1 Week later...and what a wild week..

Well it's been a very crazy week with Japan and Libya both sending the ASX a fair bit down, but we seem to have recovered a bit. Today, strong gains from US, European and Asian markets helped lift Aussie shares into positive territory by the slightest of margins today. The ASX 200 index (XJO) rose 0.6 pts to 4643.4 while the broader All Ordinaries index (XAO) rose 0.1 pct or 3.6 pts to 4737.7.

The number of existing homes sold fell by 9.6 pct in February, hitting a 9 year low overnight in the US. This comes after 3 straight months of improvement. The median sale price in February was $156,000, a 5.2 pct drop over the year.

Chinese data released yesterday, showed that commodity imports to the world’s second largest economy and Australia’s largest trading partner, fell in February. Our two largest miners, BHP Billiton (BHP) and the iron ore focused, RIO Tinto (RIO) ended lower. BHP eased by 0.67 pct or 30 cents to $44.20 while RIO dropped 0.56 pct or 45 cents to $80.55.

Our four largest banks finished mixed, with Westpac (WBC) and Commonwealth Bank of Australia (CBA) ending around 0.5 pct higher, National Australia Bank (NAB) pulled back slightly and ANZ Banking Group (ANZ) ended flat.

Australia’s largest airline, Qantas Airways (QAN) fell 0.48 pct or 1 cent to $2.09 after staff threatened to strike in order to prevent the company’s use of cheap labour and the industry’s union seeking a pay increase for QAN employees.

Outdoor clothing retailer, Kathmandu (KMD) and the Bank of Queensland (BOQ) both went ex-dividend today. This means if you bought shares in either one of these companies today, you would not be eligible to receive their next distribution.
 

Out of Japan  data was released which measures the change in the total value of goods and services purchased by businesses. Results were better than expected, however it is important to keep in mind this reading was for January, which is well before disaster hit the world’s third largest economy.

Out of the UK tonight, consumer inflation figures are scheduled for release at 8.30pm (AEDT). This measures the change in the price of goods and services purchased by consumers in February. 

I've bought some PEN (Peninsula Energy), Uranium miner, at 9.7c and now have a sell order for 0.12c (missed it today because of Uni). Otherwise I think I'm doing prety well, end of day $833 or 6.1% up

Another day of red for ASX - Libya and China news

Well today was another bearish day on the ASX, down 1.5percent on more news of unrest in Libya causing high oil prices. Also, China recorded a trade deficit of $7.3 billion in February. This makes it the worst reading for the world’s second largest economy in seven years.

This was partly blamed by some on the fact that China had seven straight days off for the Chinese New Year celebrations at the start of the month of February. However, it is interesting to ask, if this was the case, why did we not see imports also falling over the month?

Tomorrow will be the busiest day of the economic calendar for March out of China with retail sales, the consumer price index (inflation), a press conference by the China’s bureau of statistics and the producer price index (the change in the price of goods purchased and sold by producers) also scheduled for release.

Typically, China releases most of its economic data over two days around the middle of each month.

As for my actions, bought more AUT today at $2.80 and sold my MACQ that I was getting sick of

End of Day: $644 or 4.2% from initial portfolio

 

My Portfolio and Current Holdings

So now I'm going to keep track of my current holdings on the ASX (Australia Stock Exchange)  - I'm mostly invested in small caps as there are a lot more of them that are potentially undervalued. Large caps usually trade at around the price they're worth - what with all the popular news that gets churned out by the media.

I mostly use fundemental investing to pick my stocks, and a touch of T/A when I'm thinking of actually making the buy. Current holdings are as below:

Might sell MQG as I'm not that confident in them at the moment - I can always offset the capital loss against the ASX gains I made last year.

Today the market pulled back a lot despite strong leads from Wall St, Libya and Oil prices seems to be playing on a lot of investors minds.

The Power of Compound Interest

Albert Einstein once said that “The most powerful force in the universe is compound interest”, and I certainly agree. The cumulative effect of earning interest on previous principal and interest means that the sooner you  start saving the more you will earn.


 However, the trick is to find assets that beat inflation and simply term deposits considerably every year, and that's where smart investing and trading comes in. Here's a quick video on how powerful compound interest is when you start early:   

So if you can save a little bit each month and have good money management, anyone can retire in comfort. In my next few posts I'll talk about my own investing strategy at the moment and how I'm beating term deposits by saving and trading shares myself. 

Fundamental Investing vs Technical Analysis

There are two main strategies that are used to pick stocks on the market, fundamental investing and technical analysis.

Fundamental Investing aims to find the true intrinsic value of the business/stock and buy it at a discount to what is is trading now. It looks at underlying factors that influence the stock and the future prospects of the company. In theory, if you have bought a good company trading below its intrinsic value, you will do well over time.

This means that a fundamental investing is usually a long term strategy for trading stocks. They do not try to time the market or buy and sell on certain swings, but hold until the company intrinsic value of the company changes, by then, hopefully making a large capital gain.

To find out more about fundamental investing and for a more detailed look at the terms surrounding it, have a look at the investopedia entry on the strategy:   Fundamental Investing

I also like Rodger Montgomery's value investing strategy for picking well performing stocks, his blog and insights can be found here

Technical Analysis or "chartists" aim to find structural and technical patterns based on previous performance of the stock in an attempt to ascertain future price movements. T/A's try to time the market conditions when buying and selling a stock and use various technology and analysis such as candlestick charting and volume/price analysis to make their decisions.  Again for a more in depth study on technical analysis see the invesopedia entry on T/A

First Post - Beginning Fundamentals on Investing and Trading

Hello and welcome to my blog! I hope you enjoy my insights into the markets and my opinions on some the best investing and trading strategies I've encountered.

The first thing a novice should know about investing and trading, is that trading should be a part of your whole investment strategy. Depending on your individual circumstances, you could have all your capital in shares,  currencies, CFD's etc. or less than %20, it all depends on your individual outlook. 

This also means that when you start trading something like shares, you should know whether you classify yourself as a day trader (someone who trades frequently and tries to time market conditions for maximum profit) or an investor (someone who trades the market less frequently and holds more long term). An excellent resource that I used at the beginning of my investing journey was this book: "The Intelligent Investor by Benjamin Graham"

It's available free in audiobook form on YouTube:

I highly recommend listening to the entire reading and the more detailed book, touted by Warren Buffet himself as "The best book on investing ever written". Both give an invaluable insight into how one can potentially beat the market by simple investing techniques such as Dollar Cost Averaging, Margins of Safety and Portfolio Diversification.

Next post we'll look at two strategies one could use to trade worthwhile stocks: Fundamental/Value Investing and Technical Analysis.