Can i make money out of share trading?
A topic which always attracts interest when I present at the Your Money and You session at ADF transition seminars is share trading. ADF members always seem interested in the share market and the best ways to invest in shares.
Over the long term, a portfolio of good quality shares – often referred to as 'blue chips' – should grow in value, pay you income through dividends and provide tax benefits. If you have patience, time and long-term investment goals, buying and holding good quality shares can be an effective wealth-creation strategy.
However, an alarming – and growing – trend is the number of Australians and ADF members signing up to share trading courses or systems. Often referred to as 'day trading' or 'stock picking', these programs provide investors with techniques to consistently outperform 'the index' such as the 'Australian All Ordinaries'. This is a highly speculative way to invest and in some ways no different to backing a horse in the fifth at Royal Randwick.
At a recent transition seminar, I met an ADF member who had made some early profits with one of these share trading programs. He was so confident in the techniques; he was set to quit his safe and secure job to take on share trading full-time. Not only did he plan to use his all his savings to get started, but he also intended on trading his super through a self managed super fund. While I pointed out all the risks, he didn't seem too concerned about potentially gambling away his life savings.
If you are thinking about taking up day trading, here are some facts to consider from a leading academic institution: the chances of beating the index through active funds management over 10 years is one in 36, and the odds of winning on the roulette wheel are one in 37. That's right: you – and investment professionals – have as much chance of beating the index over the long-term as you do of outsmarting the casinos.
I have also seen research stating that 80 per cent of investment professionals such as fund managers and stockbrokers can't beat the index over a five-year period. Sure, some fund managers, professional traders and even part-time punters can outperform the index over one or two years, but over the medium- and longer-term, the arguments for active investment management don't stack up.
A form of investment that is growing in popularity is passive investment or beta investing such as purchasing an index fund or exchange traded fund. These funds don't try to pick and choose among all the different shares on offer. They simply buy the shares in a particular sharemarket index such as the ASX 200. The goal of these types of funds is to generate a return like the underlying index. Therefore, if the index goes up by ten per cent, the index fund should go up by 10 per cent. Off that will come a fee, but this tends to be on the small side compared to what a broker or active fund manager would charge.
Marty Switzer, BEc Soc Sc
ADF Transition Seminar Presenter
Can you spot a dangerous investment?
.......Visit the Australian Securities and Investments Commission website to find out............
Most people are greedy. Good salespeople know that, and are skilled at bringing out the worst in us. If you'd like to test your ability at spotting and avoiding a dangerous investment, visit www.asic.gov.au (Tools and Resources) and complete ASIC's quick quiz. You might be surprised at just how much of a 'soft touch' you are.
Who is Christina Van Kliss?
Ms Van Kliss recently sent an email to an ADF member, announcing that he had won $1,520,000 in a Dutch Lottery sponsored by Coca Cola, Nokia, Intel, Toyota, Toshiba, and Dell, to name but a few.
While our member had the commonsense not to respond, it seems that many people do. The 'suckers' who do respond (according to the old saying, there's one born every minute) end up sending their savings to unknown bank accounts in Eastern Europe or Africa.
So why would a sensible person send money to a mysterious stranger? Greed is the motive and it seems that there is no shortage of greedy people.
It is estimated that there are over one billion scam emails sent throughout the world every year. Even if only a small percentage of recipients fall for the scam, the crooks reap millions of dollars.
The lesson? Don't open emails that you don't trust or are sourced from strangers in such diverse places as Nigeria, Holland and Romania. These scams seem very simple to detect and avoid. So it's extraordinary how many thousands of people lose money from them, year in and year out.
Don't get caught. Don't open or respond to the emails. Very simple really!
Should you buy a v8 ute or a property?
The ute sounds like more fun, but it's absolutely guaranteed to be a bad financial investment.
This doesn't mean that personnel returning from deployment shouldn't buy the big V8, but they should make the decision rationally, understanding the consequences of pouring money into a car versus a property or share portfolio.
In addition to its Initial Training, Leadership Training, Force Preparation, Through Career and Transition programs, the Council has now designed a Post-Deployment personal finance program, accompanied by an entertaining DVD covering issues such as borrowing money, investing money and minimising tax.
For more information, contact us via our website (www.adfconsumer.gov.au).