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Sunday, 9 September 2018

21 Tips for Trading Penny Stocks

I'm going to give you 21 Tips for Trading Penny Stocks. Check it out!! The top managers and the executives of any company and the insiders are notorious for making bad trading decisions. You should never rely on insider trading to tell you anything where the share price potential is headed. There is a lot going on with the reasons that insiders are buying and selling shares some of which have nothing to do with the company. You should never rely on insider trading to tell you anything about the direction of the share price. Always use limit orders when trading penny stocks as opposed to market orders. Only trade penny stocks from the Bulletin Board or the major Markets. Do not trade penny stocks which are on the Pink Sheets and other dark markets. You should only use candle stick trading charts when looking at penny stocks. If you don't understand what candle stick charts are, or you don't understand how to read them then there is a video that we will put a link to which will explain everything. Its my explanation of how candle stick charts work and all the benefits that there are with them.

So check it out! Share holder turn over is the utmost importance when trading penny stocks. When you see at least 25% of the total outstanding shares trading over the course of weeks or a couple of months. At the same time when the share price has not really changed not either higher nor lower, then you can assume great share of share holder turn over. Whats happening is that long time share holder , frustrated investors are getting rid of their shares. At the same time that selling pressure is being met by buying demand by new share holders. The share holder base is turning over so the mix is gone, more newer investors and fewer long term investors. By their nature a newer investor is much less likely to sell their shares. They just bought, they're expecting the shares to go higher and thats why they got involved in the first place. The trading volume of a penny stock is going to tell you a lot more then the trading activity. So its great to know the price of the shares are at but even more important is to look at how many shares trading to put the shares to that price.

If you watch the trading volume you get an idea of things like; the sustainability of the price moves and share holder turn over. Typically when you look at a trading chart you're gonna see the price of the stock on the top half of the chart and the bottom half of the chart you're gonna see the trading volume. So even if you're doing any kind of technical analysis at all using the trading chart to try and predict what share price is going to do. You need to make sure that any patterns you see are formed by enough trading volume or else they are entirely unreliable. For example, if you see a stock jump up 75% or 115% but it did that on only 400 shares traded.

You can be certain that the share price activity is going to reverse and the stock is going to come back down. With penny stocks its so important to watch the management team. People tend to do what they have always done. So if the current CEO of the current stock you are watching has bankrupted 3 of the last 5 companies they were with they'll probably be pretty bad for this one too. So do a quick google search on all the top executives and management. Take a look at what companies they were with previously? What positions did they hold? How did the companies they were with perform during their tenure.

Insider and Institutional investor holdings are so important when trading penny stocks. If, 95% of shares are held by mutual fund managers and hedge fund managers. Then that only leaves about 5% of the shares which you see traded day to day to retail investors like you and I. Since institutional investors are usually in it for a much longer time frame. All the trades you are seeing are usually are just retail investors like you and I and are typically over done and they usually will reverse. This is why its so important to keep an eye on the institutional ownership of a penny stock and try to get an idea of how many shares are out there that are being actively traded compared to how many shares out there that are being held long term but professional traders.

The impact of artificial events will typically be temporary. By artificial I mean things like government grants, stock promotions, government subsidies, stock by back plans. For example; if there is a stock by back plan in a penny stock, they are buying the their shares and taking them off the market and that's going to create artificial demand. That artificial demand will increase the price of the shares temporarily. Eventually when that buy back has ended the share price will trade to where it would have been trading to in the first place if it weren't for the buy back. Read "Penny Stocks for Dummies!" Yes I'm bias because I wrote the book, and if you buy it I make a small royalty but this is the book I wish I had read when I got started trading penny stocks at 14 years old. It would have helped me avoid thousands of dollars in stupid mistakes and it would have helped me make thousands of dollars more. If you don't want to spend the $23 for it then take it out from the library or borrow it from a friend.

Any one interested in Penny Stocks should read "Penny Stocks for Dummies." Most penny stock investors average down when they are holding shares of a stock which they bought and then it decreased in price. They buy more of a losing company to try to bring their average price per share down but their actually just throwing more good money after bad. Typically when you average down you've already made a mistake when you tired to pick that stock in the first place and now you're just putting money into that losing investment and it typically tends to keep on going down. Whats better and a more effective strategy that we've found in our opinion, is to average up.

When you buy shares of a penny stock and it starts to move in the right direction then you put more money in to the winning bet because that stock maybe, is just getting started and its got a lot higher to go. When trading penny stocks always use stop loss orders. With penny stocks its so important to make sure that your small losses don't become big losses and stop losses is one way to do this. On the other side of the coin when you do have a stock that is going in the right direction then you want to let the gains run. Penny stocks typically have a way of going up a lot more then you would anticipate that they could in the first place. Investors sentiment is a contrarian indicator. When everyone believes that a stock is going to fall or collapse in price the shares are more likely to go in the exact opposite direction.

This is because people act on their beliefs. If everyone is expecting the stock market to crash, everybody is selling their shares. What happens then is when everyone who wants to sell has done so, even a little bit of buying turns things around and starts driving the prices higher. Penny stocks whether in an up trend or down trend are most likely to continue on in that exact same trend. Now, they will eventually break out of that trend and reverse but its very difficult to time and anticipate when that change of direction may occur.

SO the trends you need to understand will typically last a lot longer then people would expect and a lot longer then they should. Always get started with trading penny stocks just like I did, by paper trading. You need to notice and avoid your own confirmation bias. People see what they want to see and if you see two sides of one argument you may gravitate towards the one side that supports your opinion. This can be incredibly costly for trading penny stocks. You need to notice and avoid all of your own confirmation bias and just look at the objective facts.

Do not believe or blindly follow what the mass media is telling you. Instead use it as a tool to understand what the masses are going to be believing, how they are going to be acting. This is going to help you avoid getting involved in investments at over priced levels because everyone's crowding around to buy the same thing. Out of this understand the way the media works and understanding the impact media has on the masses of society.

It's going to open up so many more massive opportunities for you that gonna make all the difference. Invest in penny stocks in penny stock companies which you understand and then call the investor relations contact of those companies and ask questions, try the products or services that they sell if you are able. Even better make an unannounced drop by of their head office if its possible just to see whats going on , see what kind of company you're dealing with. In other words, invest your time before you invest your money. Penny stock picks which you hear about for free regardless of how you heard about them when you hear about them for free there is always hidden motivations behind those stock picks. This is even true of the stocks that you hear through the rumour mill or the co worker who tells you about this new hot investment. Your poor co worker doesn't even realize that they have fallen victim to the promoters "pump and dump" scheme in the feeding of the rumours that they are putting out there. You need to avoid free stock picks, people get burned by this more then anything else in penny stocks. Only trust penny stock picks which come from a service with a 100% unbiased guarantee.

This is the only way that you are going to know that they have your best interest at heart and they put your interests first. My team and I have found that the most effective way to find and trade penny stocks is to locate the high quality companies first using extensive fundamental analysis. Then we use technical analysis to try and find the most opportune buying and selling prices of those stocks. So thank you so much, I really hope this helps a lot! You guys are awesome, I want you to learn how to trade penny stocks really well because it can make a big difference to you. Please subscribe to the channel we've got a lot more videos like this coming out, designed to help you profit from trading penny stocks. If you have any questions, please put them in the comment fields immediately below this video or reach out and get in touch with us. We will answer you and we look forward to speaking with you. Thank you so much! .

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Stock Trading 101 - All You Need to Know to Get Started in the Stock Market

In this video I'm going to cover the basic thing you need to know to get started trading in the stock market. So what do you need to get started? First of all, you're going to need risk capital. And what I mean by risk capital is money that you have that even if you loose 100% of it, it will not negatively affect your lifestyle.

This is essential not only to safeguard your life, but also because trading with money that isn't risk capital can wreak havoc on your psychology as a trader. So it's essential that you make sure your trading with risk capital or not at all. Second, you will of course need a computer and an internet connection. You'll need an understanding of the stock market and trading basics. And also, you're going to need an online broker, a trading software platform, and if you choose to use them, trading tools and access to market information. And finally, a personal plan and strategy, and a dedication to learning. For the basics, the first thing to focus on is learning the different order types - for example, a market versus a limit order and also the settings for these orders, such as good-till-close or good-till-cancel.

The bid and ask system is also important to understand. A good resource to learn all this is online at Investopedia.com. Next in basics is the simulated account. A simulated account allows you to place orders in an environment that mimics live trading action. This is very similar to the concept of paper trading, but the simulated environment adds to the realism so it's a great idea to start out trading this way. I'll add a caveat to this though - there are some differences between a simulated account and a live account, so please do make sure you know what these are before you trade live.

But generally, a simulated account is a great way to get the feel of trading and practice placing orders without the risk of losing money. A piece of advice I can give in regards to simulated accounts is to treat them as if they are real money accounts. This gives you the closest approximation to how it will be when it's actually your money at stake, and it will give you the best preparation for your live trading. The next basic to cover is information. It's important to learn what kinds of news and information you need to know before you place a trade in a given stock. For example, things like FED announcements, earnings reports, and other pieces of news can move the stock price quickly and substantially - and you want to know before this happens, so you don't jump in and then get surprised by a jump in the market that could have been - you could have been prepared for had you had access to the right information.

Last in basics is connection. And although this is optional, I personally enjoy connecting with other traders online because there can be great opportunities to learn from each other and to share in the experience of trading as a whole. There are a lot of different online communities for traders, one of them is StockTwits and I really enjoy this one so I highly recommend you do check them out. If you want to find me on StockTwits, my username is @TraderJesseJ and that's the same username that I am on Twitter as well. So the next section that I'm going to take you through is brokers. So first of all, what exactly does the broker do? They are the entity that allows you to buy and sell securities. So you open an account with them, and that will allow you to trade. There are a huge selection of brokers to choose from though, so that takes us to the next part which is choosing your broker.

So one of the first things to consider in choosing your broker is what level of service you want. Different brokers will offer different levels of service, for example some have hands-on services where some are a lot more basic and require that you're more self sufficient in managing your own account. So the choice really depends on your own needs, so you'll want to consider what level of service suits you best when you're choosing a broker. The second thing to consider are the costs. You'll want to find out what kind of commission structure the broker offers, and then decide if the cost of these commissions are balanced with what this broker can provide you. And lastly, you do want to factor this cost into your trading plan. Another important thing to consider with a broker is compatibility. So it's really important that the broker you choose is able to tie in to your specific trading software platform.

So your trading software platform is the front end software that you're going to use that allows you to see charts and most likely place trades right on those charts. Some brokers provide a software platform as part of their offer. If this is the case, you'll want to determine if you like the platform they offer. And if not, you'll want to make sure they can tie in with a platform that you do like. That takes us to the trading software section and as I just mentioned if your broker provides this, you just want to decide if you like the one they offer.

If not, there are many platforms that are "broker neutral" that you can choose from. One really important thing though to make sure is that if you use trading tools like indicators you want to make sure that the trading software that you choose is compatible with your trading tools because not all will be. So this brings us to the final section on trading tools. Technical traders often end up using tools to help in their analysis. There are many different tools available that use different market inputs to give a variety of deeper insights to trading charts and decisions. Having a good tool set can help you create your own market edge and it can really give you a more systematic way to trade so although having and using trading tools in your trading is optional, I would highly recommend that you at least look into it and consider the use of trading tools. So in summary, make sure you have risk capital. Choose your broker considering your own needs. Choose a trading software provider that has an interface you like.

If you use tools for technical analysis make sure you choose them well as they are your equipment in the market. Finally, remember that you are the most important part in this whole equation, as a trader, and it's important that you develop your own system and commit to ongoing learning in the markets. So I hope you've enjoyed this video presentation, please stay tuned for a brief risk disclaimer video and the links to follow me on YouTube and to visit my website - it's www.StockMarketProfile.com.

Thank-you. This presentation is intended for educational purposes only. The concepts depicted are solely the opinion of the presenter and are not individualized advice for viewers. The risk of loss in trading commodity futures, options, securities and Forex markets can be substantial; therefore, prior to trading, investors should understand these risks and must assume responsibility for these risks and their results. Past performance is not indicative of future performance. .

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Stock trading tips revealed w/ market expert Howie Day-Trader of The Short Selling Academy

Stock trading tips revealed with market expert Howie Day-Trader of The Short Selling Academy. I interview Howie and he tells his strategies for making impressive profits by shorting the VIX through TVIX and UVXY, and how his biggest gains (and your biggest gains too) can come from Facebook stock. Plus, Howie explains his how to position yourself for maximum success by trading market volatility. welcome everybody to looking at the markets with David Moadel and today we have a special guest super special guest he's known to the facebook and Internet community as how we day trader and he has an amazing amazing facebook group with plenty of members but I i'm guessing he's got room for more yeah we have about the 2,000 right now and always looking for more how's it going everybody awesome well welcome Howie to looking at the markets with David motel and you know I i really appreciate coming by today it's nice to be here thank you sir alright well what I'd like to do is pick your brain a little bit because you are known as how a day trader for a reason you're day trading skills are quite impressive to say the least and you're not one of those guys that just posts trades that you already made and brag about him yet you post the trades before you make them yeah the anybody could put their trades after its view of poster trades before you know I think that's what counts that is hugely important and so you're not just talking you're living the lifestyle which I really admire for that are so tell me if you don't mind in the viewers about the short selling Academy what we do is we post the you know what we focus on short selling but we do welcome long positions also and also options trading and do focus on shorting the Vics products such as a to fix and UBS way yep yeah I don't notice that that you specialize it's not all you do but obviously but you you specialize in that and you know well this here at this year mostly focusing on shorting those two and just going long on facebook yeah okay that's an interesting mix there and very specific but you know what it's better to be a successful specialist than a jack-of-all-trades to doesn't succeed in anything so I think that's pretty cool what's up a 22-percent this year most because of a facebook Wow and my portfolio my day trading portfolio i do actually do do long-term investing also okay okay very cool now and and when he says this year please note folks it's only January 23rd so that's that's pretty impressive to say the least 20 * also you know the it started a january third and there was two off days already yeah yep couple holidays in there so you know what is that like maybe 15 trading days so far something like that that's pretty active yeah if that yep yep why did you specifically choose to focus mostly on volatility products it's actually interesting story it's a basically because they're from a credits with citibank you know credit suisse see John and all the products that are ripping people off or from them so i'm just getting back at them starting the shortening their products but basically it does is its program to go to zero and then we were split again it's just like a pinball machine but it goes straight down if you could just buy it you know after it goes up and short it you're guaranteed to make money and i have to do is just be patient and you know the market does crash you stopped to have a enough money for backup you can't go all in at once you have to buy government's right right now I think that's true of almost any product but specifically with these especially with these four and then I also you know I do tell people to just start with the pixels at 15 yeah like right now it's you know around 12 yeah I'll been for the amateur i would even suggest even even starting it right now right right you know I i perfectly i personally shorted uvx what and civics today and made about 1,800 bugs it up or like a more advanced nice very nice and did you in case we haven't mentioned it again and will mention it later on if people want to you know get in on this action and follow your trades and of course these are not you know we're not telling people how to trade what to do what not to do it's just it's just if they want to watch and laser of these are actually just suggestions and another on my page it says the console consult your financial advisor that's right that's right so we're definitely and I say this I i put a disclaimer in every video i do and i'll certainly put one on this one you know we're not here to tell you what to do or what not to do but the poor kid the market could go up and down at any second it crashes and you know this is real high risk of you could lose all your money if you do a row right exactly so and will mention this again toward the end but if people want to find you and also of course i'll put links on the YouTube how can they follow you and your trades oh that's the the short selling academy it's on facebook all you have to do is just a second request in the gladly accept it yep yep I found out that's true and you know it it's the more the merrier you know when it comes to these facebook you know some of them are very exclusive but but how it's been really great about you know help and the room has good vibes you know all the people in there are here to help the especially for new traders you know you're all welcome yeah and were you know here to here to help you and you know eventually we're probably will be a paid room but you know right now we're doing this for free wow so folks you know you can't be that getting what get it get there while the getting's good would say oh yeah right now what right now basically what we're doing is building it up yep yep awesome are so now that we have a new administration has so to speak on is your trading strategy going to be different with this with this new administration that we have now uh the only thing that I'm changing is I didn't make a couple changes of my online portfolio i think out oh USA ok and i did a JPM today okay and yeah are you bullish on financials overall people absolutely JPM wells fargo goldman sachs and DEA are going to go higher this year here in my opinion there you heard it here first alright january to get long is long and as well as a oil stocks are going to rebound okay but I'm actually with you on that one on you know it certain i don't i don't want to pinpoint certain you any particular nation but you know not every nation involved in in the oil trade is is known for keeping to their promises so we may see we may see what what you just mentioned with that may play out very very soon sooner than people think and i said i personally do will know wells fargo and jpmorgan right so there you go so obviously it's not just talk you actually trade what you recommend very good in the that's actually not for treating that's for long to ok ok gotcha gotcha are I wanted to ask how can the average retail trader use tvix you v XY and so on to their advantage first thing you have to do is find a broker i'll take it for shorting yeah you know and once that that i do use our Scottrade in etrade ok ok and the boom and then you gotta like you have to start watching the stock market to learn yeah yeah you don't want to check price and then once the stock market starts going down in the dick starts rising that you want to start putting money in increments I suggest like twenty-five percent increments ok ok so scaling and is is pretty key i would say and and starting 12 fixes typically once around 15 is good to see ya 15 and then the next increment would be 17 ok at number 19 and then the last one would be 23 for just the novice one for the novice investor okay okay i'm more of a conservative investor so i probably wouldn't even start as far as shorting it goes i wouldn't even start until it was probably higher than 15 just because sometimes the sometimes it goes months without their yeah that's true that's that that's how I am I don't mind I learned that from you know Warren Buffett guys like that they'll wait for years literally for the right trade but most people don't want to wait that long so I I don't blame you for getting it when the getting's good are speaking of that why most traders I've heard ninety percent of traders fail why do you think that isn't and is it fixable of the first thing it's fixable for some people the first thing is some people don't have the training plan yeah and they just use it like is the cocina and then they get all excited you know when a stock goes up and then they buy and then when it goes down they sell make these money and get all frustrated yeah so basically they're doing backwards what they need to do is they need to buy when the market crashes himself when it goes up with her on top great advice there it's it you have to do the opposite of what most people will do because if most people are failing don't do what they do do the opposite and I talked and that's that's that's the reason why short TV is the new be ex-wife is so many people in other groups are going along and losing all their money on it and i'm just showing him a different way how to succeed right absolutely awesome awesome so I I learned so much from this yet you know i might start doing that maybe I should get in when it's 15 because you know these these vics products going along on TV I x DX UV XY has not been kind to belong to people on the long side so you know maybe shorting it you know i I've done it before but maybe I really should start putting more focus on it well you vxy in TX has more action the XX ok but at the only a the only problem is with the UVs why is there's no shares too short a lot of times ok so people or you know what's going on that all the shares are good gotcha gotcha that at the hardest thing with the with my program Russian getting there's just getting shares too short that's interesting but would have thought right that would be the toughest part are ok ok and then i'm at i imagine another tough part would be just just the emotional control because its volatility itself is volatile when you agree um exactly it's a it's not for everybody that's not for you know the average investor it's you have to have a little gambling you yeah well I guess we all do we have otherwise you shouldn't be in the market you should just buy it buy buy bonds or you know put your money in checking account right so cool cool are real quick facebook you mentioned that what is your outlook on that for 2017 oh well I don't know for how long you've been following my pics but been on facebook for Fears a few years now and i've been recommending facebook since been at 65 ok it that's been my top pick the last two years and I know you've done well with that yeah so yeah I mean that I've actually made the most money on facebook at the any stock because it will eventually just go up you know as long as you keep it yeah that that that's that's true i mean III don't know what do you think of a mark zuckerberg and his leadership is in this for the long haul what are your thoughts on that yeah I think he's gonna be in there long enough then he has replacement such as a shell cember you know to take over even if he doesn't view and then I think Facebook is gonna skyrocket when they announced the you know when they'll split the stock split yeah very good again you heard it here first alright howie day trader and the short selling Academy once again before we sign off thank you so much and how can people contact you and find you once again other short-selling Academy all you have to do is just type it in on facebook and sent in the request you know you have to click one button and then accept it very cool very cool do you have any websites or other other products or anything you'd like to announce besides that nope that's about it and you know thanks for having me are awesome how a day trader folks go check them out gonna put a link in the description you know everybody's on facebook may be considered loading up on that a little bit there all right and you know what i'm going to change the way i trade a little bit too because of a cousin mr.

Howe here is his excellent advice if Facebook good earnings next week is gonna go up yeah that just so you guys know there you go actionable advice for everybody how we thank you so much for for joining me i really appreciate it today you have a good one take .

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Trading Tip: The Secret Power Of Stock Options

So you've probably heard that options can great big gains for you you can take small amounts of money and create even larger amounts of money that's true but let's talk about the hidden side of options so as I alluded to a lot of people that hear options just think okay trying to make big gains and while that is true you don't need to always be making big gains and there's really other things to options that I think are much much more appealing and just quite frankly should really be the start of the show not the big gains that you can make but these three things so I want to talk about the three characteristics of options that get overlooked the first one is actually some people try to you know make it sound like it's a negative or a bad thing but I think it's perfect for people because it eliminates a very common desire very common a kind of Jedi mind-trick that you try to play on yourself so the first hidden gem of options is that they expire in other words they can turn worthless and a lot of people say oh you got to be careful about that because you know they can expire worthless on you they are depreciated in value at all times very true but I think this is a good thing why be decisive I don't know how many times I've seen it and I've been there to where you take a position in a stock and it doesn't quite go your way and then you think hey yeah yeah I'm going to change my plan I'll buy a little bit more now I'll hang on for a little bit longer and that all of a sudden okay you know I'm going to start to research the fundamentals of this company maybe it's going to be a good investment and then before you know it this very short-term trade has turned into a long-term investment because you've tricked yourself into thinking well you know you don't want to cut you know you don't want to sell for a loss oh yeah yeah trick yourself and it turns into a long-term investment with options that's not the case you know that they expire you know that at some point they're going to become worthless so you need to stick to your plan and if that isn't motivation to have you stick to your plan then I don't know what is so I think it's a great motivation tool in terms of making you plan the trade and truly trade the plan not alter that not have a plan turn into a short-term day trade until you know a three-year hold or another towards you've become a bag holder so we let's just call that what it is so they expire a lot of people that oh that's negative that's bad give me a break it's going to make you be decisive and be disciplined so I think that's a great thing second with the cash account the pattern day trading rule does not apply let me say that again the pattern day trading rule does not apply pattern day trading only applies to margin accounts but if you have a cash account it no longer applies to you I did not know that somebody in the chat room mentioned that to me and I thought wow you know that's that's pretty huge because the pattern day trading that's the the probably the biggest question I get is hey are there any ways around this what can I do to try to work my way around it and a cash account is a step in the right direction and the third huge thing and this is you know quite frankly I think very game-changing is that a lot of times or not a lot of times every time there's something that's called the settlement rule but all the settlement means is this when can I use my money again now with stocks as soon as you make a trade even if you have a cash account when you make a trade you have to wait three days before you can use that money again so just keep the math simple let's say you had a hundred dollars in your account you you make a trade you have to wait three days before you can get access to that hundred dollars again however with options one day this right here is huge so with a cash account and then because options by nature only have a one day settlement period you can essentially make as many trades as you want per week not per day but if you divide up your account in a way and actually if you click on the video or click on the annotation that's on the screen right now I do a video that's a little bit more in depth about these couple things so check that video out but with the one-day settlement you can go at it again and again and get many more trades per week than what you could if you had a cash account and are trying to use stock so very overlooked again this was something that was pointed out to me by a member of the chat room so I can't really take credit for figuring that out but it's it's a huge thing like I said game-changer and I stand by that because the three-day rule is what really you know screws up people with cash accounts and stocks because you know sure the day trader rule doesn't apply to the cash accounts but still even with stocks you have that three days where you have to wait until you can use your money again but with options it's only one day so again options are going to have you be decisive they're going to have you be disciplined with a cash account no pattern day trader rule applies to you and I'm the big one down here they only have the one day settlement period so you can have your money or you can have access to your money right the next day and those three things as far as I'm concerned are very huge so if you haven't considered options hopefully this kind of sways you don't fall into a trap like I was for so long that options are super complicated and intricate they're really not the way I use them in the way I teach them very very simple and I think I do a pretty good job of simplifying it within my course if you're interested in that you can click on the link down in the description box to look into my options trading simplified course it's gotten very good reviews and I think it's a very fair value for everything that you learn and everything that it can open yourself up to with all these very big advantages particularly in the way that you can get many more trades per week compared to trying to do and trade stocks if you have a smaller count actually if you have over 25,000 then this stuff really doesn't pay attention to you but I know a lot of people out there don't have twenty five thousand so this is something that can really benefit you so if you have any questions on this you know leave them in the comments below and I will do my best to answer them in a timely fashion thanks for taking the time to watch remember get out there and trade without emotion you.

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Where to start (and finish) your investment journey.

Paul: G'day I'm Paul Clitheroe. I'm chairman of the Australian Governments Financial Literacy Board and I'm also non-executive chairman of the ASX listed company Invest Smart. My best investment, easy, it was backing myself and taking some risk. I started Ipac back in 1983 with my terrific partners and we built that into a very large company now looking after around $17 billion. My worst investment, do we have to speak about this? Myself and some uni buddies were in the pub one night and we decided ski fields were the go. We chipped in three grand each, bought a little house in Mount Beauty underneath the Falls Creek ski fields.

We had to knock it down, build a lodge. Didn't knock it down, didn't do anything and actually managed to lose all of our money over ten years. Brilliant. Ian: Hello. I'm Ian Irvine from the ISX. Joining me today is Paul Clitheroe. Paul is chairman of the Australian Financial Literacy Board as well as being non-executive chairman of ISX listed company Invest Smart.

Invest Smart is an information hub providing information to investors through publications such as the Eureka Report and Intelligent Investor. Today we're speaking with Paul around three ideas. Firstly what should those that are contemplating investing consider before they start? Secondly where is Paul invested at the moment? Then finally where does he see the future going? What themes would drive his investment decisions then? Paul thank you for joining us. Paul: Pleasure. Ian: If I go back to 1983 when I think you first entered the arena of financial services both the practitioner and since then as a financial commentator you will have seen plenty of people start investing.

What are some of the ideas and themes that you have developed over that period of time that may help those that are still standing on the threshold of getting into investments? Paul: In a sense investing is actually really a second order subject. The key issue for me is if people would just take control of their cash flow. Let's face it, people always want to talk to you about investment. Often they've got no money to invest, which I find really quite funny. The real issue is are you controlling your income? Is it an inheritance? Whatever it may be, the first issue for me is being in control of cash flow.

Particularly if you're younger then you've actually got a dollar we can talk about. In a sense, people get very excited about, "Do I buy property or shares?" The reality is both of those assets have been perfectly decent performing assets over longer periods of time. What I've often said and said regularly on my money program on TV is an advantage I have with shares over property or manages funds over property is it's damn difficult with your dollar to buy a property. What I'm really excited about in this modern world is that with the cost of brokerage so low now to buy and sell a share the cost of entry fees into so many managed funds is basically zero.

With many managed funds some of the index funds are charging about 4/100ths of 1% per . All of a sudden we're not going to get ripped off on small amounts of money so my advice is number one, get your money under control. Probably with small amounts of money I'm still arguing that shares or a managed fund, for me, are a great starting point. Ian: Okay so one of the concepts when you have a small amount of money is still achieving diversification? Paul: No. Ian: It's not? Paul: No. Ian: Tell me why. Paul: Well the issue here in a sense is that risk is your friend if you've got time.

In a sense risk is no longer my friend. I'm 60 now so my portfolio is very different, when you mentioned back in 1983 when I started Ipack. Basically what I did then is I did what any young person should have done in my opinion, and that is I concentrated my risk. Diversification is fantastic for me. Diversification lowers my risk. One thing goes down, something else goes up. In these volatile times diversification is fabulous for a 60 year old. When I was a young fellow in the 80s with limited money diversification is going to get me a modest but sensible return. I took every nickel I had, which by the way was about $20,000.

Ian: Not bad in those days. Paul: I had a job for a couple of years and I'd followed rule number one. Rule number one if you don't put any money aside you have no investments to make. Ian: Back to cash flow. Paul: Back to cash flow. I'd done that and I'd put a bit of money aside and with my four partners I started Ipac. I had 100% of my money in one company and I basically had all of my wealth in that business for some 25 years until we sold it. When you're young, ironically, concentrated risk is probably not a bad thing. Ian: Through knowledge and education of yourself back your view? Paul: Back your view I think but also in a sense that if a youngster, now lets go back to my age back then.

Go to your early 30s, late 20s or even younger. In a sense if you like, and I really encourage parents and grandparents to do this with children. The only thing I don't like about a managed fund or ETF, in a sense is the decisions are taken for you. In terms of managing risk, I really encourage parents or grandparent if they're buying a share for a youngster if you notice the youngster is having a can of Coke or something, which I'm not too sure about from a health view point we'll put that aside. Great company. Basically buy the youngster some shares in Coke. If the youngsters got a bank account with Westpac, why not buy the youngster a few shares in Westpac. Give them a sense of ownership. For me in a sense what we're doing here is if we put the youngsters thousand dollars into, let's make it up, let's go with a bank, go with Westpac.

We pop a thousand dollars into Westpac and we do portfolio analysis around a thousand dollars in Westpac and we start going, "Oh my goodness, you've got ..." It's a thousand dollars. Ian: Got you. Your view on investing has changed from when you first started back in the 80s to now. What are you invested in now? How have you evolved from that, back your idea, put into the company which you're an owner, now you're outside of that to some extend. What are you invested in? Paul: I'm now typical of my type. Part of the baby boomer generation, there's millions of us. The sort of people who are listening to this today actually. They're probably buying and selling a few shares. Pretty obviously I think we all start out with highly undiversified portfolios. Very quickly I started up with just about everything in the company. After two years I started to get a wage from the company. Then we were able to gear up and buy a property. Now I've got a wonderful portfolio. 100% of my company and the rest in a property pretty much 100% owned by the bank. I'm not going to do that today, so we need to be really careful here.

How I invest my money today is poor guidance for many Australians. My age and risk profile, where I am now is I am fully diversified across Australian shares, international shares, and I do use EFTs particularly internationally and managed fund. I don't think I could pick shares in Poland. That's not my thing. I use people to do that for me which all of us can access for next to nothing these days. A range of great managers for stock exchange can tell you about. I own a home and I don't have a problem with that, I own an investment property. Again mainly through listed companies I own parts of commercial buildings and retail and so on. The GPTs the Westfields. Then with the bottom part of my portfolio once we've got the big stuff out the way I probably hold more cash than most people would think sensible.

Probably about 10% of my portfolio. Why do I do that? My wife will kill me if I don't and there's a very important point about that. Ian: That's still even more liquid than some of the stocks listed on the ISX. Is that what it's about? Is it giving you forward cover for living, lifestyle, leisure? Paul: It's more of a matter, it's because I don't know. Basically look at my age, it's all very well to bang on about creating wealth. I am not creating wealth. I am preserving wealth. Cash is an awful asset.

I'm earning 2.6% on it. I pay tax on it. I know full well over the next 20 years that it's going to be the worst part of my portfolio categorically. It is so safe and it provides sleep at night. I'm not kidding about myself and my wife. We've been married now for 34 years and it's a critical relationship to me. Personally I'd whack 100% in shares. My wife would kill me literally. Also it doesn't' make a lot of sense so why do I diversify the way I'm doing is because I'm not trying to get high returns. I've worked bloody hard to get what I've got, I'm trying to protect it. Ian: This is sleep at night stuff. This is keep the family happy. Paul: It is sleep at night but with an override. The one thing I do fret about with the Australian population and just about any member particularly of a first world country. We just haven't got the hang of how much longer we're living. We just haven't got the hang of the fact that for over 160 years now on average we're living three months a year longer every year we survive.

Statistically, I may drop dead tomorrow, but statistically there's every chance either Vicki or myself will see 30 odd years. I look at my pool of money, never in human history have millions of people had to try and survive off a pool of money we create during our lifetime. I'm really fretful about my own money and I'm fretful about other people's money because we just don't seem to realize that in 1908 when the age pension started our forebearers chose a male retirement age of 65, not because we died at 65 in 1908.

We males died at 54. Now we're talking about living into our 80s and 90s. To me in a sense the reason for example, I wouldn't whack all my money in cash which is the best sleep at night test, if we survive 30 years I'm sure to be broke. In a sense I'm forced to take risk. I must take risk if I'm going to live longer. Ian: On that point we've heard how you started, where you are currently now, we're now talking about the future and who would have thought living longer would have been a bad thing. How are you preparing for that now? Is it still going to be the same for you? Holding that 10% cash and the other assets you hold them the same way? Will you vary that a little just to take that into consideration? Paul: Yeah, look I think the one place we can add value is I know I can't pick market cycles.

I can pick the top of the market ... what nonsense is that? I am a believer in themes. For example, I'm a really strong believer in common sense and I've got a chair in economics out at Macquarie Uni so I've got a little bit of knowledge as well as common sense. The issue for me is, and I remember being taught this as a youngster at school, is that all the economy is the net actions of individuals. In other words what you do and I do we add that together that's our economy right? I'm fascinated that if I live to my life expectancy, Australia is going to be close to 35 million people.

Think about what does that mean. Sydney is going to be 8 million and so is Melbourne. What does that mean to me? Everyone's telling me the property market's probably looking a bit overprices at the moment, it may fall. I go, "Hang on. Where are these extra 11 odd million people going to live? In a cave?" I figure that if I own well located property in my portfolio I don't care if it goes down next year or the year after. I think it's going to get rented by the way because the population's growing so my cash flow's good. I think with a life expectancy view it's a good asset. People are bagging banks at the moment but I reckon banks are going to keep making money with a growing population. People are bagging at the moment. I reckon we're going to keep eating. Ian: Paul thank you for joining us today. We sort of finished where we started. You started with cash flow as a way to start investing and we're finished up on it right now for those that are living baby boomers.

I'm including myself there, living longer. We need to manage our cash flow at the end as well. The way we invest needs to sit behind that so thank you for your time today. Appreciate your help. Paul: Pleasure. .

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