if the fall is because of something odd like a bad year) or trade out (they aint coming back in anytime soon).

Typically these things will trade inside a Portfolio Investment Entity (PIE) in NZ, which has a flat tax rate of 28%. Look them up on IR's website.

I think you're looking at trading shares more directly, from different markets? AMD a few years ago was $2.20, and now it's at $12... if only one had known it would perform (mind you, Apple was $3 in 1993 because everyone thought they were dead and dead). Shares of course are a lot more risky as you dont know what will happen (although you can research the org, decide on it's management and strategy, and make some guesses as to the future value. Chorus Fibre for example was a good bet, as no-one else is going to provide fibre to the mass market, but its also regulated and will never be allowed to make huge dividends till well in its lifecycle, around 2028. Can you wait that long?)

________
AK

tdgeek

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Reply # 1810569 2-Jul-2017 18:40

Been a long time since I was on the sharemarket. I get that these unit trusts offer an easy in, no maintenance, but as Antoniosk says, low risk but low gain.

I'd focus on some individual companies. Sectors that can grow, company that is solid and can grow more than its competitors or the industry average. You can add in some higher risk companies, and some low but safe risk. if a company is profitable, sound, the risk isn't high. Fashionable is good too, but watch the P/E on those. A boring company that just makes money and grows will eventually get on the radar. I had great success with a comment that was a cleaning company. Another into womenswear. Not fashionable, but every year they increased profits, asset backing kept rising. Its fun too

Even had some L+M Oil. Buy at 2c sell at 4c lol

logo

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Reply # 1810576 2-Jul-2017 19:01

Kol12:

@Ouranos

Thanks for that little write up it's helped me better understand some of those simple things a lot! May I ask where that detailed page for FNZ came from?

With the FNZ 50 are you buying shares from those 50 companies or shares from the "fund"?

So the quantity is the amount of shares you want to buy, funds divided by current share price or sell price? Do I need to add the trading fee into the equation myself?

If you don't put an offer in do you have to buy at the current sell price?

"whether or not the FNZ price of 229 cents per share is a "good" price is for you to determine."

Right so I could check out the price history to make my decision on that?

Quantity x share price + brokerage = final cost e.g. 1000 shares at 229c + $29.50 = $2319.50 final cost

You can choose you buy price or tick a box to accept the current market price (basically the lowest sell price). If you choose the depth option you can see what buyers and sellers are wanting to buy and sell and how many.

If you're trading then you need to trade orders around $5k upwards (preferably $10k+) at a time otherwise the brokerage will not make it worthwhile.

On a $2k trade you'll need the share price to increase by 3% just to cover the brokerage. On a $5k trade it's 1.18%. On a $10k trade it's 0.59%

On a side note (for traders), the ANZ share & bond trading platform can do trigger orders (stop loss) but it's not enabled by default - you'll need to ask them for it.

Kol12

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Reply # 1810602 2-Jul-2017 20:37

Thanks for the replies everyone, it's helping a lot.

@antoniosk

Ok so with an ETF you are buying "units", great.

"I think you're looking at trading shares more directly, from different markets?"

I'm not sure what you mean... I was thinking of giving all of the various trading methods a go, so some in an ETF for a long term lower risk investment, perhaps some shares in two or three companies that pay regular dividends and some shares for capital gain... Also maybe one of the Aussie ETF's that are a bit more robust...

The dividends from an ETF I understand are best reinvested in the ETF, but if I'm interested in creating an "income" from dividends do I need to look for the high dividend paying stocks?

My understanding is that an ETF has the potential to earn much more than a bank term deposit, can you explain why they take longer to accumulate value? Another newbie question, how exactly does and ETF gain value over x amount of years if you are not buying and selling? Does this have something to do with the dividend yield?

@tdgeek

The individual companies you talk of are these something you want to hold onto for a long term or something that you might gain on after a year or so? Is it possible to make gains selling selling in even shorter terms?

Thanks @logo, I don't think I will balls an order up now! Can't see a depth option though... Hmm is that brokerage for brokers other than ASB/ANZ Securities? I believe ANZ trade fee is $29.90...

antoniosk

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Reply # 1810604 2-Jul-2017 20:50

Kol12:

Thanks for the replies everyone, it's helping a lot.

@antoniosk

"I think you're looking at trading shares more directly, from different markets?"

I'm not sure what you mean... I was thinking of giving all of the various trading methods a go, so some in an ETF for a long term lower risk investment, perhaps some shares in two or three companies that pay regular dividends and some shares for capital gain... Also maybe one of the Aussie ETF's that are a bit more robust...

The dividends from an ETF I understand are best reinvested in the ETF, but if I'm interested in creating an "income" from dividends do I need to look for the high dividend paying stocks?

My understanding is that an ETF has the potential to earn much more than a bank term deposit, can you explain why they take longer to accumulate value? Another newbie question, how exactly does and ETF gain value over x amount of years if you are not buying and selling? Does this have something to do with the dividend yield?

Unit providers like NZX, ANZ and so on, all have trading desks that can buy off any market directly in the world. The fees are wrapped up in what you pay to buy. So if you went for ANZ fund that was aggressive and invested in the US, it could buy stock on the S&P500, NASDAQ and so on.

To do so yourself, you need a provider that will do that. ANZ securities for the small market only support trading on NZ and Australian share markets... you need someone else to buy off American, British, European etc... like Halifax.

If you want an income from your investments, you can try to self-assemble or buy a fund that will do it for you:

http://smartshares.co.nz/types-of-funds/smartdividend/nz-dividend - 8.5% gross yield if you believe the marketing, but its plausible

Many people do this to supplement their income and build up a portfolio large enough so when they retire they can have funds for income, or can sell some off if you need the money etc.

Regarding how an ETF works... ah, that's a pretty hefty set of questions, but in summary it works on the basis most orgs being invested in have an interest in being around for a long time or being purchased for a premium. Spark makes up 10% of the above portfolio - I don't have any money invested in this btw - and you can be sure it's being run to make as much profit as possible. They are working on share value appreciation, opportunities to buy more shares at a discount price (which will then go up), and on it goes.

Keep looking online... the basics are pretty common, and each country has it's own peculiarities.

________
AK

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